Finding the Truffles in an Ambitious Environment · 2019. 3. 18. · Source: JLL Research, Colliers, Savills. Transaction volume in Germany (€bn) Transaction volume by risk profile

Page 1 | CORESTATE Capital Holding S.A.

Finding the Truffles in an Ambitious Environment

Tobias GollnestManaging Director Investments

6 September

2018


Brief introduction

>17 years expertise in real estate business

Currently: CORESTATE Capital

Formerly Eurohypo, Barclays Capital, Merrill Lynch, FREO

Experience

Tobias GollnestManaging Director

Deal sourcing, acquisitions and structuring

Business plan and portfolio underwriting

Sales

Equity raising support

Key Responsibilities

Key Personal Tasks with CORESTATE

CORESTATE Capital HoldingS.A. | Page 2

Tobias GollnestManaging Director

Developing new product ideas

Tracking investment opportunities

Achieving the best price in & out

Keeping the team at full steam


Overview German economy

Source: JLL Research, Colliers, Savills

Transaction volume in Germany(€bn)

Transaction volume by risk profile

Strongeconomy

Record in real estate transactions

Consumer confidence on 17-year high

Strong demand of institutional investors forCore / Core+

Continuing upward trends in real estate

lettings

High spending in private & public

consumption

Prospering labor market

Attractivefinancing market

Investment case

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H12018

Core Core + Value-Add Opportunistic

23.5 25.330.7

39.8

55.1 52.956.8

2011 2012 2013 2014 2015 2016 2017 H1 2018

Top 7 Rest

25.6

Germany, Europe’s powerhouse and investment market of choice

Page 4 | CORESTATE Capital Holding S.A.Source: JLL Research, Colliers, Savills

Office yields in Top 7 cities (H1 2018) High street yields in Top 7 cities (H1 2018)

Office vacancy & completion Prime yields 1a locations

Strong demand for German real estate further compressing prime yields

3%

5%

7%

9%

11%

13%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2012 2013 2014 2015 2016 2017

Completion Vacancy

Real estate environment

0%

1%

2%

3%

4%

5%

6%

7%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H12018

Shopping Center Retail Parks Commercial Buildings

2.90%3.35% 3.25% 3.05%

3.45%3.20%

3.50%

Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart

3.20%3.30%

2.80%

3.20%3.30%

2.80%

3.10%

Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart


How to find suitable investment opportunities in the current market environment?

Investment Rationale - Favorable market conditions

With the right partner …


One of the leading real estate managers and developers in Germany

Berlin

Calbe

Freital

Hamburg

Rendsburg

Flensburg

Lübeck

Arzberg

Passau

CottbusSchönebeck

Harrislee

Niebüll

Westerland

Schleswig KielHusumHeide

Itzehoe

Malente

Eutin Neustadt

ElmshornBremerhaven

Wilhelmshaven

ZehdenickGroß Glienicke

Burg

Aschersleben

AuerbachWerdau

Reichenb.

Plauen

Bayreuth

Sonnefeld

LichtenfelsBurgebr. Bamberg

FürthSchwabach

Freising

AugsburgKaufbeuren

Schongau

Weißenhorn

Ochsenh.Baiernfurt

Aulendorf

Biberach

UlmGünzburg

Albstadt

Münsingen

Schelkl. Aalen

Reichenbergh

Pforzheim

AbtsgmündNeckarsulmNeunkirchen

Worms

Wolfsburg

Nienburg

Stade

Hameln

SalzgitterLemgoBielefeld

DetmoldLippstadt

MarlReckl.Dortm.

Bo.

Werl

Oberh.Duisb.

Ge.Rating.Sonsb.

Mönchengl.Frechen

Brühl

KölnEuskirchen

TroisdorfNeussHilden

KorbachKassel

Marburg

Koblenz

WiesbadenRüsselsheim

DarmstadtMaintal

Fulda

Suhl Erfurt

Baden Baden

Frankfurt

Rostock

München

Straubing

Schwandorf

Heidenheim

LörrachSingen

Heilbronn

Aschaffenburg

HanauOffenbach

Birkenfeld

Dresden

Halle

Luckenwalde

Brandenburg

Schwerin

Magdeburg

WolfenbüttelHildesheim

Lüneburg

Celle

Nordhorn

Oldenburg

Göttingen

Gießen

Sindelfingen

Acquired properties (selection)Main officeSecondary offices>600

Employees

>100Cities we have invested in

€ 7 bnCurrent mezzaninefinanced properties

€ >5 bnDeal pipelineunder review

34Cities with local representation

7‘050Micro-living apart-ments under operation

28’992Rental unitsunder management

1‘512Network of local agents and brokers

CORESTATE Capital Group footprint

Location, location, location – the real estate mantra


A fully integrated investment platform

Investment Management

41

Asset Management

40

Development Management

8

Property / Facility Management

281

ServicedApartments

26

Mezzanine Financing

62Direct Real Estate Debt

• Fund Management• Financing, Legal &

Structuring• Corporate Functions

(e.g. IT, Accounting)

