Company presentation
November 2020 Zurich | November 2020 1. Company Overview AGENDA 2. Strategy 3. Portfolio 4. Business Update 5. Summary Financials 6. Management of the Company 7. Wrap-up
Zurich | November 2020 2 COMPANY OVERVIEW
Zurich | November 2020 3 20 years Core Assets of investing in in Germany’s Top 7, real estate 1.3 bn US$ Vienna and Moscow Market Value Portfolio Portfolio spanning 15% CAGR 2 Hotels, MV growth 2015 8 Offices, 1 Refurbishment EPH 71.3 Strong international million US$ tenants with long-term Net rental income FY 2019 lease agreements 6.3% Vacancy 7.4% Yield 0.0% Central Europe & 3.2% Central Europe & 9.7% Moscow portfolio 9.8% Moscow portfolio
Zurich | November 2020 COMPANY OVERVIEW 4 AT A GLANCE
Geographical Split Asset Classes Asset Classes Market Value Portfolio in Market Value Portfolio Gross Rental Income ‘000 USD Held for Sale Hotel Retail Austria 10% 9% 198.0 Refurbishment 14% 6%
Hotel 12%
Russia 712.9 Office Office Germany 72% 77% 399.0
Diversified core and core plus commercial real estate portfolio in Central Europe and Russia with better than market yields and vacancy rates due to excellent locations and high-quality tenants
Zurich | November 2020 COMPANY OVERVIEW 5 AT A GLANCE
STANDING STANDING ASSETS IN ASSETS IN DEVELOPMENT GERMANY & RUSSIA PROJECTS AUSTRIA
♦ First class core/ core plus office & hotel ♦ First class core & core plus office ♦ Forward transaction of properties in strong locations properties including high-end retail tenants development/refurbishment projects to increase yield in mature markets ♦ Low vacancies with first class tenants ♦ Stable vacancies compared to market due to prime locations as well as international ♦ Excellent locations in business hubs with ♦ Long-term capital preservation through low and national reliable tenants decreased risk due to sellers’ capital values per sqm responsibilities for finalizing the ♦ High yields above markets ♦ Long-term investment strategy with development and renting out of the immaterial impact of Corona for short-term property
Zurich | November 2020 COMPANY OVERVIEW 6 STRATEGY
Zurich | November 2020 7 INVESTMENT CRITERIA
€
INVESTMENTS DEAL VOLUME RISK PROFILE ASSET CLASS LOCATION
Core commercial Investment target of Fully let income generating Offices, CBD in major real estate in EUR 50 to 350 million assets European cities Hotels (3-5*) Europe’s major cities for single transaction Forward Transactions Mixed use Preferentially EUR 100 Development/ to 200 million Refurbishment
Zurich | November 2020 STRATEGY 8 INTENSIVE EXPANSION IN EUROPE
From a real estate developer to a long-term investor with a diversified portfolio in standing assets across Europe
BERLIN MOSCOW VIENNA ST. PETERSBURG MOSCOW STUTTGART HAMBURG MOSCOW VIENNA DRESDEN
2003 2014 2016 2017 2018 2019 2020
Development of a very attractive Diversification of portfolio to ensure Combining high yields in Russia with high yield core portfolio in Russia long-term capital preservation stability of value and income from Central European portfolio
Zurich | November 2020 STRATEGY 9 5 YEARS VISION
The full impact of the pandemic on the world and EPH’s portfolio is difficult to judge but, as of today, the identified impact is only short-term. The hotel industry might struggle for an uncertain period of time whereas the majority of our international and strong office tenants are not materially affected. Overall, the share of tenants of EPH Group directly affected by the pandemic – like hotels, retail and temporary office spaces – is small.
