100% office exposure at a discount EUR · 2019-06-18 · Godewind Immobilien AG Company Profile...

Godewind Immobilien AG

Sponsored Research Initiating Coverage 18 June 2019

Please refer to important disclosures on the last 5 pages of this document

100% office exposure at a discount

Performance

Source: Factset

Pareto Securities AS has been paid by the issuer to produce this research report. This material is considered by Pareto Securities to qualify as an acceptable minor non-monetary benefit according to the EU MIFID 2 directive. Analysts

As a commercial real estate company, Godewind Immobilien focuses on office assets in the top 7 locations in Germany with stable cash flows and/or substantial upside potential. We see the expected reduction of the vacancy rate from currently c. 24% to 5% in 2021e and the increase of rents to market levels as the main value drivers. Because of the management’s good track record we are confident that Godewind will succeed in significantly reducing the vacancy rates. We initiate coverage with a Buy rating and a TP of EUR 4.50 as the shares are undervalued (2020e P/NAV 0.7x vs peers: 0.9x).

Experienced management team with strong track record

Godewind’s management is well experienced in the real estate sector and has an extensive track record in building a commercial portfolio from scratch. This could be seen from their previous management of WCM which was taken over by TLG Immobilien in 2017 (premium of 18% to NAV). Strong growth since IPO

Since Godewind’s blindpool IPO in April 2018, its portfolio has increased to 10 office assets with a value of c. EUR 840m. Godewind has managed to reduce the vacancy rate from c. 30% since acquisition to c. 24%. Godewind targets to increase the portfolio value to c. EUR 3bn in the mid-term with a LTV of 45%-55%. Significant value upside We see strong upside for Godewind’s NAV which should mainly result from its value-add portfolio as those assets are characterized by high vacancy rates and lower rents. Including the recently announced acquisition (City Gate in Frankfurt), its vacancy rate amounts to c. 24% and we expect the company to decrease it to 5% in 2021e. Financials

Rental income growth will be mainly driven by recent acquisitions and its active asset management activities, i.e. reduction of vacancies and increase of rents. We expect FFO to grow by c. 109% (CAGR 2019e-2021e) and NAV per share to increase by 18% (CAGR 2018-2021e).

Source: Pareto

Gode wind Immobili en AG

Sponsored Research Initiating Coverage

Target price (EUR) 4.5

Share price (EUR) 3.8

Ticker GWD.DE, GWD GR

Sector Real Estate

Property sector Industrial

Shares fully diluted (m) 107.3

Market cap (EURm) 405

Net debt (EURm) 485

Minority interests (EURm) 5

Enterprise value 19e (EURm) 914

2.6

2.8

3.0

3.2

3.4

3.6

3.8

4.0

Jun-18 Aug-18 Nov-18 Jan-19 Mar-19 Jun-19

EUR

GWD CDAX (Rebased)

Katharina Schmenger

+49 69 58997 432, [email protected]

Dr Philipp Häßler CFA

+49 69 58997 414, [email protected]

EURm 2018 2019e 2020e 2021e

Sales 1 35 57 63

NOI 1 22 39 46

NOI margin (%) 81 61 69 73

EPRA NAV ps (EUR) 3.7 4.6 5.3 6.0

DPS (EUR) - 0.0 0.1 0.2

P/EPRA NAV (x) 0.79 0.82 0.71 0.63

EBITDA/EV (%) ns 1.4 3.3 3.9

Div yield (%) - 1.0 3.4 4.6

Godewind Immobilien AG Sponsored Research Initiating Coverage

18 Jun 2019 Pareto Securities Research 2(44)

Investment Case in Charts

Exhibit 1: Investment Case in Charts

Source: Godewind, Pareto Securities Research

Office transaction volume development Development of office KPIs (in % of total space)*

Strong GDP growth and a decline in unemployment rate have been the

key drivers in the office market.

Despite slightly lower GDP prospects in the future demand for offices

should remain solid and rents are expected to further grow even if at lower

rates than in the past.

Source: Colliers, Pareto Securities *Blue line: vacancy rate (%), Red line: take up, Purple line: new constructions Source: vdp

Significant value upside Vacancy rate development

We see further upside for Godewind's NAV which should be mainly driven

by decreasing vacancies of its value-add properties.

Godewind has already been quite successful in reducing vacancy rates in

recent months. We expect this development to continue.

Source: Godewind, Pareto Securities Source: Godewind, Pareto Securities

Net rental income development Development of FFO

Recent acquisitions as well as Godewind's active asset management

measures should positively contribute to its rental income growth (CAGR

2019e-2021e: 33%).

Driven by rental growth as a result of lower vacancies and higher rents we

estimate FFO growth of 109% (CAGR 2019-2021e).

