Aroundtown Property Holdings Plc Real Estate – Commercial

5 November 2015 Aroundtown

Property Holdings plc

BUY

Real Estate Diversified for a good reason

Kai Klose, CIIA Analyst +44 20 3207 7888 [email protected]

Tina Munda Analyst +44 20 3465 2716 [email protected]

ATLAS ALPHA • THOUGHT LEADERSHIP • ACCESS • SERVICE Aroundtown Property Holdings plc Real Estate – Commercial

THE TEAM

Kai Klose has 15 years' experience in real estate, working both in the industry and on the equity side. He joined Berenberg from Macquarie, and prior to that worked for Dresdner and Sal. Oppenheim.

Tina Munda joined Berenberg from BlueCrest in 2014 where she worked in product control for the credit fund. Before that, she worked in business control at Lloyds Banking Group, specifically looking after structured credit investments. Tina started her professional career at Mazars, in assurance services. She is qualified accountant (ACA) and holds a Masters degree in Finance and Investments from the University of Nottingham.

For our disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) and our disclaimer please see the end of this document.

Please note that the use of this research report is subject to the conditions and restrictions set forth in the disclosures and the disclaimer at the end of this document.

Aroundtown Property Holdings plc Real Estate – Commercial

Table of contents

Diversified for a good reason 4

Investment thesis 5

Aroundtown Property Holdings plc – investment thesis in pictures 6

Aroundtown Property Holdings plc – company profile 7

Aroundtown Properties – our earnings forecasts 26

Valuation 34

Snapshot of German commercial property markets 45

Financials 54

Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) 58

3 Aroundtown Property Holdings plc Real Estate – Commercial

Diversified for a good reason

● Strong experience: With 11 years of experience in the German property 5 November 2015 market, Aroundtown Property Holdings (AT) has built a strong track record in creating value from managing properties sourced at a discounted price out of special situations. By successfully structuring their turnaround BUY (Initiation) by reducing vacancy rates and adjusting rental levels, AT generates

superior growth in net asset value and cash flow compared to many of its Current price Price target peers, while keeping its financial risk at a below-average level. We regard this as a fairly interesting combination. With total pro forma assets of EUR 3.94 EUR 4.85 €6.1bn, including AT’s stake in Grand City Properties (GCP) and Prime City 04/11/2015 XETRA Close Properties (PCI), the company is among the leading players in the German property market. Market cap (EUR m) 2,364 Reuters ALATP.PA ● AT is diversified for a reason: AT’s activities in commercial real estate are Bloomberg ALATP FP aggregated in the non-listed entity Camelbay, comprising a c€1.3bn portfolio (as of October) of office (53%) and retail (28%) properties with a Share data regional focus on Munich (22%), Berlin (21%) and North Rhine-Westphalia (12%). With vacancy rates of 17% and in-place rents of c€6.50/sqm/month, Shares outstanding (m) 600 Enterprise value (EUR m) 3,318 we see a high reversionary potential, particularly from improving Daily trading volume 235,000 occupancy levels reaching 8.5% on a lfl basis by year-end 2020. Including the stakes in PCI (76%) and GCP (35%) the main focus is on residential real estate with 38%. ● Clearly focused subsidiaries: Both PCI and GCP as listed subsidiaries have strong operational track records, and, in the case of GCP, substantially outperformed peers. With PCI and GCP continuing to grow independently, AT has created three attractive investment vehicles that allow investors to participate in the significant upside potential of the underlying real estate

portfolios. We also welcome AT’s intention to distribute dividends for FY 2016 with a payout ratio of 30%. ● Appealing valuation levels: We foresee adjusted EBITDA (as the key earnings figure) to advance to €389m at a CAGR of 21% by 2020 and the FFO I to grow at a 22% CAGR to €256m over the same period. Our estimates are based on separate forecasts for the Camelbay portfolio and include PCI and GCP, which we already cover. We acknowledge AT’s current small free float and low liquidity, but the balance sheet ratios are set to remain strong with a favourably low loan-to-value ratio. We see an upside of 23% on the current share price to our price target of €4.85, leading to a Buy rating.

Y/E 31/12 ., EUR m 2014 2015E 2016E 2017E 2018E Total revenues 141 206 252 288 323 Net rents 242 128 219 261 302 EBIT (inc revaluation net) 1,011 231 338 404 471 EBIT (excl revaluation) 133 199 239 273 307 Net profit (reported) 667 63 238 284 332 Funds From Operations (FFO) 38 94 160 183 208 EPS reported 1.33 0.12 0.40 0.47 0.55 FFO per share 0.08 0.17 0.27 0.31 0.35 DPS 0.00 0.00 0.08 0.09 0.10 NAV per share 2.23 2.90 3.29 3.69 4.15 NNAV per share 2.74 3.71 4.11 4.53 5.03 EV/EBITDA - 14.3 12.2 10.9 9.9 FFO yield - 4.4% 6.8% 7.7% 8.8% P/FFO - 22.7 14.8 12.9 11.4 Dividend yield - 0.0% 2.0% 2.3% 2.6% P/NAV per share - 36% 20% 7% -5% P/NNAV per share - 6% -4% -13% -22% Net gearing 13% 19% 52% 58% 61% Loan -to -value (LTV) 12% 14% 30% 32% 33% Implied yield - 3.8% 5.3% 5.9% 6.5% Source: Company data, Berenberg (the numbers for 2014 are pro forma numbers)

Kai Klose, CIIA Tina Munda Analyst Analyst +44 20 3207 7888 +44 20 3465 2716 [email protected] [email protected]

Aroundtown Property Holdings plc Real Estate – Commercial

BUY Investment thesis

● Aroundtown has a track record in sourcing properties out of 5 November 2015 distressed situations.

Current price Price target ● Letting markets for commercial properties have seen a positive development recently.

Market cap (EUR m) 2,364 EUR 3.94 EUR 4.85 ● The properties owned by Aroundtown are predominantly located in 04/11/2015 XETRA Close EV ( EUR m) 3,318 regions with solid economic fundamentals. Trading volume 235,000 ● The company’s balance sheet ratios have always been very strong. Free float 27.0 % ● Our valuation is based on return on net asset value and a dividend Non-institutional shareholders Share performance discount model.

Founder and management: 73% High 52 weeks EUR 4.00

Low 52 weeks EUR 3.15

Business description Performance relative to

Aroundtown Property Holdings focuses on SXXP CAC 40 German real estate. Including the 1mth 8.1% 8.7% commercial portfolio Camelbay and the 3mth 30.4% 28.7% stakes in the stock-listed Prime City (hotels) and Grand City (residential) Aroundtown 12mth - - owns a total portfolio of more than €6.0bn and is diversified in residential (38%), hotels (24%), offices (21%), and retail (11%).

Profit and loss summary Cash flow summary EUR m 2013 2014 2015E 2016E 2017E EUR m 2013 2014 2015E 2016E 2017E Net rental income 67 140 106 176 206 FFO 19 38 94 160 183 Total revenues 82 141 206 252 288 CF operating activities 19 38 94 160 183 Revaluation result 247 878 32 98 131 Payments (acquisitions) -79 -85 -617 -426 -433 Total operating expense -5 -8 -6 -12 -14 Income (asset disposals) 0 0 0 0 0 EBITDA 324 1,011 231 338 404 Change in debt position 227 621 350 -2 294 Adjusted EBITDA 77 133 200 240 273 Dividend paid 0 0 0 0 -48 Financial result 3 -108 -16 -39 -45 Capital measures 202 0 325 0 0

EBT 327 903 215 299 359 Net profit 149 667 63 238 284 Funds from operations 19 38 94 160 183 FFO/share 0.04 0.08 0.17 0.27 0.31 Year-end shares 500 500 600 600 600 DPS 0.00 0.00 0.00 0.08 0.09

Growth and margins Key ratios 2013 2014 2015E 2016E 2017E 2013 2014 2015E 2016E 2017E Rental growth - 109.0% -24.0% 65.9% 16.7% Net debt 571 258 954 1,760 2,044 Adj. EBITDA growth - 72.7% 49.8% 20.0% 14.1% Net debt/equity 1.9 0.4 0.8 0.9 1.0 FFO growth - 100.0% 147.8% 69.7% 14.6% LTV 35% 12% 14% 30% 32% Adj. EBITDA margin 69.5% 55.1% 156.4% 109.4% 104.8% Net gearing 65% 13% 19% 52% 58% Adj. EBIT margin 69.4% 55.0% 156.2% 109.2% 104.7% Interest cover 4.8 11.0 7.2 6.2 6.1 FFO margin 17.1% 15.7% 73.7% 72.9% 70.2% Dividend cover - - - 3.3 3.3

Payout ratio 0% 0% 0% 30% 30% Return on NAV 4.9% 3.4% 5.4% 8.1% 8.3%

Valuation metrics Key risks to our investment thesis 2013 2014 2015E 2016E 2017E ● The development of rents for average-quality office space in P / FFO - - 22.7 14.8 12.9 Germany has only been rather flat. P / NAV - - 36% 20% 7% P / NNAV - - 6% -4% -13% ● Some office markets in Germany have high vacancy rates. FFO yield - - 4.4% 6.8% 7.7% ● Competition on the investment markets for German real estate has Dividend yield - - 0.0% 2.0% 2.3% intensified. EV / adj. EBITDA - - 14.3 12.2 10.9

Kai Klose, CIIA Tina Munda Analyst Analyst +44 20 3207 7888 +44 20 3465 2716 [email protected] [email protected]

Aroundtown Property Holdings plc Real Estate – Commercial

Aroundtown Property Holdings plc – investment thesis in pictures

Chart 1: Total revenues Chart 2: Adjusted EBITDA excluding minorities

450 €m 450 €m 389 400 381 400 343 354 350 350 315 302 300 300 278 261 240 250 219 250 200 200 153 150 128 150

100 100

50 50

0 0 2015E 2016E 2017E 2018E 2019E 2020E 2015E 2016E 2017E 2018E 2019E 2020E

Source: Company reports, Berenberg estimates Source: Company reports, Berenberg estimates

Chart 3: FFO I per share excluding minorities & DPS Chart 4: Total EPRA NAV per share fully diluted

0.45 € 0.43 7.00 €

0.40 0.39 6.07 6.00 5.59 0.35 0.35 5.03 0.31 5.00 4.53 0.30 0.27 4.11 3.71 0.25 4.00

0.20 0.17 3.00

0.15 0.13 0.12 0.10 2.00 0.09 0.10 0.08 1.00 0.05

0.00 0.00 2015E 2016E 2017E 2018E 2019E 2020E 2015E 2016E 2017E 2018E 2019E 2020E FFO per share excl. minorities DPS

Source: Company reports, Berenberg estimates Source: Company reports, Berenberg estimates

6 Aroundtown Property Holdings plc Real Estate – Commercial

Aroundtown Property Holdings plc – company profile

AT offers exposure to the entire German real estate market with a special focus on creating value from undermanaged/distressed properties. The company has been in the market for more than ten years, has built a strong network of sellers and is known for its quick decision-making, which is often an important competitive advantage. AT is not a portfolio trader but follows a long-term “buy-and-hold/upgrade” strategy to create sustainable value. Disposals take place selectively on an opportunistic basis, but are not necessary to create proceeds for another transaction. Nevertheless, since demand for upgraded/so-called “core” properties with high occupancy levels and long-term leases is rather high, we would welcome to see more disposals and AT to realise capital gains, which then reflects its ability to create value. The underlying asset quality of AT’s properties is good to average, in our view, also the regional split looks reasonable. The company is keen to acquire cash flow generating properties and is not engaged in speculative project developments. To cover a broad spectrum for value-add German real estate, AT has created two focused listed entities that cover two highly attractive but rather specific sectors – GCP for residential real estate (with a portfolio of c71,000 units) and PCI for hotel properties (54 assets). Via Camelbay, AT owns and manages a commercial property portfolio worth c€1.3bn that is focused on offices and retail assets. Therefore, AT is clearly not just a holding company, which sometimes faces a valuation discount in the market as investors miss the potential for value creation; also, the entrepreneurial approach is missing if there is no own operational business. AT shareholders will benefit from Camelbay’s reversionary potential and the upturn in the underlying business of PCI and GCP, which attract investors that prefer highly focused vehicles dedicated exclusively to the hotel or residential sector. All three entities are run independently by an experienced internalised management team and are also independent from a financing perspective. We see a clear competitive advantage of this set-up as portfolios on offer out of distressed situations regularly have a diversified structure and are no “pure plays” of one specific sector. Rather than rejecting these, AT can deal with virtually all types of properties given the existing expertise set-up in all of its vehicles. As investors’ preferences vary between diversified and highly focused stocks, we see a limited risk that the level of interest for shares in AT might be jeopardized by either GCP or PCI. Lastly, in having created independently-run companies, each of them is able to receive an investment-grade rating somewhat more rapidly. Currently, only GCP has been assigned an investment-grade rating (BBB), but we understand that AT will soon initiate talks with rating agencies.

7 Aroundtown Property Holdings plc Real Estate – Commercial

AT – group structure

Source: Company reports

The group’s investment criteria are straightforward – it sources undermanaged properties with value creation potential independent from underlying market conditions. Demand for commercial properties has been improving and investor demand for stabilised properties has been growing. AT can show a constantly strong performance in sourcing as well as upgrading throughout different cycles. Accordingly, several key criteria need to be fulfilled such as: ● rental levels below market levels; ● no substantial backlog in capex; ● it should be able to reduce current above-average vacancy rates based on local letting markets; ● properties are generating cash flow; ● preference for regions with solid fundamentals and on larger and mid-sized cities; ● potential to optimise costs via operational improvements; and ● a purchase price below market values and preferably below replacement costs. While every transaction has its own specific criteria, AT has a very standardised process for deal sourcing and due diligence, in which all relevant parties, including asset and property management, are included and have their say. This enables quick decision-making, and we regard this common approach as a key criterion to run the successful repositioning and turnaround process of the property. Again, this process has been set up for GCP, PCI and for Camelbay, as different types of assets require different skillsets. For the latter, the group has a state-of-the-art IT system that monitors performance on an ongoing basis and also determines the right level of capex investments.

8 Aroundtown Property Holdings plc Real Estate – Commercial

AT – Business model and property lifecycle

STRONG CASH FLOW GENERATING PORTFOLIO WITH GROWTH POTENTIAL

REPOSITIONING AND TURNAROUND ACTIVITIES

ACQUISITION AND TAKEOVER

Value Creation Value DUE DILIGENCE

SOURCING AND TARGETING ACQUISITIONS

Source: Company reports

While every type of asset has its own KPIs there are clearly also synergy effects, which the group can utilise due to its overall size. While there is no sharing of costs within the group and each company has strict criteria to improve profitability, the group can compare prices eg for purchasing energy contracts and has a higher bargaining power due to its size. Also, from a diversification and risk-minimisation perspective particularly for office properties, we regard AT’s low dependence on specific areas as favourable. Again, with own and experienced people on the ground we regard the group’s local know-how as very high.

