company presentation - grand city properties samigration balance2: 0.9% population density3: 2,424...
TRANSCRIPT
COMPANY PRESENTATION
DEC 2019
2
GCP is a specialist in residential real estate, focused on value-add opportunities in
densely populated areas in Germany
COMPANY OVERVIEW
Net Rental Income1)
€354m
Adjusted EBITDA2)
€293m
FFO I2)
€213m
FFO I yield2)
6%3)
Dividend (65% of FFO I ps) yield over 2019 guidance
3.9%3)
Investment Properties
€7.6bn
Number of units
76k
Net Rentable Area
4.8m sqm
EPRA Vacancy
7.0%
In-place Rent
6.6€/sqm
Number of employees
>900
Key financials
Key facts and figures as of September 2019
EPRA NAV
€4.0 bn
€23.7 per share
EPRA NAVincluding perpetual notes
€5.0 bn
€29.8 per share
Net Profit9M 2019
€365m
€1.80 per share
Capital Structure
LTV 33%
Equity Ratio 50%
95th Percentile
1) Sep 2019 annualized2) 9M 2019 annualized3) based on a share price of €21
€3.5bn3)
Market Cap
Rating
BBB+ (S&P)
Baa1 (Moody’s)
➢ Gold for annual report 2018 (3rd consecutive Gold), awarded in Sept 2019
➢ Gold for sustainability report 2018 (3rd consecutive Gold), awarded in Sept 2019
MDAX
GPR250MSCI
-Global Developed-Europe Developed-Eurozone-Germany
FTSE EPRA/
NAREIT
STOXX 600
DIMAX
MSCI WORLD IMI Core Real Estate
Indices
3
PORTFOLIO OVERVIEWREGIONAL DISTRIBUTION
Regional distribution Sep 2019 (by value)
1.GDP Growth:
2018, data from the respective federal
state is used in case city data is not
available
2. Migration balance:
Average annual migration balance
2013-2017, domestic & foreign migration
3. Population density:
Residents per Sqk (2017)
Mannheim►GDP growth (BW) 1 : 1.5%
►Migration balance2: 0.9%
►Population density3: 2,125 per km2
Nuremberg/Fuerth►GDP growth (BA)1: 1.4%
►Migration balance2: 0.8%
►Population density(N)3: 2,763 per km2
Dresden/Leipzig/Halle
►GDP growth (SN) 1 : 1.2%
►Migration balance2: 0.4%-1.4%
►Population density3: 1,678-1,954 per km2
Berlin
►GDP growth1: 3.1%
►Migration balance2: 1.2%
►Population density3: 4,055 per km2
Frankfurt am Main►GDP growth (HE) 1 : 2.2%
►Migration balance2: 1.2%
►Population density3: 3,008 per km2
Bremen► GDP growth1 : 2.1%► Migration balance2: 1.0%► Population density3: 1,787 per km2
NRW►GDP share 2018 : 21% of total national
►GDP growth1: 0.9%
►Migration balance2: 0.6%
►Population density3: 525 per km2
Hamburg► GDP growth1 : 1.7%► Migration balance2: 0.9%► Population density3: 2,424 per km2
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Best in Class Berlin Portfolio
* all breakdowns are by values
24%of GCP’s Portfolio
PORTFOLIO OVERVIEW (SEP 2019)*
Largest European metropolitan areaWell distributed within NRW 24%
of GCP’s Portfolio
Berlin
Cologne
Berlin
Duisburg
2/3 of the Berlin portfolio is located in top tier neighborhoods:Charlottenburg, Wilmersdorf, Mitte, Kreuzberg, Friedrichshain, Lichtenberg, Schöneberg, Neukölln, Steglitzand Potsdam.
1/3 is well located in affordable locations located primarily in Reinickendorf, Treptow, Köpenick and Marzahn-Hellersdorf.
4th
largest city in Germany
5
Over 90% of the portfolio is situated within a
short walking distance to an underground/overground station
Map represents over 90% of the London portfolio
The total London portfolio, including pre-marketed units consists of ca. 2,400 units
High Quality, well connected London portfolio
12%of GCP’s Portfolio
London - Camden London - Hackney London - Hounslow
* all breakdowns are by values
PORTFOLIO OVERVIEW (SEP 2019)*
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PORTFOLIO OVERVIEW (SEP 2019)*
* all breakdowns are by values
Quality East Portfolio Dresden/Leipzig/Halle Quality North Portfolio Hamburg / Bremen
14%of GCP’s Portfolio
5%of GCP’s Portfolio
LeipzigDresden Hamburg BremenHalle
further diversification in Germany’s fast growing Eastern and largest Northern cities
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Value (in €M)
Area (in k sqm)
EPRA Vacancy
Annualized net rent (in €M)
In-place rent per sqm
(in €)
Number of units Value per sqm
(in €)
Rental yield
NRW 1,832 1,644 8.1% 106 5.7 24,344 1,114 5.8%
Berlin 1,604 553 5.3% 52 8.2 7,469 2,901 3.2%
Dresden/Leipzig/Halle 986 925 9.0% 52 5.2 15,921 1,066 5.3%
Mannheim/KL/Frankfurt/Mainz 377 225 5.0% 19 7.4 3,788 1,673 5.1%
Nuremberg/Fürth/Munich 227 102 3.6% 10 8.2 1,471 2,218 4.4%
Hamburg/Bremen 370 297 4.3% 20 6.0 4,265 1,248 5.5%
London 773 93 5.7% 33 32.2 1,895 8,306 4.3%
Others 964 999 7.8% 62 5.8 16,938 964 6.4%
Development rights and new buildings* 466
Total 7,599 4,838 7.0% 354 6.6 76,091 1,474 5.0%
*of which pre-marketed buildings in London amount to €164m
Quality real estate portfolio
PORTFOLIO OVERVIEW – SEPTEMBER 2019
WELL DISTRIBUTED PORTFOLIO