Source: Godewind, Pareto Securities Source: Godewind, Pareto Securities

0.5

27.0

43.547.9

0

10

20

30

40

50

60

2018 2019e 2020e 2021e

EUR m

-3.8

6.6

23.2

28.9

-10-505

101520253035

2018 2019e 2020e 2021e

EUR m

2014 2015 2016 2017 2018

0

5

10

15

20

25

30

35

EUR bn

0%

5%

10%

15%

20%

25%

30%

2018 2019e 2020e 2021e

380

684

37

58

209

IPO NAV Organic Capitalisation of

TLCFs

Net Appreciation Target NAV 2021

0

100

200

300

400

500

600

700

800

EUR m



At a glance

Exhibit 2: At a glance

7


Company

Guidance 2019 (in EUR): Pareto Estimates

FFO FFOFFO per share

NAV per share

na

# of employees FY

2018

Godewind Immobilien AG

Company

Profile

Godewind is a German commercial real estate company with a 100% focus on office in the TOP 7 locations (Berlin, Cologne, Dusseldorf, Frankfurt, Hamburg,

Munich, Stuttgart). The company was founded in 2001. In 2017 its business focus changed into being a commercial real estate company. Since the blindpool IPO

in April 2018 the company is listed in the Prime Standard in Frankfurt. The company currently has a property portfolio with a volume of c. EUR 840m, split over 10

office properties. In the mid-term Godewind targets to increase its real estate portfolio to around EUR 3bn.

Business FocusGodewind focuses on office properties in the TOP 7 locations in Germany. Unlike some of its peers like e.g. TLG it does not hold any legacy assets from past portfolo transactions. Godewind buys office properties with relatively high vacancy

rates which it targets to reduce by active asset management.

Portfolio overviewAs of June 2019 Godewind had 10 assets with a total value of EUR c. 840m. Around 47% of its assets are located in Frankfurt, 26% in Hamburg, 21% in Dusseldorf and 6% in Munich. Average vacancy rate amounted to c. 24% which is

clearly above market levels. LTV of the portfolio stood at 50%. The split between core (+) and value-add is 45% to 55%.

Acquisitions Since its listing in April 2018 Godewind has bought 10 office properties, latest acquisition was the City Gate in Frankfurt for EUR 85m.

Tenant structure The ten largest of Godewind's tenants (excl. CitGate acquisition), which stand for nearly 50% of rental income, are well-known names like e.g. Deutsche Lufthansa, Shell, Deutsche Telekom and the Arbeitsagentur.

Dividend policy Godewind has not yet paid any dividends to shareholders but intends to pay out at least 60% of its FFO as dividend to shareholders going forward.

Funding As of June 2019 total funding amounted to EUR 453m and average interest cost stood at 1.4%. Net LTV stood at c. 51% and Godewind does not have any large maturities before 2024.

DriversMain earnings drivers in the next two years should be the reduction of the high vacancy rate and increase of rents to market levels. This together with a lengthening of WALT should not only lead to higher earnings but also to higher NAVs.

Further acquisitions are likely but taken into account for our earnings estimates.

Strategy &

Guidance

Strategy:

(I) Vacancy reduction via active asset management

(II) Increase of average rent per sqm

(III) Lengthening of the WALT

(IV) Further acquisitions of office properties

Consensus

n.a. 6.61 7.510.06 0.074.59 4.36

2018Rental income (EUR m) 0.6m FFO I (EUR m) -3.8 GAV (EURm)

na na

CFO

• CFO since foundation

• Previously, he was the CFO of WCM

• More than 17 years of property experience

19 FTEs

NAV (EURm) 396.4

y/y

301

na

Portfolio Split &

Development of

KPI's

Portfolio split by property Development of Vacancy Rate

Shareholder

structure &

management

Stavros Efremidis Ralf Struckmeyer Shareholder structure

CEO

• CEO since foundation

• previously CEO of WCM

• more than 30 years of experience in the property sector

• Second largest shareholder with 12% stake

14%

12%

74.48%

Karl Ehlerding

Stavros Efremidis

Free Float

Herzog-Terassen

19%

FAC16%

Zeughaus15%

Y211%

Pentahof8%

Rest31%

0%

5%

10%

15%

20%

25%

30%

2018 2019e 2020e 2021e



Valuation

We have based our valuation on a peer group analysis and a Dividend Discount Model. We applied multiples analysis, using 2020e P/FFO and P/NAV multiples, with other German commercial real estate companies as peers and calculated a fair value per share of EUR 4.13. We have derived a fair value of EUR 4.89 from our Dividend Discount Model. Our Target Price of EUR 4.50 is calculated from the average of the two fair values. We recommend buying the shares as we see significant upside through decreasing vacancies.