Covering all aspects of the value chain

>600 >100

Covering the entire real estate value chain under one roof


CORESTATE’s investment focus

Return

Risk

Core

Core Plus

Value-Add

Opportu-nistic

Retail Mezzanine Financing

Micro Living Office Hotel

Residential

Ris

k-R

etur

n Pr

ofile

Asse

t Cla

ssPr

oduc

ts

Residential II FMCG I EVAP I OpportunityDeutschland

Landmark Building Liverpool Highstreet VIII

CORESTATE is covering all major asset classes and risk-return profiles with its specialized teams

Mixed-Use

Student Housing

Cross-sectoral expertise through full asset and risk class coverage


Current investment opportunity: European Value-Add Program I (EVAP I)

Key Facts

Strategy

Value-Add

Focus on Germany (min. 70%)

4-6 investments

Up to 75% leverage

Manage-to-Core exit

Targettimeframe

5 years

24 months to invest

3 years investment horizon

Expected returns*

16% IRR

1.6x Cash on Cash Multiple

*All numbers are pre-tax and pre-promote.


Proven expertise of our specialized teams to be implemented via our active asset management approach

Return

Risk

Institutional“demand overhang”

Core

Core Plus

Value-Add

Risk reduction & stabilization of undermanaged assets to achieve exit to

institutional Core investors

Opportu-nistic

CORESTATE’s EVAP I: Manage-to-Core

“Manage-to-Core” investment approach with a targeted return of 16% IRR* and a 1.6x CoCM*

*All numbers are pre-tax and pre-promote.


Acquisition Targets

In terms of real estate In terms of seller

• Substantial vacancies

• Under-rented situations

• CapEx / investment backlog

• Repositioning need

• Potential for (re-)development

• Undermanaged properties

• Distressed or defaulted situations

• Cash / capital shortage

• Management structure

• End-of-life cycle

• Dispute between shareholders

Manage-to-Core – Acquisition targets…


Asset substance / property quality Functional design

Location Rent-roll / tenant quality

… but no structural weaknesses


› Re-positioning / development or re-development activities› Re-letting of vacant space› Creation of additional leasing area› Conversion of usage type› Property strategy › CapEx investments› Management of non-recoverable and operating expenses› Marketing

Hands-on Management

Successful management tools


Acquisition of an undermanaged office property (12,800sqm) close to Frankfurt am Main

Property with 52% vacancy due to old and outdated establishment of vacant spaces

Asset was marked with a leasehold

Key Tenants: NGK, Merca Leasing, Pronova BKK

Initial Realized

Vacancy 52% 0%

WAULT 5.8 y 6.5 y

Net Rental Income € 1.0m € 2.0m

Purchase/sale price € 13.8m € 31.6m

€ / m² € 1’075 € 2’460

Multiple 12.2x 16.0x

Purchase of an undermanaged property

Purchase of the separate leasehold to create a freehold

Creation of modern office spaces by establishing a new room layout and implementing contemporary design for social rooms, workspaces/open-space office and conference rooms

Initiation of leasing and releasing concept achievement of 100% occupancy within 18 months & increase of WAULT

1

3

4

Key Value Drivers

Combination of free- and leasehold via two separate transactions

Significant increase of building quality through extensive investments

Full vacancy reduction from 52%

1

2

3

Full turn-around of a half vacant office asset in Kronberg

Value-Add Asset Management Initiatives

2

Previous investment project cases (1/2)


Located in the center of the high streetRetail & storage property with 8’000 sqm rental surface Property was available at a discount to market value1st and 2nd floor were vacant storage space / kitchen, reachable through elevators (no public use)Key Tenants: REWE, Decathlon, TUI, APCOA

Initial Realized

Vacancy 26% 3%

WAULT 3.7y 7.1 y

Net Rental Income € 2.0m € 2.3m

Purchase/sale price € 24.7m € 48.0m

€ / m² € 3’090 € 6’000

Multiple 12.2x 20.1x

Conversion of vacant storage space into new attractive retail space

New lease contracts with Decathlon und APCOA

Redesigned entrance to gain more common area and enhance frequency

Installation of escalators at entrance to access the new retail space and improve comfort for costumers

Lease prolongation with existing tenants

1

2

3

4

5

Partial asset conversion and enhancement in Lörrach

Value-Add Asset Management Initiatives

Key Value Drivers

Achievement of highly attractive purchase price through CORESTATE’s sourcing network

Creation of new retail space through extensive renovation and conversion of the 1st floor

Significant increase of WAULT with new tenants and prolongations

1

2

3

Previous investment project cases (2/2)