Dortmund Berlin Halle Hamburg Bremen London
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PORTFOLIO – POTENTIAL TO COME
Large upside potential for rent increase to market levels with very limited downside risk
Current annualized Rental Income vs. Market Potential including vacancy reduction
Only 3% of units subject to rent restrictions from subsidization, beginning from 2020
Total net rental income like-for-like growth of 3.6% for Sep 2019, including in-place rent like-for-like growth of 3.0% and occupancy like-for-like growth of 0.6%
Average residential tenancy length of ~10 years
9
Net Rent (in €m)
CAGR
+11%
Adj. EBITDA (in €m)
CAGR
+10%
FFO I (in €m)
CAGR
+11%
FFO I per share (in €)CAGR
FFO I per share
+7%
AFFO & FFO II (in €m)
*based on 2019 9M Annualized FFO I plus result from disposal of properties in 9M 2019
KEY FINANCIALS (1)
285328
364 380
2016 2017 2018 2019 9MAnnualized
225248
276293
2016 2017 2018 2019 9MAnnualized
160 178
198 213
2016 2017 2018 2019 9MAnnualized
104 111 122 137
229 204
334 310
2016 2017 2018 2019 9MAnnualized
AFFO
FFO II
0.92 0.96 1.01 1.08 1.05
1.121.19
1.28
2016 2017 2018 2019 9MAnnualized
FFO I per share after perpetual notes attribution
FFO I per share
*
10
KEY FINANCIALS (2)
Portfolio value (in €m)
CAGR
+18%
Total equity (in €m)
CAGR
+18%
Net Profit (in €m)
653 639583
2016 2017 2018
4,796
6,388
7,244 7,599
Dec 2016 Dec 2017 Dec 2018 Sep 2019
3,065
3,850
4,667 4,858
Dec 2016 Dec 2017 Dec 2018 Sep 2019
441365
1-9/2018 1-9/2019
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KEY FINANCIALS (3)
EPRA NAV (in €m)
EPRA NAV per share (in €) EPRA NAV incl. perpetual notes per share (in €)
in €m unless otherwise indicatedNAV EPRA NAV
EPRA NAVincluding perpetual notes
Number of shares(in 000’)
Sep 2019 4,422 3,982 5,012
168,059Sep 2019 per share (in €) €26.3 €23.7 €29.8
Per share growth (dividend adjusted) +9% +9% +7%
Per share growth (excl. dividend adjustment) +6% +5% +4%
Dec 2018 4,162 3,753 4,783166,903
Dec 2018 per share (in €) €24.9 €22.5 €28.7
322799
1,349
1,924
2,541
3,3273,753
3,982
5,012
2012 2013 2014 2015 2016 2017 2018 Sep 2019 Sep 2019 incl.perpetual
46.9
9.412.4
16.4
20.222.5 23.7
2012 2013 2014 2015 2016 2017 2018 Sep 2019
46.9
9.4
15.5
20.724.2
28.7 29.8
2012 2013 2014 2015 2016 2017 2018 Sep 2019
CAGR 2012 - Sep 2019 incl. perpetual
+50%
CAGR 2012 - Sep 2019
+30%
CAGR 2012 - Sep 2019
+35%
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GCP – TOP CLASS FINANCIAL RATIOS
BBB+by S&P
Baa1by Moody’s
with a long-term target to reach A-
unencumbered assets
80%€6.4 bn of assets
Well above policy of 50%
LTV 33%Well below board limit of 45%
ICR 6.5x Average debt maturity
8.2 yearswith no significant maturities
in the next years
Cost of Debt
1.3%
13
Maturity schedule
ø Maturity as at
year end 2016 7 years
Investment grade rating by S&P of BBB+ (A-2 Short Term) and from Moody’s of Baa1with a stable outlook. The ratings are supported by a strong financial profile whichvalidates the success of the business model
GCP’s long maturity schedule enables the Company to fully focus on lifting its assetspotentials, with no significant maturities in the near term
Many bank loans – non-recourse, non cross-collateral and non cross-default from variousfinancial institutions
Healthy and conservative capital structure with a low cost of debt of 1.3%
ø 8.2 Years
ø Maturity as at
year end 20177.7 years
ø Maturity as of
end of Sep 2019 8.2 years
ø Maturity as at
year end 20188.2 years
Loan-to-Value
DEBT SCHEDULE
36%34% 33%
45% Board of Directors' Limit
Dec 2017 Dec 2018 Sep 2019
14
88%
6%6%
fixed & swapped
capped
variable
* calculated as the ratio of the unencumbered assets to the total value of investments properties* adjusted EBITDA / interest** adjusted EBITDA / (interest + loan amortization), DSCR aka fixed charge coverage ratio
Unencumbered assets*
Interest Coverage Ratio* & Debt Service Coverage Ratio** (9M 2019)
Interest hedging structure Financing sources mix
94%Hedged
DEBT STRUCTURE AND COVER RATIOS
59% 57%
3% 3%
27% 34%
11% 6%
Dec 2018 Sep 2019
Bank Debt
Straight Bond
Convertible
Equity
Perpetuals
€2.8 bn
€4.1 bn€4.8 bn
€6.4 bn
Dec 2016 Dec 2017 Dec 2018 Sep 2019
56% of value
64% of value
65% of value
80% of value
5.4x
6.5x
DSCRICR
15
GCP has dozens of non-recourse separate bank loans from various
banks and maintains strong relations with a range of banks and
credit providers
FINANCIAL POLICY & FINANCING SOURCES
Strive to achieve A- global rating in the long term
LTV limit at 45%
Maintaining conservative financial ratios with a strong ICR
Unencumbered assets above 50% of total assets
Long debt maturity profile