Peer Group Analysis

Our Peer Group Analysis is based upon a multiples comparison of Godewind with other commercial real estate companies taking into account P/FFO and P/NAV multiples. As Godewind is focusing on German commercial real estate companies our peer group consists of only German commercial real estate companies, i.e. we have not taken into account residential real estate companies and/or foreign companies.

See Appendix I for details on the peers’ real estate portfolios and the KPI’s.

Alstria Office REIT-AG (Market Cap: EUR 2.5bn) is one of Germany’s largest listed real estate companies. The company focuses on acquiring, owning and managing office real estate in Germany. Its portfolio across attractive German office real estate markets comprises of 115 properties valued at EUR 3.9bn (Q1 2019). A major part of the portfolio is located in Hamburg (31% in terms of investment volume), followed by Rhine-Ruhr (28%) and Rhine-Main (19%). The business model is based on long-term leases, a high-quality tenant mix and stable revenues. As a REIT, Alstria Office benefits at company level from exemption from corporation and trade tax. Aroundtown (Market Cap: EUR 8.7bn) holds a commercial portfolio of EUR 14.8bn, and mainly has office properties (53% in terms of value), hotel assets (25%) and logistics/wholesale assets (11%). In Germany its commercial portfolio is located in Berlin (21%), followed by Frankfurt (12%), NRW (11%), Munich (7%) and Hamburg (5%). Aroundtown also holds assets abroad (London: 4%, Amsterdam: 5%, Utrecht and Rotterdam each 2%). DEMIRE (Market Cap: EUR 0.5m) is a real estate company that focuses on commercial real estate in secondary locations in Germany, i.e. medium-sized cities and up-and-coming areas bordering metropolitan areas. As of March 2019 the company had 84 properties with a market value of EUR 1,131m. The portfolio consists of office (68%), retail (24%) and logistic (6%) properties with a rental yield of 6.5% (as of Q1 2019). Hamborner REIT-AG (Market Cap: EUR 0.7bn) is active in the property sector and is positioned as a portfolio holder for high-yielding commercial properties. The company, based in Duisburg, has sustainable rental incomes with a nationally-dispersed substantial property portfolio as its foundation. The portfolio dominantly includes large-scale retail (48%), highstreet/retail (13%) and office properties (33%). As a REIT, Hamborner is exempt from corporation and trade tax. The major part of its assets is located in NRW. TLG Immobilien (Market Cap: EUR 2.8bn) is a commercial real estate company with a focus on office, retail and hotel assets in Germany. As of March 2019, TLG’s portfolio consisted of 391 properties with a market value of EUR 4.1bn, divided into office (54%), retail (29%) and hotel (8%) assets. VIB Vermögen (Market Cap: EUR 0.7bn) develops, acquires and owns commercial assets with a focus on high-growth regions of Southern Germany. Its current portfolio consists of 108 commercial assets with a value of EUR 1.2bn. Its



portfolio is mainly divided into logistics/ light industry properties (65% in terms of annualized net rental income) and retail assets (28%). In terms of portfolio locations Alstria and Aroundtown are the closest peers. In terms of asset focus Alstria is the closest peer as Alstria is solely focused on German office properties. Like Godewind Alstria and Aroundtown have with 1.8% (as of Q1 2019) comparably low funding costs (peer group as of Q1 2019: 2.1%) Aroundtown’s portfolio is also characterized by a high vacancy rate (as of Q1 2019: 8.9% vs. avg. vacancy rate of the peer group: 5.2% and Godewind: c. 24%).

Exhibit 3: Valuation overview German Commercial Real Estate Companies

Source: Pareto Securities Research, FactSet, Bloomberg

Company Share

Price (LC)

MC (LC m) PER 2019e PER 2020e P/FFO 2019e P/FFO 2020e P/NAV 2019e P/NAV 2020e Yield 2018e

Hamborner Reit 9.0 717 40.6 36.7 13.3 12.7 0.8 0.8 5.1%

VIB 24.5 676 11.7 10.9 14.1 13.1 1.1 1.1 2.6%

Alstria Office 14.4 2,556 10.9 13.6 22.2 21.7 0.9 0.9 3.6%

Demire 4.9 524 10.9 12.3 24.3 20.3 1.0 0.7 0.0%

Aroundtown 7.7 8,672 7.1 8.0 18.7 16.6 0.9 0.8 3.3%

TLG Immobilien 27.4 2,829 13.0 15.3 19.8 18.8 1.0 0.9 3.2%

Share Price PER 2019e PER 2020e P/FFO 2019e P/FFO 2020e P/NAV 2019e P/NAV 2020e Yield 2018e