Disclaimer

This document is personal to the recipient and has been issued by and is the sole responsibility of CORESTATE Capital Group, a company formed under the laws of Luxembourg (the "Company"), and solely for use at a presentation to potential investors concerning the proposed transaction set out herein (the "Transaction"). This document does not constitute or form part of, and should not be construed as constituting or forming part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or securities in the Company or in any other entity, or of the Transaction, nor shall any part of this document nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company or of another entity, or of the Transaction, which recognize the personal circumstances of the potential investor. Therefore, this cannot be deemed as investment advisory services. The information contained herein is for discussion purposes only. This document does not purport to contain all information that may be required to evaluate the Transaction and/or the Company and/or any other entity and/or the financial position of any of the foregoing. The potential investor should itself seek information from an investment advisor, certified accountant or tax accountant regarding the potential or actual investment. Information from third parties, which were considered as reliable, were not verified. A liability for information from third parties will not be adopted, unless the deficit in the information of third parties was clearly visible: in such case any liability will be excluded except for gross negligence and will ful misconduct.No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness, accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of the Company, its directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in this document and no liability whatsoever is accepted by the Company, its members, directors, officers or employees nor any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions or otherwise arising in connection therewith, unless the circumstances, which cause a potential liability , were deliberated or grossly negligent caused by the aforementioned persons and which stand in a causal connection to the potential damage.This document, its contents, any discussions at this meeting or otherwise made available (whether orally or in writing) in connection with the Transaction and/or Company, is being provided to you solely for information and is being given on the basis that the recipients keep confidential all such information. This document is confidential and may not be – in any way –reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose. The products mentioned herein and the Transaction are typically not admitted for public distribution in the country, in which this presentation is held, and may only be distributed in any potential private placement exceptions. Therefore, the content of this document is only directed to persons, who deal with such transactions within their respective professional business and who do not have a private interest regarding the Transaction or the products (thereinafter referred to as “relevant persons”). Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons. Any recipient of this document who is not a relevant person should return it immediately, not attend any potential presentation and may not take any other action (in particular no investment in the Transaction).

Neither this document nor any copy of it may be taken or transmitted into the United States of America, its territories or possessions or distributed, directly or indirectly, in the United States of America, its territories or possessions. This document does not constitute an offer to sell or the solicitation of an offer to buy the securities or the Transaction discussed herein. Neither this document nor any copy of it may be taken, transmitted or distributed into or in Australia, Canada or Japan or to Canadian persons or to any securities analyst or other person in any of those jurisdictions. Any failure to comply with these restrictions may constitute a violation of United States, Australian, Canadian or Japanese securities law. The distribution of this document in other jurisdictions may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. The securities mentioned herein have not been, and will not be, registered under the US Securities Act of 1933, as amended (the “Securities Act”), under the applicable securities laws of any state of the United States or under the applicable securities laws of Canada, Australia or Japan, and may not be offered or sold in the United States (as such terms are defined in Regulation S under the Securities Act) unless they are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to the registration requirements of the Securities Act and, subject to certain exceptions, may not be offered or sold within Canada, Australia or Japan or to any national, resident or citizen of Canada, Australia or Japan. No public offer of securities in the Company or any other entity is being made in the United States, Canada, Australia or Japan. This document is an advertisement and not a financial analysis or a prospectus and investors should not subscribe for or purchase any shares or securities referred to in this document except on the basis of information in the [investment memorandum] issued by the Company in due course in connection with the Transaction (the “[Investment Memorandum]”). Copies of the [Investment Memorandum] will be available from the Company, and include a description of risk factors relevant to an investment in the Company and the Transaction. The information and opinions expressed in this document are provided as of the date of this document. Certain statements, beliefs and opinions in this document, including those related to the Transaction, are forward-looking, which reflect the Company’s or, as appropriate, the Company’s directors’ current expectations and projections about future events. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or other wise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this document. No statement in this presentation is intended to be nor may it be construed to be a profit forecast. Any Investor of the Transaction should be capable of bearing the financial risks relation to such investment. A total loss of the invested amount is possible.No person, who is privy to unpublished information concerning an offer, should deal or encourage dealing in the securities of the target or any other company involved in a potential transaction (or any derivates or spread bets referenced to such securities) at any time where there is a reason to suppose a material

transaction is contemplated or when it is known or believed that a potential transaction party has decided not to proceed with a deal. Any such dealing may constitute a criminal offence, breach of the Code and/or market abuse under UK law.By attending the presentation to which this document relates or by accepting a copy of this document you agree to be bound by the foregoing limitations and, in particular, you will be taken to have represented, warranted and undertaken that: (i) you are a relevant person (as defined above); (ii) you have read and agree to comply with the contents of this notice; and (iii) you will not at any time have any discussion, correspondence or contact concerning the information in this document or the Transaction with the Target, any of the directors or employees of the Company or the Target, their subsidiaries, nor with any of their suppliers, customers, sub contractors or any governmental or regulatory body without the prior written consent of the Company.

Disclaimer


CORESTATE Capital Holding S.A. CORESTATE Capital Group4, rue Jean Monnet | L-2180 Luxembourgcorestate-capital.com

Documents

Finding the Truffles in an Ambitious Environment · 2019. 3. 18. · Source: JLL Research, Colliers, Savills. Transaction volume in Germany (€bn) Transaction volume by risk profile