AT – property portfolio map

Kiel Stralsund/Rügen

Hamburg Bremerhaven Bremen

Hanover Berlin Potsdam Osnabrück Braunschweig Bielefeld Hamm Gelenkirchen Dortmund Dessau Essen Duisburg Velbert Halle Solingen Monchengladbach Leipzig Neuss Hagen Wuppertal Kassel Dresden Mettmann Düsseldorf Erkrath Cologne Hürth Bonn

Frankfurt

Mainz

Kaiserslauten Mannheim Saarbrücken Nuremberg

Baden-Baden HOTELPROPERTIES Stuttgart Munich RESIDENTIAL PROPERTIES

Bad Reichenhall COMMERCIAL PROPERTIES /Salzburg

Source: Company reports

9 Aroundtown Property Holdings plc Real Estate – Commercial

Looking at AT’s portfolio split, we would regard the regional split as fairly reasonable.

AT – portfolio geographical split AT – portfolio sector split

Dresden / Munich, 14% Leipzig / Halle, Office, 21% 10%

Berlin, 19% Manheim / KL Hotel, 24% / Frankfurt / Retail, 11% Mainz, 8% Hannover, Industrial, 6% logistics, NRW, 19% storage and Bremen / others, 6% Hamburg, 5% Residential, 38% Other, 16% Kassel, 3%

Source: Company reports Source: Company reports

After the group’s strict investment criteria, strong and solid balance sheet ratios are imperative for AT, GCP and PCI. This is reflected in sustainably low loan-to-value levels, high interest rate cover ratios, a diversified and defensive debt expiry schedule and also the target to have a high level of unencumbered assets. AT currently has no material maturities before 2020, benefits from 75% of unencumbered assets and from favourably low gearing. Arguably, this situation may change once the €320m proceeds from the capital increase in July are completely invested. However, with these strict principles on financing, the group is exemplary in acknowledging most investors’ preferences for companies with low gearing and solid balance sheet ratios overall. The group can also demonstrate a strong track record in sourcing capital, having raised more than €3.5bn in debt, equity and hybrid and convertible bonds since 2012.

AT – development of loan-to-value ratios AT – debt structure

45% 39% 40% 35% 35% 33% Encumbered 30% , 25%

25% 19% 20% 20%

15% Unencumber 10% ed, 75%

0% 2012 2013 2014 H1 2015 Jun-15*

Source: Company reports Source: Company reports * June 2015 pro-forma following the €320m equity increase in July

AT is headed by a two-team management board. Shmuel Mayo (CEO) has been with AT since 2007 and previously worked as CEO of Dankner Group, which is an $8bn international investment conglomerate. Eyal Ben David (CFO) has been with AT for seven years and previously worked as a certified public accountant. We would also regard the experience of the senior management team as high. The founder, Yakir Gabay, is the chairman of the advisory board, and still the majority shareholder in AT, owning 73% together with management.

10 Aroundtown Property Holdings plc Real Estate – Commercial

AT – shareholder structure

Free float, 27%

Founder and management, 73%

Source: Company reports

Camelbay exposed to commercial properties Camelbay comprises AT’s activities in commercial real estate and is 100% owned by AT. Its portfolio is worth €1.3bn (as of October) – c€0.3bn more than in July. As it sources from distressed/special situations it is understandable that Camelbay is no pure play on one sector only. Currently, offices are the largest sector, followed by retail properties, which includes galleries/smaller shopping centres as well as high-street shops.

Camelbay – portfolio sector split

Retail, 28%

Industrial / logistics, 14%

Storage & other, 5%

Office, 53%

Source: Company reports

Regionally, the portfolio is widely diversified. Its exposure to Frankfurt is relatively low as the local letting markets for office space have been somewhat mixed. Overall, we regard the regional split as reasonable as the portfolio is mainly exposed to regions with solid economic fundamentals.

Camelbay – portfolio geographical split

NRW, 12%

Hannover, 9% Frankfurt, 6%

Berlin, 21% Hamburg, 5% Kassel, 5%

Mannheim, 3% Munich, 22% Stuttgart, 2% Other, 13% Leipzig, 2%

Source: Company reports

11 Aroundtown Property Holdings plc Real Estate – Commercial

Camelbay – examples of commercial properties Munich Berlin

Munich Berlin

Hannover Stuttgart

Source: Company reports

As a consequence of recent acquisitions, the Camelbay portfolio has a vacancy rate of 17%. The split between the two largest sectors is 53% for offices and 28% for retail. We understand that on a region-by-region basis, vacancy rates are largely fairly similar. The current reported in-place rents come out at €6.50/sqm/month with an average lease maturity of about five years. The lease expiry schedule for the commercial portfolio is shown below, suggesting that the company can focus on improving occupancy levels.

12 Aroundtown Property Holdings plc Real Estate – Commercial

Camelbay – lease expiry profile of commercial portfolio

30%

25% 25%

20%

15% 15% 15%

10% 10% 10% 10%

5% 5% 5% 5%

0% 2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: Company reports

The lease expiry schedule for the office and retail portfolio looks fairly similar.

Camelbay – lease expiry profile of office portfolio Camelbay – lease expiry profile of retail portfolio

30% 30%

25% 25% 25% 25%

20% 20% 20% 20%

15% 15% 15%

10% 10% 10% 10% 10% 10% 10% 10%

5% 5% 5% 5% 5% 5% 5% 5% 5%

0% 0% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: Company reports Source: Company reports

Camelbay’s tenant structure is widely diversified with over 1,000 tenants. We regard this as favourable as it reduces the dependence on individual tenants and the risk of a sudden rise in vacancy rates if the tenant decides to leave. We regard the top 10 tenants of Camelbay as being of good quality, and securing a high level of income predictability.

Camelbay – top commercial tenants

Top office tenants Tenant WALT HVB 5 years City of Hannover 20 years HP 5 years E-Plus Mobilfunk 4 years Daimler Chrysler 8 years

Top retail tenants Tenant WALT Real 5 years METRO 4 years REWE 12 years Cinemaxx 5 years Source: Company reports

13 Aroundtown Property Holdings plc Real Estate – Commercial

The key performance indicator for Camelbay’s portfolio is the successful reduction of vacancy rates. Accordingly, the assets are classified as “early turnaround” (vacancy rates above 20%), “advanced turnaround” (vacancy rates of 10-20%) or “stabilised stage” (vacancy rates below 10%). We regard this classification as reasonable, as it also offers a good indicator for external parties to assess portfolio performance. Particularly for office properties, vacancy rates of c10% are market standard. Obviously, overall vacancy rates are influenced by acquisitions, but we expect the company to publish rental growth and vacancy reduction on a lfl basis.

Camelbay – portfolio development stages

Early turnaround, 30%

Stabilised stage, 51% Advanced turnaround, 19%

Source: Company reports

Camelbay – office portfolio development stages Camelbay – retail portfolio development stages

Early turnaround, Early 42% turnaround, 16%

Stabilised stage, 59% Stabilised Advanced stage, 40% turnaround, Advanced 25% turnaround, 18%

Source: Company reports Source: Company reports

Keeping close contact to tenants and being available in case of requests or repairs is a key success factor in commercial as well as residential properties. This is also important to be able to assess the likelihood of tenants moving out at the end of the lease contract, as this decision is not made easily, particularly by larger companies. While rent levels are always intensely discussed between tenant and landlord, regular meetings and the establishment of a long-term relationship have a substantial effect on raising retention rates. The company has a good track record of very successfully improving occupancy levels in a number of properties. The operational management has been active in the market for many years and therefore benefits from a high level of experience. A number of key employees joined from Hudson Advisors, from which AT bought several properties. Our model for Camelbay is not split on a sector basis but on an aggregated basis. We assume the company will remain successful in deal sourcing with annual acquisition volumes of c€250m and initial vacancy rates of 15%.

14 Aroundtown Property Holdings plc Real Estate – Commercial

Camelbay – our estimates for acquisitions

2016E

Interest Annualised rent Additional rents Annualised expenses Total vacancy- vacancy-adjusted Acquisition Total new Cost of interest time- space Average rent Vacancy adjusted and time-adjusted Initial yield volume debt debt expenses adjusted sqm €/sqm/month % €m €m % €m €m % €m €m

250,000 7.25 15% 18.5 9.2 9.0% 205.4 154.1 2.30% 3.5 1.8

2017E

250,000 7.50 15% 19.1 9.6 8.5% 225.0 168.8 2.30% 3.9 1.9

2018E

275,000 7.50 15% 21.0 10.5 8.5% 247.5 185.6 2.30% 4.3 2.1

2019E

275,000 7.75 15% 21.7 10.9 8.5% 255.8 191.8 2.30% 4.4 2.2

2020E

250,000 7.75 15% 19.8 9.9 8.3% 239.5 179.7 2.30% 4.1 2.1

Source: Berenberg estimates

15 Aroundtown Property Holdings plc Real Estate – Commercial

For the current portfolio we forecast vacancy reductions of c200bp per year and lfl rents to improve by 1.0% pa. We have not run a scenario for the lfl development of newly acquired assets.

Camelbay – our estimates for lfl valuation change

2016E

New Change in average Vacancy New Annualise Gross Change in Gross Market Total Average rent rent rent Vacancy old reduction vacancy WALT d rent old Annual rent new yield old yield yield new Market Value value €/sqm/mon sqm €/sqm/month % th % % % years €m €m % % % €m €/sqm 1,750,000 6.50 1.0% 6.57 17.0% -2.0% 15.0% 4.6 113.3 117.2 9.00% -0.25% 8.75% 1,339.3 765.3

change 80.4 6.4%

2017E

New Change in average Vacancy New Annualise Gross Change in Gross Market Total Average rent rent rent Vacancy old reduction vacancy WALT d rent old Annual rent new yield old yield yield new Market Value value €/sqm/mon sqm €/sqm/month % th % % % years €m €m % % % €m €/sqm 1,750,000 6.57 1.0% 6.63 15.0% -2.0% 13.0% 4.2 117.2 121.1 8.75% -0.40% 8.35% 1,451 829.0

change 111.5 8.3%

2018E

New Change in average Vacancy New Annualise Gross Change in Gross Market Total Average rent rent rent Vacancy old reduction vacancy WALT d rent old Annual rent new yield old yield yield new Market Value value €/sqm/mon sqm €/sqm/month % th % % % years €m €m % % % €m €/sqm 1,750,000 6.63 1.0% 6.70 13.0% -2.0% 11% 4.1 121.1 125.2 8.35% -0.50% 7.85% 1,594 911.1

change 143.7 9.9%

2019E

New Change in average Vacancy New Annualise Gross Change in Gross Market Total Average rent rent rent Vacancy old reduction vacancy WALT d rent old Annual rent new yield old yield yield new Market Value value €/sqm/mon sqm €/sqm/month % th % % % years €m €m % % % €m €/sqm 1,750,000 6.70 1.0% 6.76 11.0% -1.5% 9.5% 4.3 125.2 128.5 7.85% -0.50% 7.35% 1,749 999.4

change 154.5 9.7%

2020E

New Change in average Vacancy New Annualise Gross Change in Gross Market Total Average rent rent rent Vacancy old reduction vacancy WALT d rent old Annual rent new yield old yield yield new Market Value value €/sqm/mon sqm €/sqm/month % th % % % years €m €m % % % €m €/sqm 1,750,000 6.76 1.0% 6.83 9.5% -1.0% 8.5% 4.5 128.5 131.3 7.4% -0.3% 7.1% 1,849 1056.5

change 99.9 5.7% Source: Berenberg estimates

16 Aroundtown Property Holdings plc Real Estate – Commercial

Primecity offers access to hotel properties Primecity Investments (PCI) is the only stock-listed company offering access to the hotel market in Germany. As described in detail in our initiation note , PCI has a strong track record in sourcing as well as improving its portfolio, which has grown in 2015 to now 54 assets with c8,500 rooms. PCI is 76% owned by AT and is listed on Euronext. PCI’s portfolio benefits from a high exposure to four-star hotels, traditionally the preferred category for guests as well as investors.

PCI – portfolio composition by category

3 stars, 13%

2 stars, 4% 5 stars, 4%

4 stars, 79%

Source: Company reports

It also has a broad range of well-known brands such as Wyndham, Mercure, ibis, Sheraton or Swissôtel. We regard the regional split of the portfolio as favourable as it contains a good mix of business and touristic destinations.

PCI’s portfolio map

Source: Company reports

The portfolio includes several properties which are well-known locally and which are established hotels with a good reputation.

17 Aroundtown Property Holdings plc Real Estate – Commercial

PCI – example hotels from portfolio

Radisson Blu Badischer Hof, BadenBaden----BadenBaden Swissôtel Düsseldorf/Neuss • 4 star hotel • 4 star hotel • Approx. 160 rooms and suites • Approx. 250 rooms and suites

Sheraton Frankfurt Congress Hotel IBIS Styles München Ost Messe • 4 star hotel • 2 star hotel • Approx. 400 rooms and suites • Approx. 140 rooms

Schlosshotel im Grunewald, Berlin Wyndham Garden Berlin Mitte • 5 star hotel • 4 star hotel • Approx. 55 rooms and suites • Approx. 172 rooms and suites

Source: Company reports

PCI is internally managed; its senior representatives have been active in the markets for several years and gained experience by working in the hotel industry. The company’s good network and access in deal sourcing can be seen in the growth of the portfolio, and we expect this positive development to continue.

18 Aroundtown Property Holdings plc Real Estate – Commercial

PCI – development of number of hotels and rooms

25,000 140 132

122 120 20,000 107 100 92 15,000 80 74

60 10,000 20,200 54 18,700 50 16,450 41 14,200 40 34 11,500 5,000 8,000 8,500 20 16 5,000 5,800 2,700 0 0 2013 2014 Q1 2015 H1 2015 Oct-15 2016E 2017E 2018E 2019E 2020E Rooms Hotels

Source: Company reports

PCI follows a long-term orientated strategy; however, given the demand for hotel investments in Germany (transaction volumes have almost doubled to €3.1bn in 2014), the company sold several properties at the end of 2014 and generated attractive returns.

PCI’s execution track record

Acquisition Hotel Rooms Exit date Equity IRR year Hotel 1 142 2006 Dec-14 211% Hotel 2 131 2008 Dec-14 28% Hotel 3 85 2008 Dec-14 35% Hotel 4 142 2008 Dec-14 39% Hotel 5 93 2009 Mar-14 60% Hotel 6 189 2006 Sep-13 43% Hotel 7 101 2006 Jun-12 84% Hotel 8 & 9 307 2006 Feb-12 117%

Weighted average equity IRR (based on sales price) 62%62%62% 62% Source: Company reports

When PCI buys a property out of distressed/special situations, the asset’s performance has typically continued to deteriorate. This can be due to several reasons ranging from an inefficient cost structure, capex backlog for the rooms, not having the right brand and/or category, lagging some amenities like a spa or conference centre to a non-performing operator. Given PCI’s experience and its reputation with global brands, the company can start the turnaround process in a very comprehensive manner, which normally takes up to 6–24 months. The relatively wide timeframe is caused by the different levels of cooperation from hotel operators, who generally welcome PCI as new owner, as they can only benefit from its broad background being realised in cost savings and know-how to improve the operational performance of a hotel property. Also, PCI is not shy about acquiring hotel properties with short remaining operating contracts, which at times might be preferable to enable a fresh start. Newly signed operating contracts typically have a fixed maturity of up to 20 years.