Average 15.7x 16.2x 18.7x 17.2x 0.9x 0.9x 3.0%

Godewind Immobilien 3.76 407 5.0x 4.8x 61.0x 17.4x 0.8x 0.7x 0.0%

vs average -67.8% -70.3% 225.7% 1.2% -13.9% -17.5% -100.0%

Fair Value based upon 2020e P/FFO 3.71

Fair Value based upon 2020e P/NAV 4.55

AVERAGE 4.13



Dividend Discount Model

We have derived a Target Price of EUR 4.89 from a dividend discount model valuation. Our model is based upon three phases; in phase I (which stands for 9% of the calculated fair value) we have made detailed earnings estimates, in phase II (22%) we have only made estimates for selected P&L lines which are of key importance for the DDM and in phase III (69%) we have calculated the terminal value.

The key parameters of the model are as follows: Average annual EBT-growth of 2.8% between 2023 and 2028. Tax rate of 10% for the years 2022 until 2027 as well as for the terminal phase. Payout-ratio of 60% of FFO(note that Godewind targets to pay at least 60% of its

FFO as dividend) for 2019e and 2020e with an increase to 80% from 2026 onwards. Cost of equity at 6.8%. Note that we have calculated a beta of 0.7x.

Exhibit 4: Dividend Discount Model

Source: Pareto Securities Research, company data

Phase III

EUR m 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

EBT 83 89 91 87 90 92 95 98 100 103

grow th rate 2168.2% 8.2% 1.8% -4.4% 3.0% 3.0% 2.9% 2.9% 2.8% 2.8%

Tax -2 -5 -6 -9 -9 -9 -9 -10 -10 -10

Tax rate -3% -5% -7% -10% -10% -10% -10% -10% -10% -10%

Minorities 1 1 1 1 1 1 1 1 1 1

grow th rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net Income 80 84 84 78 81 84 86 88 91 93

grow th rate 752.9% 5.1% 0.6% -8.1% 4.6% 2.9% 2.9% 2.8% 2.8% 2.7%

FFO 7 23 29 32 35 37 39 41 42 43

grow th rate n.m. 250.2% 25.0% 10.8% 8.0% 7.0% 6.0% 5.0% 3.0% 2.0%

Total dividend 4 14 19 21 24 26 29 33 34 35 660

payout ratio 60% 60% 65% 65% 70% 70% 75% 80% 80% 80%

Present Value Div 4 12 15 16 18 18 20 21 20 19 361

PV Phase I 47

PV Phase II 116 Risk premium 5.0% Beta 0.7

PV Phase III 361 Risk free rate 3.5% Cost of equity 6.8%

Total Fair Value 524 Sensitivity

0.5% 1.0% 1.5% 2.0% 2.5%

# shares 107.25 6.1% 5 5 6 6 7

6.5% 5 5 5 6 6

Fair value per share 4.89 C. of eq. 6.8% 4 5 5 5 6

7.2% 4 4 5 5 5

7.5% 4 4 4 5 5

Phase I Phase II

Growth in phase III



SWOT

Strenghts

Experienced management team with an outstanding track record: Godewind’s management is well experienced in the real estate sector with more than 45 years of combined real estate experience. We see Mr. Efremidis’ extensive network as a key advantage as this enables the company to get access to interesting properties despite the current high demand for office properties in Germany. Stavros Efremidis (CEO) has more than 10 years of CEO experience at listed companies which have developed favourably during his function as CEO, e.g. WCM Beteiligungs- und Grundbesitz AG’s market cap increased from EUR 19m to EUR 469m and was finally taken over by TLG in May 2017 with a premium of 18% on EPRA NAV (see Appendix III for some additional details on WCM).

Attractive funding structure: Godewind has a solid funding structure (Net LTV of c. 48% vs. peers as of Q1 2019: 38.8%) and targets Net LTV in the range of 45% to 55%. Godewind financed its portfolio growth at attractive terms as avg. funding costs amount to c. 1.38% (vs. peers as of Q1 2019: 2.1%). Its average debt maturity stands at 4 years.

Strong portfolio growth since IPO in April 2018: Since its blindpool IPO in April 2018 its portfolio significantly increased to 10 office assets with a value of c. EUR 840m (including the recently announced acquisition of City Gate Tower in Frankfurt) and a lettable space of c. 293,000 sqm. Note that first acquisitions took place in October 2018.