Good mix of long-term unsecured bonds & non-recourse bank loans
GCP financial policy
Debt to debt plus equity ratio at 45% (or lower) on a sustainable basis
Dividend distribution of 65% of FFO I per share
16
Peer companiesLowerRange
UpperRange
BusinessAmount of units 76k 131k 396k
In-place rent (€ per m2) 6.6 5.8 6.8EPRA vacancy rate 7.0% 3.6% 2.1%
Book value per sqm (€) 1,474 1,295 2,241NRI multiple 20.0x 19.0x 27.4xCredit rating BBB+ / Baa1 BBB+ / Baa1 A- / A3
Key financials
Total cost of debt 1.3% 1.6% 1.3%
LTV 33% 40% 36%
Interest Coverage Ratio (ICR) 6.5x 4.9x 5.8x
Net debt-to-EBITDA 9.1x 15.2x 9.4x
GCP has a low downside risk among the peer group
PEER ANALYSIS (LARGEST 4)
SEPTEMBER 2019
17
Credit Rating development
* rating anchor of Vonovia is BBB, their final rating, after the effects of modifiers, is BBB+
Strong position within the investment grade scaling with a long-term rating of BBB+ (A-2 short term) S&P rating and Baa1 Moody’s rating
GCP’s anchor rating positions the company well for further rating improvements with a strong business risk profile and a conservative financial risk profile.
The Board of Directors of GCP has decided to strategically aim for A- rating from S&P and A3 rating from Moody’s and will continue to implement measures to achieve this target.
CREDIT RATING MATRIX
Score
A
Baa
Aa
A
Baa
Baa
Caa
A
A
Rating:
a) Indicated Outcome from Scorecard Baa1
b) Actual Rating Assigned Baa1
Factor 4 : Leverage and Coverage
a) Total Debt + Preferred Stock / 40% - 43%
b) Net Debt / EBITDA 12.2x - 12.7x
c) Secured Debt / Gross Assets 6% - 8%
d) Fixed Charge Coverage 4.4x - 4.8x
Factor 3 : Liquidity and Access To
a) Liquidity and Access to Capital A
b) Unencumbered Assets / Gross 75% - 80%
a) Gross Assets (USD Billion) $10.7 - $10.9
Factor 2 : Business Profile (25%)
a) Market Positioning and Asset Baa
b) Operating Environment Aa
Real Estate / REIT Industry Grid [1]
Moody's 12-18 Month
Forward View As of
5/31/2019 [2]
Factor 1 : Scale (5%) Measure
[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] This represents Moody's forward view, not the view of the issuer, and unless noted in the text, does not incorporate significant acquisitions and divestitures.
1MINIMAL
2MODEST
3INTERMEDIATE
4SIGNIFICANT
5AGGRESSIVE
6HIGHLEVER-AGED
1EXCELLENT
aaa/aa+ aa a+/a a- bbb bbb-/bb+
2STRONG
aa/aa- a+/a A- BBB+ BBB bb+ bb
3SATISFACTORY
a/a- bbb+ BBB/BBB- BBB-/bb+ bb b+
4FAIR
bbb/bbb- bbb- bb+ bb bb- b
5WEAK
bb+ bb+ bb bb- b+ b/b-
6VULNERABLE
bb- bb- bb- b+ b b-
GCP will continue strengthening its position within the business profile
(Vonovia- BBB+)1)
(GCP)(DW)(Covivio)
(Alstria) 2)
(Aroundtown)
(ADO)
Financial risk profile
Bu
sin
ess
ris
k p
rofi
le
1) rating anchor of Vonovia is BBB, their final rating, after the effects of modifiers, is BBB+2) rating anchor of alstria is BBB+, their final rating after the effect of modifiers is BBB
18
Analyst Research Target Price
MDAX
GPR250 MSCI
-Global Developed-Europe Developed-Eurozone-Germany
FTSE EPRA/
NAREIT
STOXX 600
MSCI WORLD IMI Core Real Estate
Key Index Inclusions
GCP‘s operations are followed by leading real estate market analysts, who conduct independent equity research and provide price targets
ANALYST COVERAGE
31.7
28.0 28.0 27.5 27.025.5 25.2 25.0 25.0 24.5 24.1
23.0 23.0 22.721.0 21.0 21.0 21.0
20.0
17.5
0
4
8
12
16
20
24
28
32
Citigroup29.01.2020
UBS18.11.2019
First Berlin20.08.2019
Deutsche Bank20.02.2020
Berenberg29.01.2020
HSBC15.07.2019
Credit Suisse29.10.2019
KeplerCheuvreux18.11.2019
Commerzbank21.05.2019
J.P. Morgan16.01.2020
Goldman Sachs16.01.2020
BankhausLampe
18.11.2019
Hauck &Aufhäuser11.09.2019
Barclays09.01.2020
Nord LB05.12.2019
DZ Bank19.08.2019
Bank of AmericaMerrill Lynch18.11.2019
Oddo BHF15.11.2019
Jefferies18.11.2019
Kempen & co19.09.2019
19
PlacementFrankfurt Stock Exchange
(Prime Standard)
First equity issuance
19.07.2012 (€2.75 per share)
Number of shares 167,917,771
Number of shares(fully diluted)
180,676,902
Symbol (Xetra) GYC
GCP - Share Price and Total Return Since First Equity Placement (19.7.2012)
2.75 4 4.466.5
9.72 10.8
15.918
24.81
July 2012 Oct 2012* Feb 2013 Dec 2013 Feb 2014* June 2014** Sept 2015 June 2017 Feb2016/2022***
€15.5m €100m €35.7m €175.5m €150m €140m €151m €198m €450m
Share price/conversion price throughout the Company’s issuances
*Refers to the conversion price of the convertible bonds issuance**Effective conversion price 10.8 (9.72 conversion at 111.25% of par)***Refers to the conversion price. Last conversion date/maturity is March 2022
Date of issuance
Amount issued
OwnershipStructure
OUTPERFORMING
20
OUTPERFORMING
Spread over mid-€-swap for straight bonds