VIENNA VIENNA EUROPE
2021 2022 2025
EPH expects to close the acquisition In June 2022, we expect the Continuously marketing Further expand the portfolio of the office complexes QBC 1 & 2 and finalization of the refurbishment and sale of apartments focusing on first-class, high quality the parking garage QBC 7 in Vienna project LASS 1 in Vienna. After at our Arbat properties properties in outstanding locations for an approx. consideration of EUR refurbishment the total investment in Moscow across Europe’s major cities 230 million still in 2020 or Q1 2021 amounts to approx. EUR 150 million
Zurich | November 2020 STRATEGY 10 PORTFOLIO
Zurich | November 2020 11 In mln USD PORTFOLIO – STRONG GROWTH
MARKET VALUE 13 IN ‘000 +30.01% p.a.(CAGR) Core Assets 1’300.00 in Germany’s Top Cities, Russia Vienna and Moscow 597.0 1’000.00 349.6 Office/mixed-use 237.7 116.0 237.1 Moscow 700.00 +11.34% p.a. (CAGR) Germany
778.19 779.33 733.20 780.72 400.00 644.35 712.919 Offices/hotels Stuttgart 100.00 Hamburg Berlin 2015 2016 2017 2018 2019 2020 Dresden EPH Russia Portfolio EPH Central Europe Portfolio
Strong growth of Central European portfolio from USD 0 market Austria value in 2015 to USD 600 million in 2020 Office Stable development of market values in Central Europe compared Vienna to fluctuations in Moscow due to currency and ordinary course of the business
Zurich | November 2020 PORTFOLIO 12 PORTFOLIO –LOW VACANIES & HIGH YIELD
PRIME 12.0% PRIME 12.0% OFFICE OFFICE VACANCY 9.0% YIELD 9.0% RATE 6.0% 6.0% $ 3.0% 3.0%
0.0% 0.0% 2017 2018 2019 2017 2018 2019
EPH Portfolio Germany + Vienna Market Germany Top 4 + Vienna Market Moscow EPH Portfolio Moscow
BNP Paribas: European Office Market 2019,2020 ♦ Very low vacancies in Central European portfolio especially compared to market due to prime locations and first-class tenants with long-term leases – totalling to an EPH portfolio vacancy of 6.3% EPH ♦ High yields above average from properties in Moscow and stable but increasing yields in Germany and Vienna totalling to an yield of 7.4%
Zurich | November 2020 PORTFOLIO 13 SELECTED REAL ESTATE
Zurich | November 2020 PORTFOLIO 14 BUSINESS UPDATE
Zurich | November 2020 15 SUCCESSFUL EXPANSION
FULLY LET OFFICE FULLY LET 4-STAR HOTEL REFURBISHMENT 4-STAR HOTEL PROPERTY “STRAL 3 “ PROJECT “LASS1” PROPERTY “SALZ 4” IN BERLIN IN VIENNA IN DRESDEN
APRIL 2020 JUNE 2020 JULY 2020
Zurich | November 2020 BUSINESS UPDATE 16 HOTEL “NHOW” ACQUISITION IN BERLIN
Berlin is the most attractive tourist destination in Germany. We still believe in the Berlin hotel market, especially in the popular, upcoming area Mediaspree. Apart from the location fundamental factors like a consistent and future viable hotel concept, the creditworthiness of the tenant and the construction quality of the building itself remain most important.
MARKET VALUE EUR 92,100,000 CAPITAL VALUE EUR 4,500 / SQM NET RENTAL INCOME EUR 4,145,000
LOCATION Mediaspree - popular, upcoming area in Friedrichshain, Berlin
TENANT NH Hotel Group, the third largest business hotel group in Europe LEASE TERM Until Nov 2035 with the option to extend by further 10 years
RENTABLE AREA 20,160 sqm with a total of 304 rooms
Zurich | November 2020 BUSINESS UPDATE 17 OFFICE ACQUISITION IN VIENNA
Vienna is an exciting market which benefits from its central location in the heart of Europe. We have confidence in the stability of Vienna’s prime office rents. In the long term, COVID-19 will not change the shortage of modern office space in European’s metropolises.
MARKET VALUE EUR 145,000,000 CAPITAL VALUE EUR 5,000 / SQM NET RENTAL INCOME EUR 5,640,000
LOCATION 2nd District, close to the city centre of Vienna
TENANT City of Vienna, the State Police and supermarket Merkur LEASE TERM already more than 50 % of property leased with average term of more than 10 years
RENTABLE AREA 29,000 sqm
Zurich | November 2020 BUSINESS UPDATE 18 HOTEL “INNSIDE MELIA” ACQUISITION IN DRESDEN
Dresden is a popular tourist destination mainly for domestic but also international visitors due to its extensive leisure offer in the historically city centre. The modern city hotel fulfils fundamental factors which define the quality of the asset for the long-term. EPH is convinced that the asset supplements the portfolio in an excellent manner.