Large unused tax loss carry-forwards: As of Q1 2019, TLG had EUR 355m of unused

tax loss carryforwards (EUR 180m for corporate income tax and EUR 175m for trade tax) which stemmed from trading losses in the past. Due to the utilization of tax loss carryforwards, Godewind is able to keep its cash tax rate on a low level. As Godewind has EUR 133m in its contribution account, it will be able to pay tax-free dividends to its shareholders.

No structural vacancy: The portfolio was created from scratch and there is no legacy portfolio. As Godewind has increased its portfolio via asset by asset acquisition, the portfolio has no structural vacancy.

Pure office play: Godewind is the only listed large real estate company focusing solely on office real estate properties. On the one hand this should enable it to realize economies of scale to a larger extent than other players investing in different real estate classes and on the other hand make it more attractive for investors who want to invest only in office.

Alignment of Interest: The CEO holds 12% in the company, worth around EUR 50m. He is therefore highly committed to his task and focuses 100% of his time in increasing shareholder value.

Weaknesses

Short financial history of Godewind: Due to the fact that Godewind had its IPO in April 2018 and executed the first acquisitions from October 2018 onwards the acquisitions have only partially contributed to its 2018 full-year earnings, i.e. the 2018 annual report is of limited use. H1 2019 reports will however fully consolidate the recent acquisitions.

Further capital required for portfolio expansion: As Godewind targets to increase its portfolio value to c. EUR 3bn in the mid term with a target net LTV in the range of 45% to 55%, we expect further capital increases to fund future transactions.



High dependence on CEO: Mr. Efremidis as CEO is the second largest shareholder and a key person in the company. Without his experience and good standing among investors, the blindpool IPO would have not been successful. For the ongoing business and future capital measures he remains important because of his extensive network and very good reputation.

Opportunities

Significant rental upside: While Godewind’s core(+) portfolio is characterized by stable cash flows its value-add assets offer significant rental upside as those assets typically have higher vacancies. We see vacancy reduction to market rent levels as the main driver for both Godewind’s NAV and its portfolio value. Note that WALT extensions ensure a more stable cash flow. Average rent of its total portfolio is at EUR 14.71 which is below the market level of EUR 15.80. Godewind expects EUR 304m upside potential for its NAV of which EUR 135m is expected to result from its core(+) portfolio and EUR 169m from its value-add assets, both mainly driven by higher rental income.

Increased investor focus expected: As soon as Godewind shows that it is able to increase its portfolio value, its FFO as well as its NAV due to its active asset management approach, investors’ awareness is expected to increase. Additionally investors may be willing to pay higher multiples once the company proves that its business model works.

Portfolio investments to create value: Godewind targets portfolio investments of c. EUR 110m which should lead to lower vacancies and higher rents and thus also increase its NAV. These measures should include tenant improvements.

Business model highly scalable: As Godewind has outsourced its facility and

property management activities, its business model is highly scalable. Further acquisitions should require only very limited extra costs and have a more than proportionate positive FFO impact.

Threats

Lack of assets: As Godewind plans to further expand its portfolio to c. EUR 3bn it is possible that it will not be able to find acquisitions that fit into its strategy.

Problems with vacancy reduction: As Godewind’s portfolio includes value-add properties that are characterized by high vacancies it is possible that Godewind will not be able to realize the planned vacancy reductions. Thus, its upside potential for its NAV might not be achievable.

Recession in Germany: In case of a recession in Germany demand for office space will decline, which would have a negative impact on vacancy rate and rent levels in the market and this would most likely also impact Godewind.

Strong increase in interest rates: A strong increase in interest rates would lead to higher future funding costs for Godewind. Higher rates would negatively affect Godewind’s real estate portfolio value as prices come under pressure. This can result c.p. in lower valuation gains and lead to lower NAVs.

Lower threshold for share deals may burden transaction volumes: Due to the planned reforms of the land transfer tax (“Grunderwerbsteuer”) the threshold for triggering real estate transfer tax is intended to be lowered from 95% to 90%. In addition, the holding period is planned on being increased from 5 to 10 years. This make share deals less attractive due to higher ancillary costs (between 3.5% and 6.5% based on the purchase price). This may burden transaction volumes although we do not expect a major impact. Note, that such law has not been enacted yet. More importantly, Godewind has so far made only one-share deal, i.e. its acquisition strategy does not depend on acquiring assets free of land transfer tax.



Company Profile

Godewind Immobilien (Godewind) is a commercial real estate company with a focus on office properties in the Top 7 locations in Germany. As a result of the blindpool IPO on 5 April 2018, Godewind raised EUR 375m which enabled the company to conduct the first round of acquisitions in order to build up its portfolio. Including the recently announced acquisition the portfolio comprises of 10 office properties with a value of c. EUR 837m with a lettable space of around 293,000 sqm. Godewind targets to build an office real estate portfolio of around EUR 3bn in the mid term. Godewind’s shares are trading on the Regulated market (Prime Standard) of the Frankfurt Stock Exchange.