3.75% Perpetual notes Spread over mid-€-swap
21-11-2014: S&P rating upgrade to 'BBB-'
09-02-2015: Moody’s assignment of 'Baa2' rating
24-07-2015: S&P rating upgrade to 'BBB'
23-11-2016: S&P rating upgrade to 'BBB+'
07-09-2017:Moody's rating upgrade to 'Baa1'
Issuance spread: 2.01%
Current Spread: 0.47%
Issuance spread: 1.76%
Current Spread: 0.81%
0.00
0.50
1.00
1.50
2.00
2.50
Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19
Series D: remaining 2 years
Series E: remaining 6 years
23-11-2016: S&P rating upgrade to 'BBB+'
07-09-2017:Moody's rating upgrade to 'Baa1'
Issuance spread: 3.90%
Current Spread: 1.30%
-
1.00
2.00
3.00
4.00
5.00
6.00
Sep- 15 Mar- 16 Sep- 16 Mar- 17 Sep- 17 Mar- 18 Sep- 18 Mar- 19 Sep- 19
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GCP is committed to maintaining a high standard of corporate responsibility towards its stakeholders
• GCP implements environment-friendly measures throughout its portfolio, with the goal of reducing its carbon footprint
• Gradually switching to energy sources from 100% renewable energy
• Reducing energy consumption through tenant education and raising awareness
Environmental Social
• Tenant satisfaction is a top priority and an essential part of GCP’s business strategy
• Over a hundred tenant events are organized annually throughout portfolio locations
• Partnering with local organizations and initiatives
• Employee commitment through development programs
Corporate Governance
• Experienced and diverse management board
• Four committees consisting mostly of independent directors for comprehensive oversight: Audit, Risk, Remuneration and Nomination
• Prudent control mechanisms as well as internal and external risk management systems
ESG MEASURES
22
Sustainability awards and ratings
In September 2019 , for the third consecutive year, GCP retained its EPRA BPR Gold Award for the 2018 annual
financial report as well as its EPRA sBPR Gold Award for its EPRA sBPR reporting, highlighting the Company’s continued commitment to the highest standards of
transparency and reporting
The Company’s continuous effort and ongoing commitment to enhancing and expanding its ESG initiatives and reporting was
recognized in February 2019 by Sustainalytics, one of the leading sustainability rating agencies, which ranked GCP in the 95th percentile among 300 global real estate peers, as well as
noting the Company as a leader in its peer group.
95thPercentile
among 300 Real Estate Peers
(February 2019)
(September 2019)
GCP publishes a Corporate Responsibility Report, demonstrating the Company’s commitment to sustainability by presenting to investors, business partners, employees and other stakeholders its
activities and achievements and to embed the high ESG criteria of the Company. The report can be found on our company website in the Sustainability section; grandcityproperties.com/sustainability
23
MANAGEMENT
CEOChristian Windfuhr
Mr. Windfuhr is Grand City Properties’ CEO. Before joining Grand City Mr. Windfuhr served as CEO of Maritim Hotels, with 40 hotels in Germany. Prior to this he served as CEO of Mövenpick. He achievedthe financial turnaround of Mövenpick, drove international expansion, publicly listed the company, and worked out a strategic partnership with Kingdom Holding (HRH Prince Alwaleed) and JP Morgan.Served as Director of TUI, Europe’s largest tour operator. He served high positions in Holiday Inn, Kempinski, & Southern Sun. Graduated at Cornell University.
Board of Directors
Refael ZamirCFOChairman
Mr. Zamir is Grand City’s CFO and Chairman of the Board. Mr. Zamir has over 10 years of international experience in finance and accounting. Before joining GCP at the beginning of 2013, Mr. Zamir servedas a manager for Ernst & Young in the real-estate and financial institutions sectors. Mr. Zamir is a CPA and holds a BA and MBA in finance and business administration.
Simone Runge-BrandnerIndependent director
Ms. Runge-Brandner is an independent Director and member of the audit-, remuneration- and nomination committee. Her past positions include Deal Manager (Director) at UBS Deutschland AG, VicePresident Real Estate Finance/ Investment Funds, Credit Manager at Dekabank Frankfurt and Credit Manager Real Estate Finance at Helaba Frankfurt. Ms. Runge-Brandner has a Diploma in Internationalbusiness administration.
Daniel MalkinIndependent director
Mr. Malkin is an independent Director and member of the audit-, remuneration- and nomination committee. Before joining Grand City, he served as an Investment & fund Manager of fixed incomeinvestment funds at Excellence Investment Bank. Has a BA in Business Administration.