19 Aroundtown Property Holdings plc Real Estate – Commercial

PCI’s value creation approach

Source: Company reports

We regard the underlying fundamentals of the German hotel markets as attractive, we also appreciate that PCI has always kept an eye on maintaining solid balance sheet ratios. The overall loan-to-value was 40% as of June (21% assuming full conversion of the convertible bond) with an interest cover ratio of 3.7x. Currently, c70% of the properties are encumbered, which can be explained by PCI’s deal sourcing structure, where the assigned debt on the hotel property has to be taken over by the company as its new owner. Also, as banks preferably finance hotel properties after a successful turnaround, the cost of debt would sometimes be unfavourably high if PCI were to seek debt financing at an earlier stage. We welcome that PCI is currently in negotiations to extend the upcoming loan maturities for the next year, and we would assume a reduction in the cost of debt of currently c3%.

PCI’s debt maturity schedule

In € millions 160 140 120 100 80 60 40 20 0 2015 2016 2017 2018 2019 2020 2021 >2022

Bank debt Convertible bond

Source: Company reports

PCI’s performance has just recently seen an uptick, which we would expect to continue as the recent H1 results indicate a positive operational development.

20 Aroundtown Property Holdings plc Real Estate – Commercial

PCI – ytd share performance

3.8

3.7

3.6

3.5

3.4

3.3

3.2

3.1

3 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15

Source: Datastream, as of 5 November 2015

Given PCI’s strong portfolio growth and its continuously improving underlying portfolio we expect a positive development of all relevant KPIs of the company.

PCI – forecasts for rental income, adjusted EBITDA and FFO (€m)

€m 90.0 Revenues Revenues 79.9 80.0

70.0 60.9 60.0

50.0 43.0 40.0

30.0 25.6

20.0 9.9 10.0

0.0 2013 2014 2015E 2016E 2017E

€m 80.0 Adjusted EBITDA 70.0 67.2

60.0 50.8 50.0

40.0 34.5

30.0 21.7 20.0

10.0 7.5

0.0 2013 2014 2015E 2016E 2017E

€m 45.0 FFO I 41.5 40.0

35.0 30.2 30.0

25.0

20.0 18.7

15.0 13.6

10.0

5.0 3.0

0.0 2013 2014 2015E 2016E 2017E

Source: Company reports

21 Aroundtown Property Holdings plc Real Estate – Commercial

Grand City Properties as play on German residential real estate Grand City Properties (GCP) has been investing in German residential properties for more than a decade, with a primary focus on structuring the operational turnaround of previously mismanaged properties sourced out of distressed situations (please see our initiation report Realising potential in German residential real estate from 7 November 2014) and our latest note Keeping the pace and the discipline (28 September 2015). GCP’s growth has been remarkably fast; it now owns c71,000 units (as of October). However, we also regard it as very important that the performance of the underlying portfolio has continuously been positive as well. The exposure to so-called stabilised units with vacancy rates at or below 5% amounted to 42%, with average in-place rents of €5.30/sqm/month. Overall vacancy rates came out at 12.5% (as of October).

GCP – portfolio development GCP – portfolio development stages

100,000 90,000 80,000 20,000 60%

70,000 50% 60,000 21,000 40% 50,000 30% 40,000 71,000 30,000 26,000 20% 20,000 43,000 10% 12,000 9,000 10,000 5,000 2,000 0% 0 Early turnaround Advanced turnaround Stabilized stage 2009 2010 2011 2012 2013 2014 Oct-15 2011 2012 2013 2014 Oct-15 Units owned by GCP Units managed by GCP for 3rd parties

Source: Company reports Source: Company reports

While the company’s positive operational progress was clearly supported by promising market fundamentals, GCP has always kept its investment criteria strict. Its focus is still on regions with high population density and solid economic performance. Had that not been the case, the company could have grown even faster. In our view, maintaining investment discipline is important and it has been paying off by resulting in positive vacancy reduction of 2.6% lfl and solid lfl rental growth of 2.4% (as of October).

GCP – geographical portfolio split

Mannheim / Dresden / KL / Leipzig / Frankfurt / Halle, 20% Berlin, 19% Mainz, 6%

Nuremberg - Furth / Munich, 4% North Rhine Westphalia, 29% Other, 16% Bremen / Hamburg, 6%

Source: Company reports

GCP has a clear and straightforward business model when looking at opportunities as well as for the later asset and property management. From the very beginning, its asset and property management teams are involved in the due diligence process in order to assess the reversionary potential as well as the required amount of capex spending. It is not unusual that soon after the acquisition vacancy rates increase as GCP ensures that rental arrears are reduced and it therefore forces delinquent tenants to move out. At the same time, it spends a lot of attention on improving tenant satisfaction, eg with a 24-hour hotline or by ensuring that requests are dealt with in a timely manner.

22 Aroundtown Property Holdings plc Real Estate – Commercial

GCP has built its own IT system, which also gives senior management a real-time insight into tenant requests. We regard this as one of the company’s key success factors in portfolio improvement. Importantly, GCP is not a portfolio trader but follows a long-term horizon and disposals only take place opportunistically.

GCP – business model and property lifecycle

Deal-sourcing network Due Diligence & established for over 11 negotiation of best Acquisition years possible deal terms

Take-over

• Turn-around + Capex Long term • Increase: Rent & hold occupancy • Yield & value (90%) • Decrease operating costs & increase non-recoverable costs • Long term asset Sale at high • Improve tenant satisfaction financing capital gains • In-house proprietary IT (up to 10% software p.a.)

Source: Company reports

It typically takes c4.5 years until a portfolio can be defined as being “stabilised” with vacancies at c5%. Obviously, this can vary significantly between regions but looking into the previous track record and the current regional portfolio structure, we would regard this as achievable for the whole portfolio. Accordingly, the potential from rent reversions and vacancy reduction is substantial.

GCP – current annualised rental income versus market potential GCP – majority of flats rented out at below market rents including vacancy reduction at market rent

600 €m

495 500

400 380

At market Below 300 market value, 10% level, 90% 200

100

0 Current run rate Annualised market potential

Source: Company reports Source: Company reports

GCP shares have performed consistently well and the stock has joined the FTSE EPRA/NAREIT indices, which are important benchmarks for specialist investors. Also the company’s decision to initiate dividend payments with a payout ratio of 30% on FFO I has widened the range of potential investors in the stock.

23 Aroundtown Property Holdings plc Real Estate – Commercial

GCP – ytd share performance

11 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15

Source: Datastream, as of 5 November 2015

GCP’s positive internal and external growth has also materialised in attractive growth rates of all relevant operational KPIs. We expect the momentum to remain positive and would regard our forecasts as conservative.

GCP – forecasts for rental income, adjusted EBITDA and FFO (€m)

€m 700.0 Rental income 581.8 600.0 552.6 515.5 500.0 471.0 416.6 400.0 323.5 300.0 216.8 200.0

100.0

0.0 2014 2015E 2016E 2017E 2018E 2019E 2020E

350.0 €m Adjusted EBITDA 313.1 295.5 300.0 271.7 247.3 250.0 217.0 200.0 158.9 150.0 112.9 100.0

50.0

0.0 2014 2015E 2016E 2017E 2018E 2019E 2020E

€m 250.0 FFO I 217.4 205.0 200.0 188.3 168.3 147.9 150.0

98.4 100.0 76.7

50.0

0.0 2014 2015E 2016E 2017E 2018E 2019E 2020E

Source: Company reports

24 Aroundtown Property Holdings plc Real Estate – Commercial

In our view, the attractiveness of GCP’s investment case also stems from the company’s exemplary financing policy. In February 2013, GCP was the first German property company to be assigned a BB- credit rating from S&P. Only now we have seen some of its peers being rated as well. However, only GCP’s rating has been upgraded in a remarkably short period of time, reaching an investment grade-rating of BBB- in November 2014. In July 2015, the S&P rating was upgraded to BBB. GCP also obtained a Baa2 rating from Moody’s. GCP has been a frequent issuer of convertible, corporate and hybrid bonds; as of June, it issued almost €2bn of unencumbered assets, which is almost two-thirds of the investment property portfolio. Its leverage level is favourably low with a loan-to-value ratio (as of June) of 39% (32% assuming full conversion of the convertible bond). The company has decided to maintain a low gearing policy with a loan-to-value of 50% at most.

Its debt expiry schedule is undemanding and the current average cost of debt is 2%. GCP has not only diversified its funding structure but the number of lending banks has also continuously increased.

GCP’s debt maturity schedule

Source: Company reports

25 Aroundtown Property Holdings plc Real Estate – Commercial

Aroundtown Properties – our earnings forecasts

AT is fully consolidating Camelbay and PCI. GCP was deconsolidated with the FY results for 2014. As described in our initiation note on PCI we expect the portfolio to grow continuously with 20 properties (3,000 rooms) for 2016, followed by 18 properties (2,700 rooms) in 2017 and 15 properties (2,250 rooms) each for 2018 and 2019. This means an annual acquisition volume of c€150m. We have not changed our assumptions for the lfl rental growth improving by 2.5-3.0%, translating into an annual yield compression of 10bp on a lfl basis. We have not included a revaluation scenario for the newly acquired properties. For Camelbay, in addition to the lfl performance as described above, we forecast an annual acquisition volume of c€250m with initial vacancy rates of 15%. We would regard these assumptions as conservative considering the growth of its portfolio this year; however, the German investment market has become more competitive and a number of private equity investors are looking to re-enter the market. In addition to the group’s access to new investments we also follow the repositioning of the portfolio closely and welcome that AT will also report lfl rental growth, presumably from 2016 onwards. We have not included any property disposals by Camelbay or PCI in our numbers yet. All in all, we expect revenues to improve nicely with a CAGR of 24% from 2015E to 2020E.

AT – Total revenues forecast (€m)

450 €m

400 381 343 350 302 300 261 250 219 200

150 128

100

0 2015E 2016E 2017E 2018E 2019E 2020E

Source: Company reports, Berenberg estimates

In H1 2015, AT reported capital gains, property revaluations and other income of €438.5m (after €878m for FY 2014, which included the effect from GCP’s deconsolidation). As the group is specialised in sourcing properties out of distressed situations, the external revaluation can derive a significant uplift, as the new owner can manage the asset properly and is under no pressure to sell. Also, as a large number of transactions are structured as share deals, the positive (or negative) difference to the higher externally appraised value needs to be displayed in the income statement (“bargain purchase”). The group’s portfolio has been appraised predominantly by JonesLangLaSalle, which is among the leading evaluators in Germany. GCP was deconsolidated with the results of FY 2014 based on fairness opinion by an external auditor, setting GCP’s value at €908m. The difference between AT’s stake retained in GCP and its fair market value of €555m was recognised in the income statement as part of capital gains, property revaluation and other income. Obviously, this item in the income statement is non-cash, but due to its high volatility it affects the reported net profit according to IFRS significantly. The non-cash effects were adjusted for the calculation of adjusted EBITDA and funds from operations. Our forecasts for this item on the income statement for 2016-2020E only include the lfl valuation change based on our portfolio forecasts for Camelbay and PCI and no positive valuation change from bargain purchases. Also, we have not included a valuation scenario for newly- acquired properties, but adjust our lfl forecasts on a constant basis.

26 Aroundtown Property Holdings plc Real Estate – Commercial

AT’s current stake in GCP of 35% is accounted under the equity method. Property operating expenses include ancillary costs accounted as purchased services such as energy expenses, which are to a large extent recoverable from tenants. Maintenance and refurbishment costs should grow marginally compared to the overall growth of the portfolio due to the fact that necessary investments/modernisations are already reflected in a discounted purchase price. Administrative and other expenses are not directly linked to the portfolio development, since AT should benefit from scale effects. The financial results for H1 included €11.3m as other financials, which was a non-recurring and also non-cash item predominantly due to fair value gains from derivatives and traded securities. Cash interest expenses are shown in the FFO calculation. We would assume AT will reduce its current average cost of debt further. The larger part of taxes according to IFRS is deferred taxes related to the change in the portfolio value.

AT – income statement forecast

IncomeIncome statementstatement FY2013 FY2014 Q1 2015 Q2 2015 H1 2015 FY2015E FY2016E FY2017E FY2018E FY2019E FY2020E

Rental and operating income 111.0 242.0 0.0 0.0 0.0 127.7 219.2 260.9 302.3 342.7 381.0

Revenues from sales of buildings 70.0 15.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Revenues 181.0 257.0 20.1 26.1 46.2 127.7 219.2 260.9 302.3 342.7 381.0

Change in fair value in investment property 186.0 226.0 0.0 0.0 0.0 31.7 98.3 130.8 164.3 176.6 119.5

Capital gains and profit arising from business combinations (Bargain purchase) 61.0 652.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Capital gains, property revaluations and other income 247.0 878.0 250.8 187.7 438.5 588.5 98.3 130.8 164.3 176.6 119.5

Share in profit from investment in equity-accounted investeesinvestees 0.00.0 0.0 0.00.00.0 28.9 33.2 62.2 99.7 75.8 81.9 86.7 94.8 100.4

Purchased services -34.0 -74.0 0.0 0.0 -6.1 -12.8 -21.9 -26.1 -30.2 -34.3 -38.1

Maintenance and refurbishment -6.0 -16.0 0.0 0.0 -1.0 -3.8 -11.4 -18.3 -22.7 -25.0 -27.1

Personnel expenses -2.0 -8.0 0.0 0.0 -1.0 -3.2 -5.5 -6.5 -7.6 -8.6 -9.5

Other operating costs -2.0 -4.0 0.0 0.0 0.0 -1.5 -3.9 -4.2 -5.4 -6.2 -6.9

Property operating expenses -44.0 -102.0 -2.3 -5.9 -8.1 -21.3 -42.7 -55.1 -65.9 -74.0 -81.5

Cost of buildings sold -55.0 -14.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Personnel expenses -1.0 -2.0 0.0 0.0 -1.2 -2.6 -5.5 -6.5 -7.6 -8.6 -9.5

Legal and professional fees -0.7 -1.3 0.0 0.0 -0.5 -1.3 -1.8 -1.8 -2.0 -2.1 -2.3

Year-end closing, accounting and audit expenses -1.2 -1.5 0.0 0.0 0.0 -0.6 -1.5 -1.7 -1.8 -1.9 -2.0