Exhibit 5: Company development


Company overview

Recent History The company was founded as a limited liability company under German law in 2001. Its business includes trading activities in shares of listed holdings and real estate companies but with limited business operations. In 2015 its legal form was changed into a stock company and in 2017 its business objective was changed into a commercial real estate company with a focus on acquiring, managing, repositioning and trading commercial assets, portfolios or companies. Godewind had its blindpool IPO in March 2018 and received gross proceeds of EUR 375m.

2001 2015 2018

Foundation as a

l imited l iability company

Change of legal form into a stock company

May 2019: Conclusion of loan

agreements for EUR 76m to finance theproperties „Y2“ in Frankfurt, „sunsquare“ in Munich and „Eight Dornach“ in Greater Munich. Avg. interest rate of theportfolio decreases to 1.38%

2019

April 2018: Lis ting in the Prime Standard (Frankfurt Stock Exchange)

March 2018: IPO @ EUR 4.00 (gross

proceeds of EUR 375m)

Port

folio

dev

elop

men

tCo

mpa

ny d

evel

opm

ent

& C

apit

al m

arke

tsac

tivi

ties

Jan. 2019: Acquisition IX:office property „Herzogen-Terrassen“ in Dusseldorf for EUR 149.4m*. Clos ing: 15 Apri l 2019

11 Dec. 2018: Acquisition VI: office property „Quartier am Zeughaus“ in Hamburg for EUR 160m*. Closing: 30 Apri l 2019

11 Dec. 2018: Acquisition VII:

office property „Y2“ in Frankfurt for EUR 55.3m*. Clos ing: 13 February 2019

19 Dec. 2018: Acquisition VIII: office property „Eight Dornach“ near

Munich for EUR 32.2m*. Clos ing: 31 January 2019

19 Nov. 2018: Acquisition V:

office property „Pentahof“ in Hamburg for EUR 55.3m*. Clos ing: 31 January 2019

13 Nov. 2018: Acquisition IV:

office property „Frankfurt Airport Center“ in Frankfurt for EUR 168.3m*. Clos ing: 28 December 2018

16 Oct. 2018: Acquisition I: office property „ComConCenter“ in Frankfurt for EUR 35.8m*. Clos ing: 31 October 2018

16 Oct. 2018: Acquisition II: office property „Airport Business Center“ in Dusseldorf for EUR 42.9m*. Clos ing: 30 November 2018

24 Oct. 2018: Acquisition III: office property „Sunsquare“ nearMunich for EUR 32.2m*. Clos ing: 15 December 2018

13 Dec. 2018: Share buyback of up toEUR 1.5m shares resolved

*gross purchase price** net purchase price

2017

Change of business objective into a

commercial real estate company

May 2019: Acquisition X:

office property „Citygate“ in Frankfurt for EUR 83m**.Clos ing: Q3 2019



As a result of trading losses in the past Godewind has tax loss carry-forwards (as of Dec. 2018: tax losses carry-forwards for corporation tax of EUR 180m and EUR 175m for trade tax). Due to the utilization of tax loss carryforwards, Godewind is able to keep its cash tax rate at a low level. In addition, Godewind has a contribution account for tax purposes enabling Godewind to pay tax-free dividends. Management The management board of Godewind consists of two members: Stavros Efremidis (CEO) and Ralf Struckmeyer (CFO). They have worked together for c. 10 years (Mr. Efremidis having worked as CEO for KWG, conwert Germany and WCM and Mr. Struckmeyer having worked for Evercore & Kuna & Co, one of the leading German real estate M&A firms) and have executed acquisitions, operations and disposals across various asset classes. See Appendix II, III, IV for detailed information on the management board of Godewind. Shareholder structure Main shareholder of Godewind with a stake of 13.50% are Karl Ehlerding, founder and major shareholder of WCM in early 2000 and today mainly active as a real estate investor, and CEO Stavros Efremidis with a 12.0% stake. Freefloat, which comprises DWS, Pelhalm Capital, Morgan Stanley and others, amounts to 73%.