Audit Committee consists of the two independent directors Daniel Malkin and Simone Runge-Brandner
Yakir Gabay Mr. Gabay is the chairman of the Advisory Board. Before GCP, Mr. Gabay was chairman & managing partner of an investment company which managed over $30 billion of assets, before that he was the CEO of the investment banking of Bank Leumi. Mr. Gabay holds a MBA and BA in Accounting/Economics, and is a CPA.
Andrew Wallis Vice chairman, Advisory Board Member. Mr. Wallis was owner and CEO of a large German property management company. Previously he spent 10 years as an investment banker in the city of London for Merrill Lynch and JP Morgan. Mr. Wallis holds an MBA and a CFA.
Claudio Jarczyk Advisory Board member. Prior to GCP, Mr. Jarczyk served as an Executive Director at BerlinHyp Bank specializing in real estate financing with a focus on international clients, as a Chief InternationalExecutive at Landesbank Berlin and as an International Division-Department Manager at Bayerische Vereinsbank Munich. Mr. Jarczyk holds a Dipl.Kfm. / MBA at Munich University.
David Maimon Mr. David Maimon was the President and CEO of EL AL Airlines. Prior to that, Mr. Maimon was EVP of Customer Service, Commerce & Industry Affairs Sales & Marketing in EL AL Airlines and also servedas a Director in various commercial companies such as Leumi Gemel Ltd, Hever and Sun D'Or International Airlines. Mr. Maimon holds an MBA.
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Generating superior risk
adjusted returns for our shareholders &
bondholders
Experienced management team with unique knowledge of the market
Conservative financial leverage with best financial profile in German real
estate market
In-house IT/software to support a strong team
Proven expertise with established track record
Permanent capital and rating improvement & reduction in cost of debt
Top geographical distribution in Germany
Investing in value-add
assets with downside
protection & upside
potential
High EBITDA & FFO margins and operational performance
Diversified portfolio with strong upside potential
Originate transactions at the source profiting from the full value chain
SUMMARY
25
APPENDIX
Essen Hamburg Munich Nuremberg-Fürth
London Berlin
Dortmund Frankfurt Dresden BremenHannover
Cologne
26
GERMANY - ROBUST MACRO ECONOMIC BASE
German GDP Development (€ trillion)
Source: Eurostat September 2019, forecast based on European Commission Summer 2019 Economic Forecast
German Purchasing Power Standard (EU=100)
Source: eurostat
Source: eurostat Source: eurostat
Debt-to-GDP 2018: Major European countries Budget Surplus/Deficit 2018: Major European countries
INCREASING GDP DESPITE GLOBAL ECONOMIC HEADWINDS
LOW DEBT LEVEL AND A BUDGET SURPLUS POSITIONS GERMANY WELL ABOVE THE EU AVERAGE AND MAJOR ECONOMIES
27
GERMANY - STRONG LABOUR MARKET
Strong economic fundamentals with a strong labor market which sees increasing employment, reducing unemployment rates and increasing wages, especially in Berlin, Leipzig and Munich
People in employment and unemployment rate Development of gross monthly earning (in €)
Source: destatis Source: destatis, industry and service sector excluding bonuses
Germany has the second lowest unemployment in the EU which, and according to Deutsche Bank, results in a greater opportunity to find employment than in many other countries. This, combined with attractive wages and a significant income gap compared to many Eastern European countries is a continueddriver for migration
Growth of Employment major German cities* 2009-2018
* B = BerlinD = DüsseldorfF = FrankfurtHH = HamburgL = LeipzigM = MunichS = StuttgartDE = German average
28
GERMANY - INCREASING RESIDENTIAL DEMAND
Increasing population from strong migration balance, and increasing urbanization levels along with a trend towards single-person households drivedemand for residential real estate
Increasing Population in Germany
Population growth major German cities* 2011-2018
Increasing urbanization rate in Germany
Population Density 2018 (residents per km²)
Source: Worldbank
Source: World BankSource: destatis
B = BerlinD = DüsseldorfF = FrankfurtHH = HamburgL = LeipzigM = MunichS = Stuttgart
Positive net migration in Germany (2018-2020 Bundesbank forecast)
29
GERMANY - LOW RESIDENTIAL SUPPLY, SIGNIFICANTLY BELOW DEMAND LEVELS
Building permits at low levels (000’), significantly below demand levelsShortage and high demand increases
cost inflation in construction (indexed)
Source: destatis
Construction over the last 15 years has been exceptionally low and completions even lower, well below target of approx. 370k p.a. according to IWCologne
Strong construction cost inflation of 4.7% for the 2nd quarter of 2019, and well above regular inflation over the last years according to destatis
According to Deutsche Bank the construction shortfall will remain in the near-term. Even when new supply outpaces annual demand, which DB expectsafter 2022, there is a backlog of well over a million units which will take many years to reduce
Due to demographic changes there is a shortage of master craftsmen in Germany which, according to Deutsche Bank, will have a major impact on thecapacity of new supply going forward, more than the lack of construction plots during the current cycle. As a result they deem overcapacity in theconstruction market unlikely
Source: destatis (actuals), IW Cologne (required construction)
According to IW Cologne construction does not follow the regional demand. As a result some, mainly rural regions, have no shortage while in manymetropolitan areas and student cities the problems persisted or worsened
370k p.a. target by IW
30
LONDON MARKET OVERVIEW
Source: Housing in London 2019 - GLA
Growing London population
Upward trent in open market rented housing
New constructions lagging required additionsIncreasingly strong labour market
Very low total vacancy Strong rental growth
KEY DRIVERS: POPULATION GROWTH, STRONG LABOUR MARKET AND ECONOMIC GROWTH
Robust real GVA growth
31
BERLIN
MARKET OVERVIEW
Key drivers: Capital city, positive net migration balance, public administration and start-up hub
Strong population growth attributable to migration – 30k-50k net migration growth p.a.