Sales and marketing expenses -0.1 -1.2 0.0 0.0 0.0 -0.6 -1.8 -2.1 -2.4 -2.7 -3.0

Other administrative expenses -1.8 -1.7 0.0 0.0 -0.7 -1.3 -2.0 -2.1 -2.1 -2.4 -2.7

Depreciation and amortization -0.2 -0.3 0.0 0.0 0.0 -0.3 -0.3 -0.4 -0.4 -0.5 -0.5

Administrative and other expenses -5.0 -8.0 -1.1-1.1-1.1 -1.3-1.3-1.3 -2.4 -6.7 -12.8 -14.6 -16.3 -18.1 -20.0

Operating profit / EBIT 324.0 1,011.0 296.5 239.9 536.3 787.9 337.7 403.9 471.2 521.9 499.4

Adjusted EBIT I excluding valuation results 77.0 133.0 45.7 52.2 97.8 199.4 239.4 273.1 306.9 345.3 379.9

Adjusted EBIT II excluding valuation results and disposal results 62.0 132.0 45.7 52.2 97.8 199.4 239.4 273.1 306.9 345.3 379.9

Finance expenses from credit institutions and straight bonds net -13.0 -12.0 -3.1 -2.8 -6.0 -27.8 -38.5 -44.8 -51.1 -57.6 -63.1

Changes in FV of financial assets and liabilities, net 17.0 -25.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Finance related expenses -6.0 -23.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Expenses related to redeemed convertible bonds (until 2013) / convertible and straight bonds -3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other financial result 8.0 -48.0 10.8 0.5 11.3 11.3 0.0 0.0 0.0 0.0 0.0

Net cash finance expenses -13.0 -12.0 -3.1 -2.8 -6.0 -27.8 -38.5 -44.8 -51.1 -57.6 -63.1

Total financial expenses 3.03.03.0-108.0 7.77.77.7 -2.4 5.35.35.3 -16.5 -38.5 -44.8 -51.1 -57.6 -63.1

EBT 327.0 903.0 304.2 237.5 541.6 771.4 299.2 359.0 420.1 464.3 436.3

Current tax expenses -6.0 -17.0 -1.0 -1.5 -2.4 -8.7 -14.1 -16.3 -18.5 -20.7 -22.8

Deferred tax expenses -30.0 -36.0 -18.3 -15.5 -33.8 -58.8 -14.8 -19.6 -24.6 -26.5 -17.9

Tax and deferred tax expenses -36.0 -53.0 -19.3 -17.0 -36.3 -67.6 -28.8 -35.9 -43.1 -47.2 -40.7

Profit for the year 291.0 850.0 284.9 220.5 505.4 703.8 270.4 323.1 377.0 417.0 395.6 Source: Company reports, Berenberg estimates

27 Aroundtown Property Holdings plc Real Estate – Commercial

As the reported results according to IFRS can be very volatile as mentioned above, they are not an ideal parameter to assess property companies’ operational performance. To gain a clean and more sustainable picture of the earnings development, the reported results are adjusted by one-off results and non-cash items, leading to the adjusted EBITDA. AT’s calculation method is very straightforward in deducting capital gains, property revaluations and other income and only adding the delta between the at-equity consolidated stake in GCP with the effective operational contribution.

AT – adjusted EBITDA forecast (€m)

Adjusted EBITDA calculation FY2013 FY2014 H1 2015 FY2015E FY2016E FY2017E FY2018E FY2019E FY2020E

EBITDA reported 324.0 1,011.0 536.3 787.9 337.7 403.9 471.2 521.9 499.4

Capital gains, property revaluations and other income -247.0 -878.0 -438.5 -588.5 -98.3 -130.8 -164.3 -176.6 -119.5

Result on disposal of inventories - trading properties -15.0 0.0 0.0

Adjusted EBITDA including minorities 62.0 133.0 97.8 199.4 239.4 273.1 306.9 345.3 379.9

Adjusted EBITDA related to Aroundtown's share in GCP 0.0 0.0 25.3 53.1 76.0 86.5 95.1 103.4 109.6

Share in profit from investment in equity-accounted investees 0.0 0.0 -62.2 -99.7 -75.8 -81.9 -86.7 -94.8 -100.4

Adjusted EBITDA excluding minorities 62.0 133.0 61.0 152.7 239.6 277.8 315.3 353.9 389.0 Source: Company reports, Berenberg estimates

AT does not provide an earnings forecasts of its KPIs for a specific fiscal year but a run rate reflecting the status of the underlying portfolio without assuming any future operational improvement or acquisitions. The run rate for the adjusted EBITDA, based on the monthly performance of July multiplied by 12, stands at €167m, reflecting a CAGR of 119% from 2012. Our numbers are always for the fiscal year ending and we would foresee AT’s adjusted EBITDA (as the key operational figure) to continue to perform steadily.

AT – adjusted EBITDA excluding minorities forecast (€m)

450 €m 389 400 354 350 315 300 278 240 250

200 153 150

100

0 2015E 2016E 2017E 2018E 2019E 2020E

Source: Company reports, Berenberg estimates

Funds from operations (FFO) has become the key earnings figure for property companies, though there is no standardised calculation method, unlike for example EPRA earnings defined by the standard setter for European property companies ( www.epra.com ). Nevertheless, FFO generally translates as cash realised net profit from recurrent operations adjusted by non-cash items such as non-cash results from portfolio valuation or from financial derivatives. Accordingly, AT deducts the cash interest expenses and cash taxes from the adjusted EBITDA (as the normalised operational results). Also, the FFO is adjusted by AT’s actual positions in PCI and GCP.

28 Aroundtown Property Holdings plc Real Estate – Commercial

AT – FFO forecast (€m)

FFO as per company's calculation FY2013 FY2014 H1 2015 FY2015E FY2016E FY2017E FY2018E FY2019E FY2020E

EBITDA reported 324.0 1,011.0 536.3 787.9 337.7 403.9 471.2 521.9 499.4

Capital gains, property revaluations and other income -247.0 -878.0 -438.5 -588.5 -98.3 -130.8 -164.3 -176.6 -119.5

Result on disposal of inventories - trading properties -15.0 0.0 0.0

Adjusted EBITDA including minorities 62.0 133.0 97.8 199.4 239.4 273.1 306.9 345.3 379.9

Adjusted EBITDA related to Aroundtown's share in GCP 0.0 0.0 25.3 53.1 76.0 86.5 95.1 103.4 109.6

Share in profit from investment in equity-accounted investees 0.0 0.0 -62.2 -99.7 -75.8 -81.9 -86.7 -94.8 -100.4

Adjusted EBITDA excluding minorities 62.0 133.0 61.0 152.7 239.6 277.8 315.3 353.9 389.0

Finance expense -13.0 -27.0 -6.0 -27.8 -38.5 -44.8 -51.1 -57.6 -63.1

Adjusted EBT 49.0 106.0 55.0 125.0 201.0 233.0 264.2 296.3 326.0

Current tax -6.0 -17.0 -2.4 -8.7 -14.1 -16.3 -18.5 -20.7 -22.8

FFO I including minorities 43.0 89.0 52.6 116.2 187.0 216.7 245.7 275.6 303.1

FFO I related to minorities in GCP and PCI -24.0 -51.0 -12.5 -22.1 -27.1 -33.5 -37.9 -42.9 -47.1

FFO I excluding minorities 19.00 38.00 40.10 94.16 159.83 183.13 207.80 232.70 256.05

FFO I per share 0.04 0.08 0.08 0.17 0.27 0.31 0.35 0.39 0.43

Source: Company reports, Berenberg estimates

We expect the FFO to show a continuous improvement, with a strong rise particularly for FY 2017E and beyond. AT foresees a run rate for the FFO (FFO July 2015 x 12) of €97m. We welcome that the company aims for dividend payments in FY 2016 already (to be paid out in 2017) and the payout ratio was set at 30% on FFO I.

AT – FFO I per share excluding minorities & DPS (€)

0.45 € 0.43

0.40 0.39 0.35 0.35 0.31 0.30 0.27 0.25

0.20 0.17

0.15 0.13 0.12 0.10 0.09 0.10 0.08

0.05

0.00 2015E 2016E 2017E 2018E 2019E 2020E

FFO per share excl. minorities DPS

Source: Berenberg estimates

29 Aroundtown Property Holdings plc Real Estate – Commercial

Arguably, AT’s portfolio is still in the build-up phase, but we welcome the company’s very defensive debt maturity profile with no short-term maturities.

AT – debt maturity profile

Source: Company reports

AT’s balance sheet looks fairly similar to that of other property companies except for the item equity-accounted investees reflecting the stake in GCP. As of June, the 35% stake was accounted at €969m which equals €22/share, which compares to €15.56 as the closing price for 30 June. It is worth mentioning that the stake in GCP is not accounted on the actual price on the stock market but based on the external fairness opinion provided for the deconsolidation as of year-end 2014. The underlying assumptions are being reviewed with an impairment test for the publication of the year-end results.

30 Aroundtown Property Holdings plc Real Estate – Commercial

AT – balance sheet forecast (€m)

Balance sheet FY2013 FY2014 H1 2015 FY2015E FY2016E FY2017E FY2018E FY2019E FY2020E

Equipment and intangible assets 5.0 5.0 4.7 5.2 5.3 5.4 5.5 5.6 5.7 Investment property 1,545.0 426.0 1,469.2 1,697.5 2,838.4 3,402.6 3,996.7 4,620.5 5,113.6 Advanced payments for investment property 11.0 25.0 11.0 26.3 27.6 28.9 30.4 31.9 33.5 Equity-accounted investees 33.0 909.0 969.4 1,069.1 1,144.8 1,226.7 1,313.4 1,408.2 1,508.6 Deferred tax assets 4.0 1.0 0.8 1.7 1.8 2.0 2.2 2.4 2.7 Other long term assets 18.0 178.0 384.2 384.2 268.9 215.1 172.1 137.7 110.2

Non-current assets 1,616.0 1,544.0 2,839.1 3,183.9 4,286.8 4,880.7 5,520.3 6,206.3 6,774.2

Cash and cash equivalents 134.0 28.0 82.3 330.4 100.6 138.2 181.4 231.9 297.7 Short term deposits 2.0 2.0 2.8 1.7 1.7 1.7 1.7 1.7 1.7 Trade securities at fair value through profit and loss 48.0 146.0 139.9 104.9 10.5 5.2 2.6 2.2 1.9 Inventories - trading property 20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Trade and other receivables 63.0 2.0 30.9 14.1 14.5 15.0 15.4 15.9 16.3

Current assets 267.0 178.0 255.8 451.1 127.4 160.1 201.1 251.7 317.6

Total assets 1,883.0 1,722.0 3,094.9 3,635.0 4,414.2 5,040.8 5,721.4 6,458.0 7,091.8

Share capital 0.0 0.0 5.0 6.0 6.0 6.0 6.0 6.0 6.0 Retained earnings and capital reserves 390.0 1,114.0 1,535.9 1,733.4 1,971.3 2,207.7 2,484.5 2,796.5 3,074.8 Non-controlling interest 482.0 108.0 202.5 286.9 319.4 358.2 403.4 453.4 500.9

Equity 872.0 1,222.0 1,743.4 2,026.3 2,296.7 2,571.8 2,893.8 3,255.9 3,581.7

Loans and borrowings 524.0 138.0 240.2 583.9 1,064.2 1,378.8 1,692.1 2,017.9 2,291.3 Straight bonds 195.0 150.0 187.0 187.3 187.3 187.3 187.3 187.3 187.3 Convertible bonds 0.0 97.0 562.8 562.8 562.8 562.8 562.8 562.8 562.8 Derivative financial instruments 17.0 5.0 4.2 5.0 5.0 5.0 5.0 5.0 5.0 Deferred tax liabilities 98.0 47.0 105.4 116.0 140.6 173.3 214.3 258.5 288.4 Other long term liabilities 34.0 2.0 104.4 5.4 5.7 6.0 6.3 6.6 6.9

Non-current liabilities 868.0 439.0 1,204.1 1,460.4 1,965.5 2,313.1 2,667.7 3,038.0 3,341.7

Credit from bank institutions 22.0 42.0 44.5 47.1 48.1 49.0 50.0 51.0 52.0 Current portion of long term loans 10.0 7.0 7.9 9.6 10.5 11.6 12.7 14.0 15.4 Other bank loan 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Trade and other payables 98.0 9.0 87.3 85.0 86.7 88.5 90.2 92.0 93.9 Tax payable 4.0 2.0 1.9 2.0 2.0 2.0 2.0 2.0 2.0 Provisions for other liabilities and charges 5.0 1.0 5.9 4.6 4.7 4.8 4.9 5.0 5.1

Current liabilities 143.0 61.0 147.5 148.3 152.0 155.9 159.9 164.1 168.4

Total liabilities 1,011.0 500.0 1,351.5 1,608.7 2,117.5 2,469.0 2,827.6 3,202.1 3,510.1

Total liabilities and equity 1,883.0 1,722.0 3,094.9 3,635.0 4,414.2 5,040.8 5,721.4 6,458.0 7,091.8

Source: Company reports, Berenberg estimates

31 Aroundtown Property Holdings plc Real Estate – Commercial

AT’s financial ratios are rock solid, and we do not expect this to change. The company increased its outstanding straight bond in January by €40m to €200m, issued a convertible bond of €450m with a coupon of 3% in April and raised €320m equity in July.

AT – financial ratios forecast

FY2013 FY2014 H1 2015 FY2015E FY2016E FY2017E FY2018E FY2019E FY2020E

Total financial debt including corporate bonds and hybrid bond but excluding convertible bond 755.0 337.0 479.6 827.9 1,310.1 1,626.8 1,942.1 2,270.2 2,546.1

Cash 134.0 28.0 82.3 330.4 100.6 138.2 181.4 231.9 297.7

Deposits 2.0 2.0 2.8 1.7 1.7 1.7 1.7 1.7 1.7

Traded securities 48.0 146.0 139.9 104.9 10.5 5.2 2.6 2.2 1.9

Net debt 571.0 161.0 254.7 390.9 1,197.3 1,481.6 1,756.4 2,034.4 2,244.8

Investment properties including assets held for sale and investments in equity accounted investees 1,609.0 1,360.0 2,449.5 2,792.9 4,010.9 4,658.2 5,340.5 6,060.6 6,655.7

Net loan-to-value 35.5% 11.8% 10.4% 14.0% 29.9% 31.8% 32.9% 33.6% 33.7%

Total loan-to-value 46.9% 24.8% 19.6% 29.6% 32.7% 34.9% 36.4% 37.5% 38.3%

Loan-to-value according to banks' covenants

Net debt including convertible bond and corporate bond 571.0 258.0 817.5 953.7 1,760.1 2,044.4 2,319.2 2,597.2 2,807.6

Net loan-to-value including convertible bond accounted as debt 35.5% 19.0% 33.4% 34.1% 43.9% 43.9% 43.4% 42.9% 42.2%

ICR 4.8 11.0 16.4 7.2 6.2 6.1 6.0 6.0 6.0

Net gearing 65% 13% 15% 19% 52% 58% 61% 62% 63%

Net gearing including convertible / corporate bonds 65% 21% 47% 47% 77% 79% 80% 80% 78%

Net debt including convertible bond / adjusted EBITDA 9.2 1.9 13.4 6.2 7.3 7.4 7.4 7.3 7.2

Equity ratio 46% 71% 56% 56% 52% 51% 51% 50% 51%

Source: Company reports, Berenberg estimates

While FFO has become the key earnings indicator, net asset value (NAV) remains a relevant figure for property companies. As it has become a standard measure in the industry, we also refer to the so-called EPRA NAV, where the IFRS equity is adjusted by fair value measurements of derivatives and most importantly by net deferred taxes. As AT’s convertible bond is deeply in the money, we also add it to the calculation of the EPRA NAV. Again, this NAV calculation includes GCP at a value based on the external appraiser’s calculation. We also show an adjusted EPRA NAV, taking only into account AT’s stake of 35% in GCP at the current market cap.