Business Model

Godewind with offices in Berlin and Frankfurt is a commercial real estate company with a focus on office assets with stable cash flows and/or substantial upside potential in the top 7 locations in Germany. The company started as a blindpool IPO in April 2018 and used the proceeds of EUR 375m to build up a portfolio. Since October 2018 Godewind has closed the acquisition of 10 office properties with a value of around EUR 837m in total. The latest transaction was the acquisition of the office property City Gate in Frankfurt for EUR 85m. The transaction is expected to be closed in Q3 2019. Godewind’s strategy is to acquire, hold and manage commercial real estate properties located in Germany. Value should be created through its active asset management approach, i.e. vacancy reduction through new lettings, extension of lease contracts and upward-adjustment of rents to market level. Godewind targets to further expand its portfolio to around EUR 3bn with a pure focus on office assets. In case of portfolio transactions that include non-office and non-strategic assets these would be sold. The CEO seems to be very keen in our view on holding no legacy assets and to be a pure office play. The portfolio is classified into value-add (56% of rental income) and core (+) assets (44% of rental income). While its core (+) assets can be seen as cash generating assets its value-add portfolio offers significant value creation potential due to vacancy reductions, WALT extensions and increase of rents. Godewind manages its properties in-house through its in-house asset management activities. Note that property and facility management activities are provided externally which gives Godewind a flexible cost base and makes its business model highly scalable. Portfolio As of Q1 2019 Godewind’s portfolio consisted of 9 office properties with a portfolio value of c. EUR 452m. Note that its Q1 results did not include the properties from the acquisition of “Herzogen-Terrassen” in Dusseldorf and “Quartier am Zeughaus” in Hamburg as these acquisitions were closed post the reporting date in March 2019. On 23 May 2019 Godewind announced the acquisition of office property City Gate Tower in Frankfurt for EUR 85m.



Exhibit 6: Portfolio Overview (as of June 2019)

Source: Pareto Securities Research, Godewind *sources: Thomas Daily, JLL, Cushman, Colliers, Savills, CBRE, Godewind Research

**excl. ground rent payments, incl. yield is 6.4%

***calculation based on EUR 18.00 per sqm for City Gate office area **** LTV excl. City Gate

Including its recent acquisitions the portfolio of 10 office assets is mainly located in Frankfurt (47% of group rental income), Hamburg (26%), Dusseldorf (21%), Munich (6%), classified into value-add (55% of rental income) and core(+) assets (45% of rental income).

Exhibit 7: Portfolio split by region (rental income) Exhibit 8: Portfolio split by property type

Source: Godewind, Pareto Securities Research Source: Godewind, Pareto Securities Research

The total gross yield of the 10 office properties amounted to 5.3%. Its portfolio is characterized by a comparably high vacancy rate of 23.6% (vs. peer group: 5.2%) which offers further upside potential. Note that the high vacancy rate stems from its value-add portfolio which is characterized by a vacancy rate of on avg. 34.5% while its core(+) assets have an avg. vacancy rate of 7.9%. Weighted average lease term (WALT) of the 10 assets were on avg. at 5.2 yrs and was thus lower than its its peer group. WALT ranged from 2.9 yrs. (ComConCenter in Frankfurt) to 6.1 yrs (Herzog-Terrassen in Dusseldorf). Note that a long WALT should ensure a stable rental income but at the same time limit rental increases. Ideally a long WALT comes along with a rent at or above market level.

Office Location Lettable

Area (sqm)

Vacancy

Rate

Rental

Income p.a.

(EUR m)

Avg. Rent

EUR per sqm

per month

Mkt. Rent

EUR per sqm

per month*

WALT

(years)

Net Acq.

Price

(EUR m)

Net Acq.

Price per sqm

(EUR m)

Gross

Yield

LTV

Core (+)

ComCon Center Frankfurt 16,264 13.6% 2.0 11.19 13.50 2.9 33.5 2,060 6.1% 57%

Airport Center Dusseldorf 13,050 16.5% 1.9 13.60 14.00 3.9 40.0 3,065 4.7% 57%

Pentahof Hamburg 24,747 0.0% 3.0 8.93 10.50 4.6 60.6 2,449 4.9% 57%

Zeughaus Hamburg 43,522 4.8% 7.9 13.50 14.50 3.7 153.0 3,515 5.2% 56%

CityGate Frankfurt 23,308 13.4% 3.8 14.57 14.5/18.0 6.7 85.0 3,647 4.5% tbd

Subtotal Core (+) 120,891 7.9% 18.6 12.33 14.1*** 4.4 372.1 3,078 5.0% 56.5%****

Value-Add

FAC Frankfurt 48,495 9.5% 11.4 21.51 21.0 5.9 168.0 3,464 6.8%** 49%

Sunsquare Munich 19,492 47.8% 1.3 12.08 12.0 5.9 30.5 1,565 4.3% 35%

Eight Dornach Munich 17,612 51.1% 1.1 9.97 12.5 4.0 30.0 1,703 3.6% 39%

Y2 Frankfurt 30,930 35.7% 2.6 11.12 12.0 5.1 52.0 1,681 5.1% 54%

Herzog-Terassen Dusseldorf 55,717 45.7% 6.7 18.99 20.5 6.1 140.0 2,513 4.8% 44%

Subtotal Value-Add 172,246 34.5% 23.1 17.20 17.1 5.8 420.5 2,441 5.5% 50%

Total 293,137 23.6% 41.7 14.71 15.80*** 5.2 792.6 2,704 5.3% 51%

47%

21%

26%

6%

Frankfurt

Dusseldorf

Hamburg

Munich

45%

55%

Core(+)