Highest population density at >4,000 residents per km² and the second most populous EU inner city after London
Strong base in public administration and other services, illustrated by high employment in service sector of 83%, industry and manufacturing 11% and 6% construction
Germany’s strongly growing start-up capital, with 30% of German startups having their HQ in Berlin and the second highestinvestment in startups in Europe in 2017, after London, offering countercyclical GDP diversification
The country’s most popular university among students and one of the most popular university cities world wide
One of Europe’s fastest growing tourist destinations with 13 million visits every year
Source: destatis.de - Genisis database 82111-0001
Nominal GDP 2009-2018
Source: statistik Berlin Brandenburg
Population growth (2014-Nov 2018)
Source: JLL Residential city profile Berlin
Purchase price development Berlin
2013 2015 201720162014 20182000
3000
4000
5000
6000
7000
8000
PrimeMedian
Median & prime rent development Berlin
2013 2015 201720162014 2018
PrimeMedian
15
10
5
20
25
32
NORTH RHINE-WESTPHALIA
MARKET OVERVIEWKey drivers: Economic growth and urbanization
Highest populated federal state in Germany with a population of approx. 18 million
Strongest economic region in Germany, generating 21% of the country’s GDP in 2018
Home to 29 of 79 largest German cities
High population density with 525 inhabitants per sqm, compared to national average of 230/sqm
NRW houses 20 of Germany’s largest 50 companies by revenue
Source: destatis.de - Genisis database 82111-0001
Nominal GDP 2009-2018
Source: JLL Residential city profile Cologne Source: JLL Residential city profile Düsseldorf
Source: JLL Residential city profile Düsseldorf
Median rent development Düsseldorf
2013 2015 201720162014 2018
Source: JLL Residential city profile Cologne
Median rent development Cologne
PrimeMedian
2013 2015 201720162014 2018
Purchase price development Cologne
PrimeMedian
2013 2015 201720162014 2018
Purchase price development Düsseldorf
2013 2015 201720162014 2018
2000 -
3000 -
4000 -
5000 -
6000 -
7000 -
8000 -
2000 -
3000 -
4000 -
5000 -
6000 -
7000 -
15
10
5
20
25
15
10
5
20
25
1 in 4 students in Germany studies in NRW
33 Source: JLL Residential city profile Leipzig
2013 2015 201720162014 2018
PrimeMedian
Source: JLL Residential city profile Leipzig
2013 2015 201720162014 2018
PrimeMedian
Median rent development Leipzig
Purchase price development Leipzig
DRESDEN/LEIPZIG/HALLE
MARKET OVERVIEW
Source: statsitical bureaus of respective cities
Source: destatis.de - Genisis database 82111-0001
5000
4000
3000
2000
1,000
15
10
5
Population growth 2018
Nominal GDP 2009-2018 Sachsen
2017
Key drivers: IT and Key Technology sectors
Software and IT sector experiences most growth across industry and services sectors, the state of Saxony is in the top 5 of patent applications per capita across German statesDresden & Leipzig have recently been declared one of the 12 digital hubs by the Federal Ministry for Economic Affairs and Energy in Germany leading to an increasing number of start-ups in the region.
Major industrial clusters: Microelectronics, Biotechnology, Automotive
Strong population growth figures from high birth rates. Dresden has the highest birth rate among Germany’s largest cities while Leipzig has the highest population growth in Germany since 2012
34
25
20
15
10
5
Source: JLL Residential city profile Hamburg
2013 2015 201720162014 2018
9,000
8,000
7,000
4,000
3,000
Source: JLL Residential city profile Hamburg
2013 2015 201720162014 2018
5,000
6,000
Median rent development Hamburg
Purchase price development Hamburg
HAMBURG/BREMEN
MARKET OVERVIEW
Key drivers: Major ports, Education, Science and Research and Aerospace industry
Hamburg is a major European education, science and research hub, with nearly 20 universities
Hamburg is Germany’s second largest city and boasts the highest GDP per capita of all German states
Bremen is an important economic center with a focus on international trade, aerospace and automotive industries as well as food industry
Hamburg is the 2nd and Bremen the 4th busiest port in Europe, boosting international trade
Population growth Hamburg
Population growth Bremen
35
EQUITY AND BOND BOOKRUNNERS
Aug-19 ➢ Issuance of Series V, 2034 straight bonds of €70m, under the EMTN programme, effective coupon of 1.5% p.a. until 2024
Jul-19 ➢ Issuance of Series U, 2025 straight bonds of €80m, under the EMTN programme, coupon of 0.75%
Jul-19 ➢ Issuance of Series T, 2021 straight bonds of €52m, under the EMTN programme, coupon of 0.6% + 3 month EURIBOR
Jul-19 ➢ Tap issuance of Series J, 2027 straight bonds of €168m to an aggregate nominal amount of €668m
Jul-19 ➢ Issuance of Series S, 2021 straight bonds of €60.5m under the EMTN programme, zero coupon
Jun-19 ➢ Issuance of Series R, 2039 straight bonds of €40m under the EMTN programme, coupon of 2.5% p.a.
Jun-19 ➢ Issuance of Series Q, 2024 straight bonds of CHF 130m under the EMTN programme, full currency hedge to Euro of notional amount, coupon of 0.6% p.a.