AT – EPRA NAV forecast (€m)

Calculation of EPRA Net Asset Value FY2013 FY2014 H1 2015 FY2015E FY2016E FY2017E FY2018E FY2019E FY2020E

Total equity 872.5 1,222.2 1,743.6 2,026.4 2,296.8 2,571.9 2,894.0 3,256.1 3,581.8

Fair value remasurements of derivative instruments 17.0 5.0 4.2 5.0 5.0 5.0 5.0 5.0 5.0

Deferred tax liabilities 98.0 47.0 105.4 116.0 140.6 173.3 214.3 258.5 288.4

Convertible bond 0.0 97.0 562.8 562.8 562.8 562.8 562.8 562.8 562.8

EPRA NAV 987.5 1,371.2 2,416.0 2,710.1 3,005.1 3,312.9 3,676.0 4,082.3 4,437.9

EPRA NAV per share fully diluted 1.97 2.74 3.85 3.71 4.11 4.53 5.03 5.59 6.07

Adjusted EPRA NAV with GYC-stake based on market cap 1,313.4 2,297.8 2,492.2 2,711.4 2,937.4 3,213.8 3,525.3 3,780.5

Adjusted EPRA NAV / share with GYC-stake based on market cap 2.63 3.66 3.41 3.71 4.02 4.40 4.82 5.17

Source: Company reports, Berenberg estimates

32 Aroundtown Property Holdings plc Real Estate – Commercial

Following AT’s calculation method we forecast a promising development for the EPRA NAV/share.

AT – EPRA NAV per share fully diluted (€)

7.00 € 6.07 6.00 5.59 5.03 5.00 4.53 4.11 4.00 3.71

3.00

2.00

1.00

0.00 2015E 2016E 2017E 2018E 2019E 2020E

Source: Berenberg estimates

33 Aroundtown Property Holdings plc Real Estate – Commercial

Valuation

Standalone valuation leads to an average fair value of €4.85 For the valuation of property stocks, we typically follow a standardised approach, which is based on return on NAV and on a three-stage Gordon growth/dividend discount model. Through this method, we try to determine which companies generate or destroy value and should therefore trade at a premium or discount to NAV. The total return is split into the economic return, which is the sustainable operating profit defined as funds from operations excluding disposal gains, and the indirect profit, which is the result of the valuation changes of the investment property portfolio. The total return is typically forecast for three years. The return on NAV is then compared with the cost of equity. By adding company-specific risk premiums such as those reflecting financial leverage, portfolio quality, transparency or potential share overhangs, we derive the cost of equity. By incorporating financial and non-financial items, we attempt the calculation of a correctly priced, company-specific cost of equity. Finally, the spread between total return and cost of equity in relation to the company’s economic profit leads us to the economic value that is generated or destroyed. By adding the NPVs of the economic value to the NAV, we reach the “fair value” of the company. In general, we believe that a standalone valuation is more reasonable than a peer group based approach. For the “base” cost of equity – calculated via the CAPM – we start with a risk-free rate of 2.75%, a risk premium of 4.0% and a beta of 1.1. For AT, we derive company-specific risk spreads of 60bp according to the criteria below, which leads to a total cost of equity of 7.75%.

Calculation for cost of equity of AT

Portfolio Asset type 0.20% Focussed / Multi-focussed 0.10% Location (national/Pan-European) 0.00% Quality of assets / tenant structure 0.00%

Development exposure 0.00% Management In-/external management 0.00% Experience/track record 0.00% Financing structure LTV -0.10% Structure of debt -0.10% Shareholder structure 0.15% Liquidity / Indices 0.25% Transparency 0.10% Corporate Governance 0.00% Total risk premiums 0.60% Normalised risk free rate 2.75% Risk spread 4.00% Beta 1.10 Total Cost of Equity 7.75% Source: Berenberg estimates

34 Aroundtown Property Holdings plc Real Estate – Commercial

Based on return on NAV and taking the adjusted EPRA NAV reflecting the current market cap of GCP, we derive a fair value of €5.13 for AT based on FY 2016 estimates.

Equity value for AT based on return on net asset value

2016E 2017E 2018E Operating results / FFO 159.8 183.1 207.8 Revaluation results 31.7 130.8 164.3 New equity 0.0 0.0 0.0 Other items 0.0 0.0 0.0 Total return 191.6 313.9 372.1

EPRA Net Asset Value 3,005.1 3,312.9 3,676.0 Adjustments 0.0 0.0 0.0 Adjusted NAV 3,005.1 3,312.9 3,676.0

Return on NAV 6.4% 9.5% 10.1% Cost of equity 7.8% 7.8% 7.8%

Spread -1.4% 1.7% 2.4%

Value creation -41.3 57.1 87.2 Year 2.0 3.0 4.0 NPV -35.6 45.7 64.7 Total value creation 74.8 Net Asset Value 3,005.1 Adjustments 0.0 Equity value 3,079.8

Fair Value 12M 3,079.8

Number of shares 600.1 Fair Value per share 5.13 Source: Berenberg estimates

AT is domiciled in Cyprus and treated as “normal” corporation and not as a real estate investment trust (REIT); therefore it is not tax-exempt. Our DDM valuation, with 40% as the normalised payout ratio, derives a fair value for AT of €4.56 per share.

Equity value of AT based on dividend discount model

Mid-term growth 3.00% Terminal growth 1.50% Sustainable payout 45% Normalised CoE 6.50%

Net Asset Return on (€m)DPS FFO I Payout Cost of equity Growth Value equity (NAV) FY0 0.00 0.17 0% 3.71 4.7% 7.75% FY1 0.08 0.27 30% 4.11 6.5% 7.75% FY2 0.09 0.31 30% 5.03 6.1% 7.75% 15% FY3 0.12 0.39 30% 5.59 6.9% 7.75% 27%

FY1 FY2 FY3 NPV 0.07 0.1 0.1 NPV of forecasted dividend 0.25

FY4 0.18 0.40 FY5 0.19 0.41 FY6 0.19 0.42 FY7 0.20 0.44 FY8 0.20 0.45 FY9 0.21 0.46

FY4 FY5 FY6 FY7 FY8 FY9 NPV 0.14 0.14 0.13 0.13 0.12 0.12 NPV of dividend FY4-FY9 0.14

NPV of Terminal Value 4.17

Fair Value per share 4.56 Source: Berenberg estimates

35 Aroundtown Property Holdings plc Real Estate – Commercial

The range for AT’s fair values based on return on net asset value and on a dividend discount model comes out relatively wide, but one might take into account that the initial payout ratio is relatively low. We would like to stress again that our assumptions for earnings and in particular of NAV growth are fairly conservative. On an equal-weight basis, we set the fair value for AT at €4.85 per share.

Range of fair value for AT on a standalone basis (€)

5.20 5.13 5.10 5.00 4.90 4.84 4.80 4.70 4.60 4.56 4.50 4.40 4.30 4.20 Target price based on Target price based on Average target price for return on NAV DDM AT

Source: Berenberg

36 Aroundtown Property Holdings plc Real Estate – Commercial

Peer group valuation leads to an average fair value of €3.90

For the peer-group we refer to Camelbay, which is AT’s fully-owned commercial property subsidiary, and from our current coverage universe, we have included five German commercial property companies in the peer group for AT: alstria office REIT AG, DO Deutsche Office AG (DO), DIC Asset AG, Hamborner REIT AG,TLG Immobilien AG and WCM. DO and alstria are pure sector plays on offices in Germany, while the others follow a more diversified commercial property portfolio strategy. alstria’s takeover offer for DO has been progressing and is about to be completed towards year-end. However, we have included both companies for the peer group comparison.

Sector focus of AT/Camelbay and peers

Camelbay alstria

Retail, 28% Industrial / logistics, 14% Storage & other, 5%

Office, 53% Office, 100%

Deutsche Office DICDICDIC

Nursing homes, 7% Retail, 18% Other Retail, 4% commercial , 10% Logistics, 3% Residential, Hotel, 2% 1% Office, 84% Office, 71%

Hamborner TLG

Highstreet retail, 32% Retail, 47%

Large-scale Hotel, 10% retail, 33%

Offices, Offices, 35% 34%

VIBVIBVIB WCM

Retail, 34% Retail, 35% Industrial, 7% Offices, 4%

Commecial Warehouse, buildings 5% and others, Logistics / 3% Light Office, 53% industry, 59%

Source: Company reports

37 Aroundtown Property Holdings plc Real Estate – Commercial

alstria has a strong regional focus – in its case Hamburg – whereas the portfolios of DIC Asset, DO and Hamborner are more regionally diversified. In recent years, more of Hamborner’s acquisitions have been located in the southern part of Germany. TLG is a pure play on eastern Germany.

Regional focus of AT / Camelbay and peers

Camelbay alstria

NRW, 12% Hannover, Frankfurt / Stuttgart 9% Mainz, 6% region, 17% Rhine / Ruhr, 17% Berlin, 21% Rhine / Hamburg, Main, 7% 5% Munich, 4% Kassel, 5% Hanover, Mannheim, 3% Munich, 3% Hamburg, Berlin, 2% 22% Stuttgart, 42% Saxony, 2% Other, 13% 2% Leipzig, 2% Others, 5%

Deutsche Office DICDICDIC

Stuttgart, Berlin, 9% 6% Eastern Darmstadt, Germany, 12% Cologne, Central 11% 6% Germany, Frankfurt, 32% Southern 14% Essen, 6% Germany, 20% Munich, 4% Dusseldorf, Hamburg, Notherrn 20% 2% Western Other, 21% Germany, Germany, 13% 24%

Baden- Hamborner TLG Wuerttemb erg, 10% Leipzig, 5% Bavaria, Rostock, 9% 9% Hessen, 8% Lower Dresden, Bremen, 7% Saxony, 11% Hamburg, 15% Other, 27% 4% Frankfurt / Rhine-Main, 3% North- Saxony, 3% Berlin, 44% Rhine West, 43% Thueringia, 2% Berlin, 1%

VIBVIBVIB WCM

Saxony Bremen, 7% Anhalt, 14% Hesse, 6% Lower- Baden - Saxony, Saxony, 8% Wurtember 15% g, 3%

Others, 11% NRW, 6% Bavaria, 80% Berlin, 6% Hesse, 44% Brandenbur g, 1%

Source: Company reports

38 Aroundtown Property Holdings plc Real Estate – Commercial

The tenant structure of the portfolios differs, which is partly due to the varying exposure to single- or multi-tenant properties.

Most relevant tenant structure of Camelbay/AT and peers

alstria Top office tenants alstria Barmer, 3% Tenant WALT HVB 5 years Wurttembe rgische, 3% City og Hannover 20 years Bilfinger Daimler, HP 5 years Berger AG, L'Oreal, 2% 16% E-Plus Mobilfunk 4 years 6% Siemens, Daimler Chrysler 8 years 2% State of Top retail tenants Baden- Tenant WALT Wurttemberg, Real 5 years 2% METRO 4 years City of HUK - REWE 12 years Hamburg, 29% Conurg, 1% Cinemaxx 5 years ATOS Origin, 1%

Daimler, 3% Deutsche Office DICDICDIC ebay Nursing International Home AG, 2% Cologne, Siemens Zurich REWE Deutsche 3% City of AG, 3% Insurance, Hochtief, Zentral, Telekom, 8% Hambur 8% Nursing Home 3% 2% Recklinghausen g, 4% , 2% State of State-run Property and Allianz, 13% Nursing Hesse, 4% Building Home Trier, Department, 1% 2% LG Metro AG, Electronics, 6% Deutsche 1% Deutsche State of Baden Bahn AG, - Württemberg, Telekom, 2% Medtronic, 17% 6% 1%

Hamborner TLG

Top tenants - office Bundesanstalt fur Immobilienaufgaben Jobcenter, Daimler Real Estate OBI, 8% 5% real, 3% Freistaat Thuringen C&A, 2% OstseeSparkasse SAP H&M, 2% Kaufland Gruppe, AREVA, 2% Top tenants - retail 10% EDEKA Group SFC Daimler Real Estate Energy, 2% Freistaat Thuringen Estee OstseeSparkasse Lauder, 2% EDEKA, SAP 14%

VIBVIBVIB WCM Loxxess- BayWa Gruppe, 4% Bau- und Gillhuber Gartenmark Tenant 2 Logistik, te, 4% Tenant 1 (Public 4% (Retail), sector), Anylink 23.9% 11.6% Geis Systems, Industrie- 4% Tenant 3 Service, 7% (Conglomer Continental ate), 5.2% Rudolph- Automotive Gruppe, 7% , 4% Tenant 4 (IT), 5.2% Other, 50.5% Gartenfachm Tenant 5 arkt Dehner, Lidl- Scherm (Chemicals 10% Schwarz-Gruppe, 3% ), 3.6% Gruppe, 3%

Source: Company reports

39 Aroundtown Property Holdings plc Real Estate – Commercial

Camelbay is in terms of portfolio size in the middle of the peer group.

Portfolio details of Camelbay and peers

Deutsche Camelbay alstria DIC asset Hamborner TLG VIBVIBVIB WCM Office Investment properties €1.3bn €1.6bn €1.8bn €2.4bn €0.7bn €1.5bn €0.9bn €437.8m Vacancy rate 17.0% 11.0% 16.4% 10.9% 2.3% 6.7% 2.7% 6.8% WALT 5.0 years 6.8 years 4.7 years 5 years 6.6 years 5.7 years 6.6 years 9.9 years Rental yield 7.5% 6.0% 6.1% 6.6% 6.4% 7.8% 7.3% 6.7%

Source: Company

The lease expiry schedules of all six companies are relatively similar. In general, we would regard an annual expiry of c10% of the entire lease contracts as standard for commercial real estate.