MARKET VALUE EUR 51,500,000 CAPITAL VALUE EUR 3,300 / SQM NET RENTAL INCOME EUR 3,000,000 (APPROX.)
LOCATION Situated in the historic centre of Dresden right next to the famous Old Lady
TENANT Meliá Hotels International, one of the largest operators in Spain with a strong global presence LEASE TERM Until Dec 2029, with two five-year extension options
RENTABLE AREA 15,550 sqm with a total of 180 rooms
Zurich | November 2020 BUSINESS UPDATE 19 SUMMARY FINANCIALS
Zurich | November 2020 20 SELECTED INCOME-FIGURES
Net Rental Income in USDk Net Operational Profit in USDk Finance Costs in USDk 40’000 40’000 EPH Russia Portfolio EPH Western Europe Portfolio 35’747 32’647 33’190 31’889 31’386 80’000 - 501 10’115 30’169 3’740 5’811 30’000 26’669 30’000 24’215 60’000 18’723 18’258 20’000 20’000 40’000 14’809 14’341 74’132 70’643 66’806 62’403 61’183 6’302 10’000 10’000 20’000 22’743 0 0 0 2015 2016 2017 2018 2019 2020HY 2020 HY 2015 2016 2017 2018 2019 HY 2020 2015 2016 2017 2018 2019 HY 2020
Russian portfolio net rental income Efficient external management structure with Decreasing interest rates in Russia (now decreasing due to currency impact and optimized costs 4.25 % vs 8-15% in 2014/2015) together renewal of lease agreements with the shift of portfolio to Central Europe Finance costs of approx. USD 32m FY 2019 leaving room for lower interest rates in COVID-19 implications are continuously main item of operational expenses (esp. refinancing managed – as of today, only short-term bonds issued with interest p.a. 5.5% - 7.25% impact visible and notes with interest p.a. 1.5% - 1.7%) Bonds maturing in 2023 & 2024 are likely to be refinanced on better terms
Zurich | November 2020 SUMMARY FINANCIALS 21 SELECTED BALANCE SHEET FIGURES
Total Assets in USDk Equity in USDk 1’476’609 1’600’000 500’000 1’268’556 363’034 375’156 407’332 373’920 1’143’231 1’073’144 400’000 339’169 1’200’000 990’455 1’044’937 300’000 800’000 189’007 200’000 400’000 100’000
0 0 2015 2016 2017 2018 2019 HY 2020 2015 2016 2017 2018 2019 HY 2020
Increase of total assets from 2015 until end of In line with NAV development, the decrease in June 2020 by close to 50% equity mainly driven by currency effects between USD & RUB Annual growth of total assets from 2015 until 2019 of 6.4 % (CAGR)
Zurich | November 2020 SUMMARY FINANCIALS 22 SELECTED BALANCE SHEET FIGURES
Equity Ratio in % Loan-to-Value in % NAV per share in USD 34.74 in m 35 32.82 31.61 32.11 Total Assets Borrowings Loan-to-value 50 32.62 1’750 100% 30 40.73 36.35 37.43 36.82 25.32 1’500 40 35.54 25 75% 33.82 1’250 63% 52% 20 19.08 56% 30 1’000 49% 52% 48% 46% 15 50% 750 20 10 500 25% 10 5 250 0 - 0% 0 2015 2016 2017 2018 2019 HY 2020 Pro-Forma 2015 2016 2017 2018 2019 HY 2020 Pro-forma 2015 2016 2017 2018 2019 HY 2020
Equity ratio of 25.3 % by the end of June The Group’s interest-bearing borrowings have Stable NAV over the past years which 2020 slightly increased over the past years due to next to operational business is mainly additional loan facilities regarding our assets and driven by currency fluctuations notes issued but the borrowings are still well covered by the assets which also increased. HY 2020 valuations were impacted by changes in market assumptions due to corona pandemic
Zurich | November 2020 SUMMARY FINANCIALS 23 MANAGEMENT OF THE COMPANY
Zurich | November 2020 24 BOARD OF DIRECTORS
OLGA MICHAEL TOMASZ HANS GUSTAV ANNAMARIA MELNIKOVA CUTHBERT DUKALA MESSMER STENBOLT VASSILIADES CHAIRMAN
Zurich | November 2020 MANAGEMENT COMMITTEE 25 MANAGEMENT COMMITTEE
OLGA HANS VERA ALEXANDER ANNAMARIA MELNIKOVA MESSMER CHRISTODOULOU NIKOLAEV VASSILIADES CHAIRMAN
Zurich | November 2020 MANAGEMENT COMMITTEE 26 OPERATIONAL MANAGEMENT
VLR GERMANY VALARTIS INTERNATIONAL MANAGING DIRECTOR HEAD OF VALARTIS INTERNATIONAL MOSCOW HEAD OF ASSET MANAGEMENT HEAD OF ASSET & PROPERTY MANAGEMENT THORSTEN LEISCHKE MEDINA DIETZ
VLR Germany is a full cycle asset management Valartis International is a full cycle asset and company located in Frankfurt, Germany, which is property management company located in taking care of the operational management of Moscow which is taking care of EPH’s Russian EPH’s Central European portfolio. portfolio.