Mar-19 ➢ Issuance of Series P, 2029 straight bonds of HKD 290m under the EMTN programme, full currency hedge to Euro, effective coupon of 1.4% p.a. +3 month Euribor
Feb-19 ➢ Issuance of Series O, 2034 straight bonds of €15m under the EMTN programme, effective coupon of 1.7% p.a. +3 month Euribor
Feb-19 ➢ Issuance of Series N, 2039 straight bonds of €88m under the EMTN programme, effective coupon of 1.7% p.a. +3 month Euribor
Jun-18 ➢ Issuance of Series M, 2033 straight bonds of €55m under the EMTN programme, coupon of 1.7% p.a. till 2023
May-18 ➢ Issuance of Series L, 20-year straight bonds of JPY 7.5bn (€57m) due 2038 under the EMTN programme, currency hedge, coupon of 1.4% p.a.
Apr-18 ➢ Issuance of €350 million perpetual notes, coupon of 2.5% p.a.
Feb-18 ➢ Tap issuance of Series H, 2032 straight bonds of €145m to an aggregate nominal amount of €255m
Feb-18 ➢ Issuance of Series K, 2026 straight bonds of CHF 125m under the EMTN programme, currency hedge, coupon of 0.96% p.a.
Feb-18 ➢ Issuance of Series J, 2027 straight bonds of €500m under the EMTN programme, coupon of 1.5% p.a.
Feb-18 ➢ Issuance of Series I, 2028 straight bonds of HKD 900m under the EMTN programme, currency hedge, effective € coupon of 1% p.a. until 2023
Oct-17 ➢ Issuance of Series H, 2032 straight bonds of €110m under the EMTN programme, coupon of 2% p.a
Jul-17 ➢ Issuance of Series G, 2026 straight bonds of €600m under the EMTN programme, coupon of 1.375% p.a.
Jul-17 ➢ Established Euro Medium Term Note (EMTN) Programme
Jun-17 ➢ Equity capital increase of €198 million at €18 per share
Sep-16 ➢ Issuance of €200 million perpetual notes, coupon of 2.75% p.a.
Feb-16 ➢ Issuance of Series F, 2022 convertible bonds of €450m, coupon of 0.25% p.a, conversion price of €25.54
Jan-16 ➢ Completion of the conversion of Series C convertible bonds (€275m)
Sep-15 ➢ Tap issuance of €150m of 10 year straight bond to an aggregate nominal amount of €550m
Sep-15 ➢ Equity capital increase of €151m at €15.9 per share
Jul-15 ➢ Tap issuance of perpetual notes of additional €100m
Apr-15 ➢ Issuance of Series E, 10-year straight bond of €400m with a coupon of 1.5% p.a.
Mar-15 ➢ Tap issuance of perpetual notes of additional €250m
Feb-15 ➢ Issuance of €150m perpetual notes, coupon 3.75%
Oct-14 ➢ Redemption of straight bonds with nominal amount of €350m. Issuance of 7-year straight bond of €500m with a coupon of 2% p.a.
Jun-14 ➢ Tap issuance of convertible bonds with gross proceeds of €140m
Apr-14 ➢ Tap issuance of existing straight bonds with gross proceeds of €160m
Feb-14 ➢ Issuance of Series C, 5-year convertible bonds of €150m and a coupon of 1.50% p.a
PROVEN ABILITY TO ACCESS CAPITAL MARKETS
36
Overview of Covenant Package
Covenant Type GCP (BBB+ from S&P, Baa1 from Moody’s)
Limitation on Debt ✓
Total Debt / Assets <=60%(1)
Limitation on Secured Debt ✓
Secured Debt / Total Assets <=45%(2)
Interest Coverage Ratio ✓
Adjusted EBITDA / Net Cash Interest >= 2.0x(3)
Maintenance of Unencumbered Assets ✓
Unencumbered Assets / Unsecured Net Debt >= 125%(4)
Change of Control Protection ✓
1
2
3
4
Notes: 1) Total Net Debt / Total Net Assets2) Secured Net Debt / Total Assets3) All issuances under the EMTN programme require min. coverage of 1.8x4) Net Unencumbered Assets / Net Unsecured Indebtedness
The straight bonds and the convertible bond are unsecured and have the below covenant package:
5
GCP COVENANT PACKAGE
37
Screening process
Acquisition in densely populated areas and major cities
High cash flow generating assets
Vacancy reduction potential
Rent level per sqm is below market level (under-rented), upside potential
Purchase price below replacement costs and/or below market values
Potential to reduce the operating cost per sqm
Diversified and large base deal sources Acquisition criteria
Institutional investors
Private Equity
Banks
Loan funds Distressed
ownersBroker
network
“cherry-pick”best deals
Receivers
Court Auctions
▪ Yield & value increase▪ Long term asset
financing
AcquisitionDue Diligence & negotiation ofbest possible deal terms
Deal-sourcing network established since 2004
▪ Repositioning + Capex ▪ Increase Rent & occupancy▪ Decrease operating costs & non-
recoverable costs▪ Improve tenant satisfaction▪ In-house proprietary
IT software
Take-over
Sale on opportunistic basis at high capital gains and channel into high quality properties (up to 10% p.a.)