Lease expiry profile of Camelbay and peers

70% Camelbay 65% 35% alstria 32% 60% 30%

50% 25% 23%

40% 20% 17% 17% 30% 15%

20% 10% 6% 10% 10% 10% 4% 10% 5% 5%

0% 0% 2015 2016 2017 2018 >4 years 2015 2016 2017 3-5 years 5-10 years >10 years

80.0% Deutsche Office 60% DICDICDIC 54% 70.0% 67% 50% 60.0% 40% 50.0% 40.0% 30% 30.0% 20% 17% 17.7% 20.0% 12% 11% 7.6% 10% 10.0% 6.9% 5% 0.6% 0.0% 0% 2015 2016 2017 2018 >4 years 2015 2016 2017 2018 >4 years

80% Hamborner 72% 70% TLG (Offices) 65% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 13% 11% 11% 8% 6% 6% 10% 10% 3% 5% 0% 0% 2015 2016 2017 2018 >4 years 2015 2016 2017 2018 >4 years

25% 80% VIBVIBVIB 23% 22% WCM 71% 20% 70% 20% 60% 14% 14% 15% 50% 40% 10% 7% 30%

5% 20% 13% 9% 10% 5% 0% 2% Up to 1 yr 1 - 3 yrs 3 - 5 yrs 5 - 7 yrs 7 - 10 yrs More than 0% 10 yrs 2015 2016 2017 2018 >4 years

Source: Company reports; latest data for WCM excluding the recently acquired DIY market in Olpe and rent extension for an office property in Berlin.

40 Aroundtown Property Holdings plc Real Estate – Commercial

In addition to the companies’ portfolio details, investors have been closely following the development of balance sheet ratios. The loan-to-value levels have been relatively low at most companies in the sector. The vast majority of the debt among the peers has been asset-backed; apart from AT, only DIC has issued non-rated corporate bonds. At 75%, AT has the highest percentage of unencumbered assets among the peers.

Details on debt structure of AT and peers

Aroundtown alstria

Variable, 6%

Fixed or hedged, 94%

Variable, 100%

Deutsche Office DICDICDIC

Fixed / hedged via caps, 20% Variable, 16%

Variable, 12%

Fixed / hedged via Fixed / swaps, 68% hedged, 84%

Hamborner TLG

Fixed or hedged, 99% Variable, 1%

Fixed, 100%

VIBVIBVIB WCM

Variable, 14% Fixed or hedged, 86%

Fixed, 100%

Source: Company reports

41 Aroundtown Property Holdings plc Real Estate – Commercial

In terms of the debt expiry schedule, we see that all the peers have a relatively low amount of debt coming due in the short term and a fairly defensive maturity schedule. AT, obviously, stands out but is also still in the build-up phase (similar to WCM).

Debt maturity profile of AT and peers

800 Aroundtown 750 700 alstria 621 700 600 600 500 500 400 m

€ 400

in €min 300 in 300 200 135 200 100 67 67 100 3 0 0 0 0 0 0 0 0 2015 2016 2017 2018 2019 >5 years 2015 2016 2017 2018 2019 >5 years

Deutsche Office 665 700 Deutsche Office 700 DIC asset 595 600 600 500 500 400 400 m

€ 299 in €min in 300 300 233 204 216 200 200 166 80 100 83 100 100 10 2 0 0 2015 2016 2017 2018 2019 >5 years 2015 2016 2017 2018 2019 >5 years

300 Hamborner 276 600 TLG 477 250 500

200 400 m

€ 150 300 in €min in in 100 200 113 85 50 32 35 100 50 18 0 4 4 15 0 0 2015 2016 2017 2018 2019 >5 years 2015 2016 2017 2018 2019 >5 years

132 250 VIBVIBVIB 140 WCM 126 202 120 200 100 150 80 m

€ 100 in €min in in 100 60 72 73 40 50 32 28 20 9 0 0 0 0 0 0 2015 2016 2017 2018 2019 >5 years Variable 2015 2016 2017 2018 2019 >5 years Source: Company reports

AT is currently not a member of any relevant index.

Stock market details of AT and peers

Deutsche Aroundtown alstria DIC asset Hamborner TLG VIBVIBVIB WCM Office Share price 3.94 12.39 4.10 8.86 9.58 16.46 17.50 2.35 Market cap (€m) 2,364 1,928 740 607 593 1,009 481 258 Free float 27% 95% 35% 67% 78% 53% 80% 88% Largest holder 73% 5% 60% 33% 9% 18% 9% 10% 52W low (€) 3.15 9.15 2.70 6.27 7.46 10.66 13.72 1.05 52W high (€) 4.00 13.36 4.86 9.99 11.28 17.59 17.88 3.22 Average daily turnover (shares, 1Y) 168,000 110,000 170,000 95,000 136,488 15,200 113,260 Weighting in EPRA Global - 0.09% 0.03% 0.02% 0.05% 0.07% - - Weighting in EPRA Europe - 0.52% 0.15% 0.14% 0.28% 0.41% - - Weighting in SDAX - 4.18% - 1.55% 1.61% 3.59% - - Source: Datastream as of 5 November 2015

The sector’s performance has been fairly positive. AT has seen a positive performance once the stock changed into the continuous trading at Euronext in mid-October.

42 Aroundtown Property Holdings plc Real Estate – Commercial

AT and peers performance

3 months performance 1 year performance 3 years performance

Aroundtown 24% WCM 73% VIB 114%

WCM 14% TLG 52% Hamborner 62%

DIC asset 9% Deutsche Office 46% alstria 54%

Hamborner 7% DIC asset 36% DIC asset 50%

VIB 3% alstria 30% Deutsche Office 32%

TLG -2% VIB 26% WCM 24%

alstria -3% Hamborner 24%

Deutsche Office -14%

So urce: Datastream as of 5 November 2015

For FY 2016, the peers are trading at a median FFO yield of 7.4%, at a median dividend yield of 4.0%, and the median premium to NAV is 1%. It has to be noted that range of the valuation multiples within the peer group is very wide.

Valuation levels of peer group

German commercial Market Net Dividend Yield FFO yield Premium/(discount) NAV Price LTV Float % stocks cap gearing 14a 15e 16e 17e 14a 15e 16e 17e 14a 15e 16e 17e

Aroundtown 3.94 2,364 14% 20% 27 0.0% 2.0% 2.3% 3.9% 6.8% 7.7% 7% -4% -13% alstria office 12.39 1,928 51% 123% 95 4.9% 4.0% 4.0% 4.4% 5.9% 5.0% 5.8% 6.4% -6% 17% 6% 4% Deutsche Office 4.10 740 51% 108% 35 5.1% 4.3% 4.8% 5.3% 9.3% 7.1% 8.0% 8.8% -34% -20% -22% -27% DIC Asset 8.86 607 64% 194% 67 4.7% 4.0% 4.0% 4.0% 9.4% 8.0% 7.5% 7.5% -38% -26% -27% -28% HAMBORNER REIT 9.58 593 42% 64% 78 4.5% 4.2% 4.2% 4.4% 6.1% 4.9% 5.6% 5.8% 2% 6% 3% 0% TLG 16.46 1,009 40% 111% 53 2.0% 4.6% 5.1% 5.5% 7.8% 6.1% 6.7% 7.2% -16% 4% -2% -10% VIB 17.50 481 54% 119% 80 2.9% 3.0% 3.1% 3.3% 6.8% 6.7% 7.4% 7.8% -2% 7% 2% -4% WCM 2.35 258 57% 96% 88 0.0% 4.0% 4.6% 4.5% 7.9% 8.3% 7% 1% -6%

average peers 51% 117% 4.0% 3.4% 4.2% 4.5% 7.5% 6.0% 7.0% 7.4% -16% -1% -6% -10% median peers 51% 111% 4.6% 4.0% 4.0% 4.4% 7.3% 6.1% 7.4% 7.5% -11% 6% 1% -6% Source: Berenberg, Bloomberg as of 5 November 2015

A peer group-based valuation has to take into account that alstria and Hamborner are both REITs and therefore have to distribute higher dividends. Also, AT has a lower free float but saw an improvement in the share liquidity recently. Given the size of the portfolio and taking into account its exposure to the residential markets via GCP, we see no reason why AT should not trade at current sector multiples. Applying the peers’ multiples, the rounded mid-point of the valuation range for the fair value is €3.90 per share.

Range of fair value for AT based on peer multiples (€)

4.20 4.15 4.10 4.00 3.88 3.90 3.80 3.70 3.60 3.60 3.50 3.40 3.30 Valuation based on peers Valuation based on peers Peer group-based fair P/NAV2016E P/FFO2016E value for Aroundtown (average)

Source: Berenberg

43 Aroundtown Property Holdings plc Real Estate – Commercial

Given the broad range of the peer groups’ valuation multiples and as we regard AT’s strong balance sheet as a strong plus for the company together with the strong growth potential, we would regard the stand-alone based valuation as more reasonable. We therefore set the price target for the coverage initiation with €4.85, which leads to a Buy rating with an upside of about 23%.

44 Aroundtown Property Holdings plc Real Estate – Commercial

Snapshot of German commercial property markets

The German investment market for commercial real estate was worth €38.2bn in Q3 2015, a 50% increase on the same period last year. This is new all-time high on the German investment market and not only represents the sixth successive year of growth but is also significantly higher than the 10-year average of c€29bn.

Commercial transaction volume in Germany (€bn)

in €bn 60.0 54.7 55.0 49.5 50.0

39.8 40.0 38.2

30.7 30.0 25.3 25.5 23.5 19.6 19.3 20.0

10.3 10.0

0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E H1 2014H1 2015 Commercial transaction volume in Germany Forecast

Source: JLL

Cities where transactions exceeded €4bn during 9M 2015 include Berlin, Frankfurt, and Munich. Berlin has been able to maintain its position as the number one city, recording a transaction volume of over €5bn in 9M 2015 (+83% yoy). Cologne achieved the strongest growth (+102% yoy), although the nominal transaction volume of €980m is at the bottom of the range of big seven.

Commercial transaction volume in Germany in the top seven cities (€m)

in €m 6,000

5,010 5,000 4,140 4,280 4,000 3,500 3,470

3,000 2,740 2,350 2,380 1,935 2,000 1,700 1,130 980 910 1,000 485

0 Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart Q3 2014 Q3 2015

Source: Colliers, JLL

45 Aroundtown Property Holdings plc Real Estate – Commercial

Although the four largest transactions were retail assets (a few large deals include 43 Kaufhof department stores, four shopping centres sold by Corio NV to Klépierre SA and Deka Real Estate’s purchase of the Julia portfolio from D&R Invest), offices were again the most transacted asset class with 40% of transactions, compared to retail with 22%.

Transaction volume of German commercial property by asset class

Retail, 22%

Mixed- use, 11%

Logistics / Industrial, 9%

Office, 40% Other, 14%

Source: JLL

Individual transactions accounted for 67% of transaction volume and have increased yoy by 44% to €25.6bn. The portfolio transaction volume increased by 64% to €12.6bn, big-ticket deals in the €250m-500m range still remain in short supply, even though these are exactly what equity-rich investors are looking for.

Transaction volume of German commercial properties by size (€bn)

Q3 2015

Portfolios, £12.6, 33%

Single assets, £25.6, 67%

Single assets Portfolios

Source: JLL

Foreign investors continue to show interest; their share is now at 54% (c€20.6bn) of transaction volume. In 9M of 2015, 16 out of 20 largest transactions were carried out by international investors. Among the buyers most capital originated, as before, from North America and France, although increased interest is also being seen from Asia.

46 Aroundtown Property Holdings plc Real Estate – Commercial

German office markets recovering In the last few years, take-up in the office leasing markets has remained stagnant after a peak in 2011. This year started out strong with a Q3 take-up of 2,358,400sqm, 15% higher than a year ago, representing the best nine months take-up result since 2011.

German office take-up in the top seven cities (in 1,000sqm) in 1,000 sqm 4,000 3,407 3,500 3,100 2,910 3,026 2,914 3,004 3,000

2,500 2,358 2,051 2,000

1,500

1,000 500

0 2010 2011 2012 2013 2014 2015E Q3 2014 Q3 2015 Office space take up in the top 7 cities in Germany Forecast

Source: Colliers

Düsseldorf (+45% yoy) and Berlin (+47% yoy) have enjoyed increases in take-up levels of over 40% yoy. While Cologne was almost able to offset its decline in H1 with a good third quarter, Hamburg was the worst performer with a -5% decline in take-up yoy. With growing mobility, technological advances and the rising pressure to improve cost efficiency, the current trend is towards the design of offices with more open space and fewer individual workspaces.

German office take-up in the top seven cities (in 1,000sqm)

in 1,000 sqm 700

600 584 517 500 423 398 400 375 350 355 291 300 273 242 204 202 192 191 200

100

0 Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart

Q3 2014 Q3 2015

Source: JLL

47 Aroundtown Property Holdings plc Real Estate – Commercial

The upwards trend in net absorption continues, leading to steadily falling office vacancy rates, indicating that tenants are looking to expand, moving to new and larger premises or new companies are entering the German office market. In Q3 2015 vacancy rates in six out of seven major German cities hit new lows with an aggregate level of 6.9%, down 1ppt yoy. Vacancies in Düsseldorf (-19%) and Berlin (-15%) declined by a disproportionately high level, reflecting the strong demand in Q3 2015. As before, Stuttgart had the lowest vacancy rate (4.9%) among the big seven. This means that its vacancy rate has again fallen below 5% for the first time since the new economy boom at the beginning of the 21 st century. There is currently no evidence that demand will fall significantly in the medium term. Therefore, together with the continuing moderate growth in new-building supply, further reduction in vacancies in other cities can be expected. The current discussion about refugees, and the related question where and how to house them, has now reached the commercial property markets as some propose the conversion and use of office properties for that purpose. Conversions of office stock into residential properties could ensure the removal of older office spaces from stock and lower vacancy rates. With regards to the VW exhaust emission scandal, some investors may worry about its potential impact on the German real estate market. However, the automobile industry is in fact only a small player on the office lettings markets in the big seven – in the last 10 years the total leased to the sector (including parts suppliers) amounted to 480,000sqm, which represents only 1.3% of the total take-up volume over that period.