VALARTIS ADVISORY SERVICES VALARTIS INTERNATIONAL SECRETARY TO EPH & INVESTOR RELATIONS HEAD ACCOUNTING & CONTROLLING ANNA BERNHART YULIA MAKHINOVA
Valartis Advisory Services takes care of the corporate management and administration of Valartis International is responsible for EPH’s EPH and supports acquisitions and project accounting, financial review as well as developments of the Company. financial consolidation of the Group
Zurich | November 2020 OPERATIONAL MANAGEMENT 27 WRAP UP
Strong core and core plus asset base with better than market yields and vacancy rates due to excellent locations
High asset quality combined with long-term lease contracts with reputable national and international tenants supporting long-term capital preservation
Strong operational performance due to efficient management structure with improvement potential due to decreasing interest rates on the market and diversification to stable economies in Central Europe
Additional acquisitions in the future based on the Group’s investment criteria to further diversify and stabilize
Zurich | November 2020 WRAP-UP 28 EPH European Property Holdings Ltd. c/o Valartis Advisory Services SA St. Annagasse 18 CH-8001 Zurich | Switzerland CONTACT Phone: +41 44 503 5400 [email protected]
The annual report is available in the Investor Relations section of the EPH website at the following link: https://europeanpropertyholdings.com/investors/reports.php
Zurich | November 2020 29 DISCLAIMER
Although the information contained in this presentation is believed to be reliable, we make no representation or warranty as to the accuracy or completeness of any information contained in this presentation or otherwise provided by us and we accept no liability for the accuracy or completeness of such information. Prior to entering into any transaction contemplated hereby (“Transaction”) you should determine, without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these risks), as well as legal, tax and accounting characterizations and consequences of any such Transaction. In this regard, by accepting this presentation, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal, tax or accounting advice, (b) there may be legal, tax or accounting risks associated with any Transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise senior management in your organization as to such legal, tax and accounting advice (and any risks associated with any Transaction) and our disclaimer as to these matters. Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the Private securities Litigation reform Act of 1995. When used in this presentation, the “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, and similar terms and phrases, including references to assumptions, as they relate to Eastern Property Holdings Ltd (“EPH”), its management or third parties, identify forward-looking statements. Forward-looking statements include statements regarding EPH’s business strategy, financial condition, results of operations, and market data, as well as any other statements that are not historical facts. These statements reflect beliefs of EPH’s management as well as assumptions made by its management and information currently available to EPH. Although EPH believes that these beliefs and assumptions are reasonable, the statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. These factors include, but are not limited to, the following: global economic turmoil, weather, and other factors beyond our control, competitive pressures and trends in the real estate industry, our ability to implement our business strategy, our liquidity and capital expenditures, our ability to obtain financing, our ability to compete, including internationally, our ability to introduce new portfolio investments, legal proceedings and regulatory matters, our ability to fund our future capital needs, and general economic conditions. These factors, risks and uncertainties expressly qualify all subsequent oral and written forward-looking statements attributable to EPH or persons acting on its behalf.
Zurich | November 2020 DISCLAIMER 30