Long term hold (90%)
BUSINESS MODEL AND ACQUISITION CRITERIA
38
Continuous monitoring of portfolio operations, costs and staff performance
Systematic tenant lead following
Spot opportunities for rent increases
Manage re-letting risks
Collection monitoring
Asset Management
Sales & MarketingOperations / Maintenance
ConstructionAcquisitions & Due Diligence
Customer retention
Customer Relation Management (CRM) through Proprietary and Centralized IT system
Düsseldorf
Neu-Isenburg
Bremen
39
Goal of continuously reducing the carbon footprint
HEATING SYSTEMS
• Replacing heating systems to district heating with the focus on renewable resources or centralized gas with the focus
on climate-neutral produced gas
• 1/3 of the portfolio uses gas supplied heating, of which 28% has been switched to climate-neutral gas – CO2 missions
reduced by 20k tons as a result. A further 13% will be switched in the next two years, and the remainder gradually as
existing contracts expire
• New gas contracts are signed only with suppliers that provide 100% climate-neutral gas
EFFICIENCY AND IMPROVEMENTS
• Working with external providers to ensure efficient waste separation and management, optimizing recycling process
• Creating awareness among our tenants through various language-independent handouts, posters and explanatory videos regarding energy and
heating saving behavior and proper trash disposal
• Working on a Photovoltaic pilot project that will supply 150 apartments with solar energy, with potential to expand
• GCP continuously reviews its portfolio to identify potential energy-saving measures or reduction of CO2 emissions
RENEWABLE ENERGY
• Two thirds of properties have been switched to electricity from 100% renewable sources in the past two years, with
the goal of gradually switching when the opportunity arises
• All of GCP’s offices are supplied with energy from 100% renewable resources
• Cost savings of 23% have been achieved to date as a result
95th
Percentile
ESG MEASURES: ENVIRONMENTAL AND SUSTAINABILITY
40
Neighborhood and community initiatives
• The creation and maintenance of a comfortable community feeling is of high priority to Grand City, and this is
the target of our various initiatives
• GCP organizes over 150 family-friendly tenant events such as Easter egg hunts, barbeques, summer and
Christmas-related festivities to foster and support a community feeling, as well as various contests
• Supporting local associations such as kids’ soccer clubs, language schools, homework initiatives for children and
educational projects, social and consulting services, back-to-school equipment, various cultural events, etc.
Additionally, free spaces are provided for activities such as art projects or workshops
Modernization and accessibility measures
• Installations of playgrounds (both indoor and outdoor), fitness trails, BBQ spaces
• Elderly-friendly installations, e.g. elevators, ramps, stair lifts, bathrooms
• Partnering with local bodies and organizations to support the creation of community spaces and contributing to a
comfortable residential environment
Employee commitment
• Leadership Program provides employees the opportunity for personal development and internal advancement
potential
• Providing benefits such as a dedicated, free-of-charge fitness center and classes at the Company’s operational
headquarters
• Regular trainings for all staff (expert in-house and external trainers)
• High employee retention rate, including among management
95th
Percentile
ESG MEASURES: SOCIAL RESPONSIBILITY
41
Best-in-class tenant service through professional and 24/7 availability
A dedicated and professional service team is available 24/7 for existing and
prospective tenants, reachable through toll-free numbers, e-mail, and the recently
launched GCP mobile app
GCP‘s Service Center is certified with two TÜV service quality certificates, and in March
2017 passed the demanding annual TÜV inspection. Additionally, the Service Center
received the ISO 9001:2015 certification in 2019
Ticketing system: tenant applications and requests are documented in detail to allow
for an efficient follow-up on all stages of the request – setting up schedule for repairs,
visiting master apartments, discussing timetables etc. A ticket is not closed until a
request has been followed up to ensure tenant satisfaction
ESG MEASURES: TENANT SATISFACTION
*TÜV approved Service Center*
42
Advanced IT/software systems to monitor the complete portfolio and to
identify fluctuations of tenants, with immediate control over newly acquired
assets
Operational excellence with tenant management software - top service to
ensure tenant satisfaction and reduce termination
Tenant portal app for smartphones, enabling tenants to communicate with
property management, and submit and monitor the status of service requests
Tenants are able to book and manage consultations with property management
through the app
ESG MEASURES: TENANT SATISFACTION WITH IT SUPPORT
43
CONTACT
Halle
DISCLAIMERIMPORTANT:
This presentation has been provided for information purposes only and is being circulated on a confidential basis. This presentation shall be used only in accordance with applicable law, e.g.regarding national and international insider dealing rules, and must not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by the recipient to anyother person. Receipt of this presentation constitutes an express agreement to be bound by such confidentiality and the other terms set out herein. This presentation includes statements,estimates, opinions and projections with respect to anticipated future performance of the Group ("forward-looking statements"). All forward-looking statements contained in this documentand all views expressed and all projections, forecasts or statements relating to expectations regarding future events or the possible future performance of Grand City Properties S.A. or anycorporation affiliated with Grand City Properties S.A. (the “Group”) only represent the own assessments and interpretation by Grand City Properties S.A. of information available to it as ofthe date of this document. They have not been independently verified or assessed and may or may not prove to be correct. Any forward-looking statements may involve significant risks anduncertainties and should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. Norepresentation is made or assurance given that such statements, views, projections or forecasts are correct or that they will be achieved as described. Tables and diagrams may includerounding effects. This presentation is intended to provide a general overview of the Group's business and does not purport to deal with all aspects and details regarding the Group.Accordingly, neither the Group nor any of its directors, officers, employees or advisers nor any other person makes any representation or warranty, express or implied, as to, and accordinglyno reliance should be placed on, the accuracy or completeness of the information contained in the presentation or of the views given or implied. Neither the Group nor any of its directors,officers, employees or advisors nor any other person shall have any liability whatsoever for any errors or omissions or any loss howsoever arising, directly or indirectly, from any use of thisinformation or its contents or otherwise arising in connection therewith. Grand City Properties S.A. does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this presentation.
Katrin PetersenHead of CommunicationsE-mail: [email protected]
www.grandcityproperties.com