German offices vacancy in the top seven cities (%)

14.0%

12.0%

10.0% 9.6% 9.1%

8.0%

6.6% 6.4% 6.2% 5.9% 6.0% 4.9%

4.0%

2.0%

0.0% Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart Q1 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

Source: JLL

48 Aroundtown Property Holdings plc Real Estate – Commercial

Development of German offices vacancy (%)

9.0% 11.0% 8.4% 8.5% 9.8% 7.9% 10.0% 8.0% 7.5% 7.0% 9.0% 7.0% 8.0% 6.5% 8.0% 6.0% 7.4% 6.0% 7.0% 7.0% 5.5% 4.9% 6.0% 5.0% 6.0% 4.3% 5.5% 4.5% 4.0% 5.0% 2010 2011 2012 2013 2014 H1 2015 2010 2011 2012 2013 2014 H1 2015 Berlin - vacancy Hamburg - vacancy

12.0% 8.5% 7.9% 11.5% 8.0% 11.4% 11.5% 7.5% 7.1% 7.0% 11.0% 10.8% 10.7% 6.5% 6.1% 6.1% 10.4% 6.0% 10.5% 5.5% 5.1%

10.0% 5.0% 9.7% 4.4% 4.5%

9.5% 4.0% 2010 2011 2012 2013 2014 H1 2015 2010 2011 2012 2013 2014 H1 2015 Dusseldorf - vacancy Munich - vacancy

18.5% 7.0% 17.8% 6.5% 17.5% 6.5%

16.5% 6.0% 15.8% 5.7% 5.4% 15.5% 5.5% 4.9% 14.5% 5.0% 13.9% 13.8%

13.5% 4.5% 4.2% 12.5% 12.5% 4.0% 3.8% 11.8%

11.5% 3.5% 2010 2011 2012 2013 2014 H1 2015 2010 2011 2012 2013 2014 H1 2015 Frankfurt - vacancy Stuttgart - vacancy

Source: Colliers

The shortage of high-quality office properties available at short notice is particularly felt in the prime locations, forcing companies to stay put until they find suitable alternatives. This is not likely to improve in the short term, as many new construction projects are being postponed, presumably as a consequence of the financial crisis and banks being more selective when it comes to financing construction projects. The volume of scheduled office completions is forecast to remain stable at 984,000sqm for 2015. The regional focus of construction during this and next year is on Berlin, Munich and Hamburg. Due to positive market developments, with persistent demand for office space and a decreasing number of completions, rents in major German cities have already risen and are expected to expand further.

49 Aroundtown Property Holdings plc Real Estate – Commercial

German office rent index (1990 = base year)

120 1990=100

110

100

40 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 199820002002200420062008 2010 2012 2014

Real estate rent index - Office

Source: BulwienGesa

In Q3 2015, rents have stabilised at H1 2015 level. Overall, rents in the top seven cities increased by 1.7% yoy with a further increase of 1.5% expected by the end of 2015 following an increase in rents by €0.50 in Hamburg, Munich and Stuttgart and by €1 in Berlin.

German offices rent in the top seven cities (€/sqm/month)

€/sqm/month 40.0

35.5 35.0 33.5

30.0 26.0 24.5 25.0 23.0 22.0 19.5 20.0

15.0

10.0

5.0

0.0 Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart Q1 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

Source: JLL

50 Aroundtown Property Holdings plc Real Estate – Commercial

German prime office rents and yields in the top seven cities (€/sqm/month)

in €/sqm/month 40.0 4.60% 35.5 4.55% 4.50% 35.0 33.5 4.40% 30.0 4.35% 4.35% 4.30%26.0 4.30% 25.0 23.0 24.5 22.0 4.20% 4.15% 19.5 20.0 4.10% 4.10%

4.00% 15.0 3.90% 10.0 3.80% 3.75% 5.0 3.70%

0.0 3.60% Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart

Prime rent Q3 15 (€/sqm/month) Prime yield Q3 15 (%)

Source: JLL

The high level of liquidity in the market has affected the prime yields of traditional investment classes.

EMEA office yield index yoy annual change (bps)

150 (BPs)

100

-50

-100 1995 1996 1997 1998 1999 2000 2001 2002 20032004 2005 2006 2007 20082009 2010 2011 2012 2013 2014 2015

Source: CBRE

Core office prices continue to rise, causing further softening of yields. Due to the short supply of core/high-quality offices, a further decline in yields is expected as the year progresses.

51 Aroundtown Property Holdings plc Real Estate – Commercial

German prime office yields development over the year in the top seven cities (%)

6.00%

5.00% 4.55% 4.30% 4.35% 4.35% 4.10% 4.15% 4.00% 3.75%

3.00%

2.00%

1.00%

0.00% Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Source: JLL

Retail markets in Germany High streets across Germany are again increasingly the focus for international luxury brands, looking for purchasing power, tourist footfall, established retail structures and a successful mix of traditional and suitable more modern architecture. Therefore, it is no surprise that retailers focus on the three most populous cities (Berlin, Hamburg and Munich). Growing demand makes it difficult to find suitable new retail units and rising rents increase the pressure to achieve ambitious turnover targets. In the biggest 10 cities, 75% of retail concepts are operated by international retailers and 71% of shops serve the mainstream sector, while the proportion of the luxury and premium sector was only 29%. Where prime rents are lower, mainstream shops have a larger share, whereas premium and luxury sectors have presence of above 20% only in Munich, Frankfurt and Düsseldorf. Mainstream sector is increasing its focus on “B cities”, mainly looking for footfall and tourist numbers. Transaction volume on the retail investment market more than doubled yoy (increase of +120%) in 9M 2015 to €12.94bn.

Retail transaction volume in Germany (€m)

in €m 18,000

16,000

14,000 12,940

12,000 9,763 10,000 8,423 7,500 7,694 8,000 6,842 5,882 6,000

4,000 2,425 2,000

0 2009 2010 2011 2012 2013 2014 2015E Q3 2014 Q3 2015 Retail transaction volume in Germany Forecast

Source: Colliers

52 Aroundtown Property Holdings plc Real Estate – Commercial

Despite numerous portfolio deals signed in the warehouse store segment, shopping centres defended their position as the most popular asset class among German retail investments during Q3. Since the start of the year, investors have poured slightly more than €5.6bn, or c44% of total transaction volume, into shopping centres. That puts shopping centres well ahead of retail parks and warehouse stores this year to date, which accounted for c€3.8bn, or 29% of total transaction volume. Downtown business buildings and department stores as well as high-street properties accounted for a combined total of €3.5bn, or 27% of invested capital.

Transaction volume of German retail properties by type (€bn)

Q3 2015

High street, £3.5, 27% Shopping centres, £5.7, 44%

Retail parks, £3.8, 29%

Source: JLL

Although retail prime yields remained stable across almost all asset classes qoq, yields have compressed considerably yoy – 20bp for most large cities, 30bp in Berlin and 50bp in Munich.

German prime retail rents and yields in the top cities (€/sqm/annum)

6,000 4.2%

5,000 4.0% 4.0% 4,800 4.0% 3.9% 3.9% 3.9% 4,000 3,960 3,840 3,960 3.8% 3,360 3,180 3,000 3.6% 3.5% 2,000 3.4%

1,000 3.2%

0 3.0% Germany - Berlin Germany - Germany - Germany - Germany - Germany - Munich Cologne Dusseldorf Frankfurt Hamburg

Prime rent Q3 2015 (€/sqm/annum) Prime yield (%)

Source: CBRE

53 Aroundtown Property Holdings plc Real Estate – Commercial

Financials

Profit and loss account Year-end December(EUR m) 2014 2015E 2016E 2017E 2018E Net rents 242242242 128128128 219219219 261261261 302 Direct property expenses -102 -21 -43 -55 -66 Net operating income 140 106 176 206 236 Earnings from property disposals 1 0 0 0 0 Earnings from project developments 0 0 0 0 0 Earnings from other property activities 0 0 0 0 0 Other operating income 0 100 76 82 87 Total revenues 141141141 206 252252252 288288288 323323323 Revaluation result from investment properties (net) 878 32 98 131 164 Total income 1,019 238238238 351351351 418418418 487 Administrative expenses -6 -4 -7 -8 -8 Personnel expenses -2 -3 -5 -7 -8 Other operating expenses 0 0 0 0 0 Total operating expenses ---8-888 ---6-666 ---12-121212 ---14-141414 ---16-161616 EBITDA 1,011 231231231 338338338 404 472472472 EBITDA excl revaluation result (net) 133133133 200 240240240 273273273 307 Depreciation 0 0 0 0 0 EBITA 1,011 231231231 338338338 404 471471471 EBITA excl revaluation result (net) 133133133 199199199 239239239 273273273 307 Amortisation of goodwill 0 0 0 0 0 Amortisation of intangible assets 0 0 0 0 0 Impairment charges 0 0 0 0 0 EBIT (incl revaluation result net) 1,011 231231231 338338338 404 471471471 EBIT excl revaluation result 133133133 199199199 239239239 273273273 307 Interest income -48 11 0 0 0 Interest expenses -35 -28 -39 -45 -51 Depreciation of financial investment -25 0 0 0 0 Investment income 0 0 0 0 0 Financial result ---108-108108108 ---16-161616 ---39-393939 ---45-454545 ---51-515151 Earnings before taxes (incl revaluation result) 903 215215215 299299299 359359359 420420420 Earnings before taxes (excl revaluation result) 252525 183183183 201 228228228 256256256 Total taxes -17 -9 -14 -16 -18 Net income from continuing operations (incl revaluation result) 850850850 147147147 270270270 323323323 377377377 Net income from continuing operations (excl revaluation result) ---28 -282828 115115115 172172172 192192192 213213213 Income from discontinued operations (net of tax) 0 0 0 0 0 Extraordinary items (net of tax) 0 0 0 0 0 Cumulative effect of accounting changes (net of tax) 0 0 0 0 0 Net income (incl revaluation result net) 850850850 147147147 270270270 323323323 377377377 Net income (excl revaluation result net) ---28-282828 115115115 172172172 192192192 213213213 Minority interest 183 84 32 39 45 Net income (net of minority interest, incl revaluation result) 667 636363 238238238 284284284 332332332 Net income (net of minority interest, excl revaluation result) ---211 -211211211 313131 140140140 154154154 167167167 Funds from operations (FFO) 38 94 160 183 208 Source: Company data, Berenberg estimates

54 Aroundtown Property Holdings plc Real Estate – Commercial

Balance sheet Year-end December (EUR m) 2014 2015E 2016E 2017E 2018E Intangible assets 0 0 0 0 0 Investment properties 451 1,724 2,866 3,432 4,027 Development assets - - - - - Property, plant and equipment 5 5 5 5 5 Financial assets 909 1,069 1,145 1,227 1,313 Other non-current assets 178 384 269 215 172 Deferred tax assets 1 2 2 2 2 FIXED ASSETS 1,544 3,184 4,287 4,881 5,520 Properties held for sale 0 0 0 0 0 Inventories 0 0 0 0 0 Accounts receivable 2 14 15 15 15 Accounts receivable and other assets 2 14 15 15 15 Liquid assets 176 437 113 145 186 CURRENT ASSETS 178178178 451 127127127 160160160 201 TOTAL ASSETS 1,722 3,635 4,414 5,041 5,721 Subscribed capital 0 6 6 6 6 Surplus capital 0 0 0 0 0 Additional paid-in capital 0 0 0 0 0 Net profit/loss 1,114 1,733 1,971 2,208 2,484 SHAREHOLDERS' EQUITY 1,114 1,739 1,977 2,214 2,490 MINORITY INTEREST 108108108 287287287 319319319 358358358 403 PROVISIONS AND ACCRUED LIABILITIES 505050 126126126 151151151 184184184 225225225 short-term liabilities to banks 49 57 59 61 63 Bonds (long-term) 247 750 750 750 750 long-term liabilities to banks 138 584 1,064 1,379 1,692 other interest-bearing liabilities 0 0 0 0 0 InterestInterest----bearingbearing liabilities 434 1,391 1,873 2,190 2,505 Accounts payable 9 85 87 88 90 Current liabilities 161616 929292 949494 959595 979797 Deferred income 0 0 0 0 0 Deferred taxes 0 0 0 0 0 LIABILITIES 450 1,483 1,967 2,285 2,602 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,722 3,635 4,414 5,041 5,721 Source: Company data, Berenberg estimates

55 Aroundtown Property Holdings plc Real Estate – Commercial

Cash flow statement EUR m 2014 2015E 2016E 2017E 2018E Funds from operations 383838 949494 160160160 183183183 208 Other recurrent / nonnon----recurrentrecurrent items 979797 176176176 676767 757575 828282 Increase/decrease in working capital 0 0 0 0 0 Cash flow from operating activities 383838 949494 160160160 183183183 208 Capex -322 -17 -28 -34 -40 Payments for acquisitions -85 -617 -426 -433 -430 Financial investments -222 0 0 0 7 Income from asset disposals 0 0 0 0 0 Cash flow from investing activities ---629-629629629 ---634-634634634 ---454-454 ---467-467 ---463-463 Increase/decrease in debt position 621 350 -2 294 264 Dividends paid 0 0 0 -48 -55 Purchase of own shares 0 0 0 0 0 Capital measures 0 325 0 0 0 Others 37 -10 0 0 0 Cash flow from financing activities 658658658 666 ---2-222 246246246 209 Cash flow from operating activities 383838 949494 160160160 183183183 208 Cash flow after maintenance capex 383838 949494 160160160 183183183 208 Cash flow before financing 764764764 903 681 774774774 808 Increase/decrease in liquid assets 1,152 1,569 679679679 1,068 1,072 Source: Company data, Berenberg estimates

56 Aroundtown Property Holdings plc Real Estate – Commercial

Ratios Ratios 2014 2015E 2016E 2017E 2018E Return on equity Net profit / Y/E equity 59.9% 3.6% 12.0% 12.8% 13.3% Recurring net profit / Y/E equity 3.4% 5.4% 8.1% 8.3% 8.3% Net profit / avg. equity 59.9% 3.6% 12.0% 12.8% 13.3% Recurring net profit / avg. equity 3.4% 5.4% 8.1% 8.3% 8.3% Security Net debt 258 954 1760 2044 2319 Debt / equity 39% 80% 95% 99% 101% Net gearing 13% 19% 52% 58% 61% Interest cover 11.0 7.2 6.2 6.1 6.0 EBITDA / interest paid 11.0 7.2 6.2 6.1 6.0 Dividend payout ratio 0% 0% 20% 19% 19% Dividend cover - - 3.3 3.3 3.3 Loan-to-value (LTV) 12% 14% 30% 32% 33% Return on net asset value 3.4% 5.4% 8.1% 8.3% 8.3% Liquidity Current ratio 2.7 3.0 0.8 1.0 1.3 Acid test ratio 2.7 3.0 0.8 1.0 1.3 Source: Company data, Berenberg estimates

57 Aroundtown Property Holdings plc Real Estate – Commercial

Please note that the use of this research report is subject to the conditions and restrictions set forth in the “General inveinvestmentstmentstment----relatedrelated disclosures” and the “Legal disclaimer” at the end of this document. For analyst certification and remarks regardinregardingg foreignforeign investors and countrycountry----specificspecific disclosures, please refer to the respectivrespectivee paragraph at the end of this document.

Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz ––– WpHG)

Company Disclosures Aroundtown Property Holdings plc 1, 3, 5 PrimeCity Investment plc 5 Grand City Properties SA 1, 3, 5 alstria office REIT AG no disclosures DIC Asset AG no disclosures Hamborner REIT AG 3, 5 WCM Beteiligungs und Grundbesitz AG 3, 5

(1) Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”) and/or its affiliate(s) was Lead Manager or Co- Lead Manager over the previous 12 months of a public offering of this company. (2) The Bank acts as Designated Sponsor for this company. (3) Over the previous 12 months, the Bank and/or its affiliate(s) has effected an agreement with this company for investment banking services or received compensation or a promise to pay from this company for investment banking services. (4) The Bank and/or its affiliate(s) holds 5% or more of the share capital of this company. (5) The Bank holds a trading position in shares of this company.

Historical price target and rating changes for Aroundtown Property Holdings plc in the last 12 months

Date Price target --- EUR Rating Initiation of coverage 05 November 15 4.85 Buy 05 November 15

Historical price target and rating changes for PrimeCity Investment plc in the last 12 months

Date Price target --- EUR Rating Initiation of coverage 22 June 15 4.40 Buy 22 June 15

Historical price target and rating changes for Grand City Properties SA in the last 12 months

Date Price target --- EUR Rating Initiation of coverage 08 December 14 14.50 Buy 07 November 13 05 February 15 15.50 Buy 17 March 15 18.50 Buy 28 September 15 19.50 Buy

Historical price target and rating changes for alstria office REIT AG in the last 12 months

Date Price target --- EUR Rating Initiation of coverage 12 January 15 11.80 Buy 16 November 09 24 March 15 14.00 Buy

Historical price target and rating changes for DIC Asset AG in the last 12 months

Date Price target --- EUR Rating Initiation of coverage 12 January 15 9.00 Buy 16 November 09

Historical price target and rating changes for Hamborner REIT AG in the last 12 months

Date Price target --- EUR Rating Initiation of coverage 13 February 15 10.50 Buy 08 February 11 29 May 15 11.50 Buy

58 Aroundtown Property Holdings plc Real Estate – Commercial

Historical price target and rating changes for WCM Beteiligungs und Grundbesitz AG in the last 12 months

Date Price target --- EUR Rating Initiation of coverage 06 August 15 2.65 Buy 06 August 15

Berenberg Equity Research ratings distribution and in proportion to investment banking services, as of 1 October 2015 in respect of section 5 paragraph 4 of the German Financial Analysis Regulation (Finanzanalyseverordnung ––– FinAnV)

Buy 46.90 % 79.31 % Sell 16.94 % 0.00 % Hold 36.16 % 20.69 %

Valuation basis/rating key The recommendations for companies analysed by Berenberg’s Equity Research department are made on an absolute basis for which the following three-step rating key is applicable: Buy: Sustainable upside potential of more than 15% to the current share price within 12 months; Sell: Sustainable downside potential of more than 15% to the current share price within 12 months; Hold: Upside/downside potential regarding the current share price limited; no immediate catalyst visible. NB: During periods of high market, sector, or stock volatility, or in special situations, the recommendation system criteria may be breached temporarily.

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General investmentinvestment----relatedrelated disclosures Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”) has made every effort to carefully research all information contained in this financial analysis. The information on which the financial analysis is based has been obtained from sources which we believe to be reliable such as, for example, Thomson Reuters, Bloomberg and the relevant specialised press as well as the company which is the subject of this financial analysis. Only that part of the research note is made available to the issuer (who is the subject of this analysis) which is necessary to properly reconcile with the facts. Should this result in considerable changes a reference is made in the research note. Opinions expressed in this financial analysis are our current opinions as of the issuing date indicated on this document. The companies covered by Berenberg are continuously followed by the analyst. Based on developments with the relevant company, the sector or the market which may have a material impact on the research views, research reports will be updated as it deems appropriate. The functional job title of the person/s responsible for the recommendations contained in this report is “Equity Research Analyst” unless otherwise stated on the cover. The following internet link provides further remarks on our financial analyses: http://www.berenberg.de/research.html?&L=1&no_cache=1

Legal disclaimer This document has been prepared by Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”). This document does not claim completeness regarding all the information on the stocks, stock markets or developments referred to in it. On no account should the document be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgements. The document has been produced for information purposes for institutional clients or market professionals. Private customers, into whose possession this document comes, should discuss possible investment decisions with their customer service officer as differing views and opinions may exist with regard to the stocks referred to in this document. This document is not a solicitation or an offer to buy or sell the mentioned stock.

59 Aroundtown Property Holdings plc Real Estate – Commercial

The document may include certain descriptions, statements, estimates, and conclusions underlining potential market and company development. These reflect assumptions, which may turn out to be incorrect. The Bank and/or its employees accept no liability whatsoever for any direct or consequential loss or damages of any kind arising out of the use of this document or any part of its content. The Bank and/or its employees may hold, buy or sell positions in any securities mentioned in this document, derivatives thereon or related financial products. The Bank and/or its employees may underwrite issues for any securities mentioned in this document, derivatives thereon or related financial products or seek to perform capital market or underwriting services.

Analyst certification I, Kai Klose, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates.

I, Tina Munda, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates.

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ThirdThird----partyparty research disclosures

Company Disclosures Aroundtown Property Holdings plc no disclosures PrimeCity Investment plc no disclosures Grand City Properties SA no disclosures alstria office REIT AG no disclosures DIC Asset AG no disclosures Hamborner REIT AG no disclosures WCM Beteiligungs und Grundbesitz AG no disclosures

(1) Berenberg Capital Markets LLC owned 1% or more of the outstanding shares of any class of the subject company by the end of the prior month.* (2) Over the previous 12 months, Berenberg Capital Markets LLC has managed or co-managed any public offering for the subject company.* (3) Berenberg Capital Markets LLC is making a market in the subject securities at the time of the report. (4) Berenberg Capital Markets LLC received compensation for investment banking services in the past 12 months, or expects to receive such compensation in the next 3 months.* (5) There is another potential conflict of interest of the analyst or Berenberg Capital Markets LLC, of which the analyst knows or has reason to know at the time of publication of this research report.

* For disclosures regarding affiliates of Berenberg Capital Markets LLC please refer to the ‘Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG)’ section above.

60 Aroundtown Property Holdings plc Real Estate – Commercial

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EQUITY RESEARCH Internet www.berenberg.com E-mail: [email protected] RESEARCH AEROSPACE & DEFENCE CAPITAL GOODS INSURANCE TECHNOLOGY Andrew Gollan +44 20 3207 7891 Sebastian Kuenne +44 20 3207 7856 Iain Pearce +44 20 3465 2665 Adnaan Ahmad +44 20 3207 7851 Charlotte Keyworth +44 20 3753 3013 Philippe Lorrain +44 20 3207 7823 Sami Taipalus +44 20 3207 7866 Jean Beaubois +44 20 3207 7835 Rizk Maidi +44 203 207 7806 Georgios Kertsos +44 20 3465 2715 AUTOMOTIVES Horace Tam +44 20 3465 2726 LUXURY GOODS Daud Khan +44 20 3465 2638 Adam Hull +44 20 3465 2749 Simon Toennessen +44 20 3207 7819 Zuzanna Pusz +44 20 3207 7812 Gal Munda +44 20 3465 2746 Paul Kratz +44 20 3465 2678 Tammy Qiu +44 20 3465 2673 CHEMICALS MEDIA BANKS Sebastian Bray +44 20 3753 3011 Robert Berg +44 20 3465 2680 TELECOMMUNICATIONS Nick Anderson +44 20 3207 7838 John Klein +44 20 3207 7930 Laura Janssens +44 20 3465 2639 Wassil El Hebil +44 20 3207 7862 Adam Barrass +44 20 3207 7923 Evgenia Molotova +44 20 3465 2664 Sarah Simon +44 20 3207 7830 Usman Ghazi +44 20 3207 7824 James Burbridge +44 20 3753 3014 Siyi He +44 20 3465 2697 James Chappell +44 20 3207 7844 CONSTRUCTION METALS & MINING Laura Janssens +44 20 3465 2639 Andrew Lowe +44 20 3465 2743 Lush Mahendrarajah +44 20 3207 7896 Alessandro Abate +44 20 3753 3029 Paul Marsch +44 20 3207 7857 Eoin Mullany +44 20 3207 7854 Robert Muir +44 20 3207 7860 Peter Richardson +44 20 3465 2681 Michael Watts +44 20 3207 7928 THEMATIC RESEARCH Jonathan Sharpe +44 20 3753 3031 MID CAP GENERAL Asad Farid +44 20 3207 7932 FOOD MANUFACTURING AND H&PC Robert Chantry +44 20 3207 7861 BEVERAGES Fintan Ryan +44 20 3465 2748 Gunnar Cohrs +44 20 3207 7894 UTILITIES Javier Gonzalez Lastra +44 20 3465 2719 James Targett +44 20 3207 7873 Sam England +44 20 3465 2687 Robin Abrams +44 20 3465 2635 Adam Mizrahi +44 20 3465 2653 Ned Hammond +44 20 3753 3017 Andrew Fisher +44 20 3207 7937 GENERAL RETAIL Benjamin May +44 20 3465 2667 Mehul Mahatma +44 20 3465 2698 BUSINESS SERVICES, LEISURE & TRANSPORT Conrad Bartos +44 20 3753 3053 Virginia Nordback +44 20 3465 2693 Lawson Steele +44 20 3207 7887 Najet El Kassir +44 20 3207 7836 Michelle Wilson +44 20 3465 2663 Anna Patrice +44 20 3207 7863 Stuart Gordon +44 20 3207 7858 Philip Saliba +44 20 3465 2620 Simon Mezzanotte +44 20 3207 7917 HEALTHCARE Simona Sarli +44 20 3207 7834 ECONOMICS Matthew O'Keeffe +44 20 3207 7895 Scott Bardo +44 20 3207 7869 Kallum Pickering +44 20 3465 2672 Josh Puddle +44 20 3207 7881 Alistair Campbell +44 20 3207 7876 REAL ESTATE Holger Schmieding +44 20 3207 7889 Alastair Reid +44 20 3207 7841 Graham Doyle +44 20 3465 2634 Kai Klose +44 20 3207 7888 Klara Fernandes +44 20 3465 2718 Tina Munda +44 20 3465 2716 Tom Jones +44 20 3207 7877 Louise Pearson +44 20 3465 2747 Laura Sutcliffe +44 20 3465 2669

EQUITY SALES E-mail: [email protected] SPECIALIST SALES SALES (cont.) SALES (cont.) FIXED INCOME BANKS & DIVERSIFIED FINANCIALS UK SCANDINAVIA James Ankerson +44 20 3753 3261 Iro Papadopoulou +44 20 3207 7924 Frederik Angel +44 20 3753 3055 Marco Weiss +49 40 350 60 719 CONSUMER STAPLES John von Berenberg- ELECTRONIC TRADING Rupert Trotter +44 20 3207 7815Consbruch +44 20 3207 7805 SWITZERLAND, AUSTRIA & ITALY Daniel Eichhorn +49 40 350 60 391 CONSUMER DISCRETIONARY Matthew Chawner +44 20 3207 7847 Andrea Ferrari +41 44 283 2020 Matthias Führer +49 40 350 60 597 Victoria Maigrot +44 20 3753 3010 Alexandra Clément +44 20 3753 3018 Stephan Hofer +41 44 283 2029 HEALTHCARE Fabian De Smet +44 20 3207 7810 Carsten Kinder +41 44 283 2024 CRM Frazer Hall +44 20 3207 7875 Toby Flaux +44 20 3465 2745 Gianni Lavigna +41 44 283 2038 Edwina Lucas +44 20 3207 7908 INDUSTRIALS Karl Hancock +44 20 3207 7803 Jamie Nettleton +41 44 283 2026 Greg Swallow +44 20 3207 7833 Chris Armstrong +44 20 3207 7809 Sean Heath +44 20 3465 2742 Benjamin Stillfried +41 44 283 2033 INSURANCE David Hogg +44 20 3465 2628 CORPORATE ACCESS Trevor Moss +44 20 3207 7893 Peter Kaineder +44 20 3753 3062 SALES TRADING Lindsay Arnold +44 20 3207 7821 MEDIA & TELECOMMUNICATIONS Christoph Kleinasser +44 20 3753 3063 HAMBURG Jennie Jiricny +44 20 3207 7886 Julia Thannheiser +44 20 3465 2676 James Matthews +44 20 3207 7807 Alexander Heinz +49 40 350 60 359 Stella Siggins +44 20 3465 2630 MATERIALS David Mortlock +44 20 3207 7850 Gregor Labahn +49 40 350 60 571 Jina Zachrisson +44 20 3207 7879 Eleni Papoula +44 20 3465 2741 Marvin Schweden +49 40 350 60 576 EVENTS Richard Payman +44 20 3207 7825 Tim Storm +49 40 350 60 415 Omi Adjekukor +44 20 3753 3008 SALES George Smibert +44 20 3207 7911 Philipp Wiechmann +49 40 350 60 346 Charlotte Kilby +44 20 3207 7832 BENELUX Anita Surana +44 20 3207 7855 Christoffer Winter +49 40 350 60 559 Natalie Meech +44 20 3207 7831 Miel Bakker +44 20 3207 7808 Paul Walker +44 20 3465 2632 Ellen Parker +44 20 3465 2684 Martin de Laet +44 20 3207 7804 LONDON Sarah Weyman +44 20 3207 7801 Alexander Wace +44 20 3465 2670 FRANCE Mike Berry +44 20 3465 2755 Lisa Winterton +44 20 3753 3057 Thibault Bourgeat +33 1 5844 9505 Stewart Cook +44 20 3465 2752 GERMANY Alexandre Chevassus +33 1 5844 9512 Chris McKeand +44 20 3207 7938 Michael Brauburger +49 69 91 30 90 741 Dalila Farigoule +33 1 5844 9510 Simon Messman +44 20 3465 2754 Nina Buechs +49 69 91 30 90 735 Clémence Peyraud +33 1 5844 9521 AJ Pulleyn +44 20 3207 2756 André Grosskurth +49 69 91 30 90 734 Benjamin Voisin +33 1 5844 9507 Paul Somers +44 20 3465 2753 Joerg Wenzel +49 69 91 30 90 743

US SALES E-mail: [email protected] BERENBERG CAPITAL MARKETS LLC SALES SALES TRADING CRM Member FINRA & SIPC Kelleigh Faldi +1 617 292 8288 Scott Duxbury +1 646 445 5573 Laura Cooper +1 646 445 7201 Shawna Giust +1 646 445 7216 Tristan Hedley +1 646 445 5566 Zubin Hubner +1 646 445 5572 Christopher Kanian +1 646 445 5576 CORPORATE ACCESS Jessica London +1 646 445 7218 Lars Schwartau +1 646 445 5571 Olivia Lee +1 646 445 7212 Ryan McDonnell +1 646 445 7214 Bob Spillane +1 646 445 5574 Emily Mouret +1 415 802 2525 ECONOMICS Peter Nichols +1 646 445 7204 Mickey Levy +1 646 445 4842 Kieran O'Sullivan +1 617 292 8292 Jonathan Saxon +1 646 445 7202