Value-add



Exhibit 9: Vacancy rate of commercial real estate companies Exhibit 10: WALT of commercial real estate companies

Source: companies, Pareto Securities Research Source: companies, Pareto Securities Research

Around 48% of its rental income stems from its top 10 tenants with an avg. WALT of 5.2 yrs. (vs. WALT of 5.2 yrs. for its total portfolio) which consists of creditworthy tenants such as Lufthansa (7%), Shell Germany (7%), Telekom (6%) and NRW.Bank (6%).

Exhibit 11: Tenant Mix

Source: Godewind

Recent portfolio growth Godewind’s first acquisitions were two office complexes located in Frankfurt and Dusseldorf with a total net purchase price of EUR 73.5m, which were announced on 16 October 2018.

Acquisition I: ComConCenter Frankfurt On 31 October 2018 Godewind closed the acquisition of the office property “ComConCenter” in Frankfurt which was acquired for EUR 33.5m. The property was constructed in 2002 and is located in Frankfurt Niederrad which lies between the city center and the airport, in close proximity to both the city and the airport. The property has a lettable space of 16,264 sqm and generates rental income of EUR 2.0m p.a. with a WALT of 3.1 yrs. This translates into a yield of 6.0% based upon net purchase price. With a vacancy rate of 12.3%, we see further upside for Godewind to increase the value of the asset by decreasing its vacancy rate

Company % Rep. Date

alstria office 9.2% Q1 '19

Aroundtown 8.9% Q1 '19

DEMIRE 8.3% Q1 '19

Deutsche EuroShop 1.0% Q4 '18

DIC Asset 8.4% Q1 '19

Hamborner REIT 2.0% Q1 '19

TLG Immobilien 3.4% Q1 '19

VIB Vermoegen 0.60% Q1 '19

avg. peer group 5.2% Q1 '19

Godewind Immobilien 23.6% June 2019

Company Years Rep. Date

alstria office 4.9 Q1 '19

Aroundtown 8.2 Q1 '19

DEMIRE 4.3 Q1 '19

Deutsche EuroShop 5.1 Q4 '18

DIC Asset 5.8 Q1 '19

Hamborner REIT 6.6 Q1 '19

TLG Immobilien 6.1 Q1 '19

VIB Vermoegen 5.4 Q1 '19

avg. peer group 5.8 Q1 '19

Godewind Immobilien 5.2 June 2019



through its active asset management. Note that the asset also has 1,090 sqm of vacant office space which is at the enhanced shell stage of construction and is expected to be let before the construction works are done. As the average rent of the ComComCenter is with EUR 10.89 below the market level we see further upside potential for rent increases. According to Godewind the value of the property should have increased to EUR 40.2m (multiple of 19.7x) based upon an indicative valuation. Taking into account the gross purchase price of EUR 35.8m this leads to a lucky-buy effect of EUR 4.4m. Due to rental income growth as a result of lower vacancies and increase of in-place rents through indexation Godewind plans to increase rental income from EUR 2.0m p.a. to EUR 2.3m p.a. by 2021. Note that the relatively short WALT of 3.1 years is also planned to increase which would ensure stable cash flows. EUR 1.5m is planned to be invested into the property and the value of the asset is expected to increase to EUR 44.9m by 2021. Godewind estimates NAV to increase by EUR 12.8m until 2021.

Exhibit 12: KPI’s of Comconcenter Frankfurt (at acq. date) Exhibit 13: Comconcenter – Targets

Source: Pareto Securities Research, Godewind *Multiple based on the net purchase price Source: Pareto Securities Research. Godewind

Acquisition II: Airport business center Dusseldorf Godewind’s second portfolio addition was the acquisition of airport business center in Dusseldorf for a net purchase price of EUR 40.0m. The closing took place on 30 November 2018. The property has a lettable space of 13,077 sqm and the vacancy rate was at 16.6% at time of acquisition. Rental income of the property was at EUR 1.8m (yield of 4.6% based upon net purchase price) with a WALT of 3.9 yrs. As avg. rent of the property was at EUR 13.30 per sqm and below the market rent we see further upside for rental income growth. Godewind announced that the asset has 1,994 sqm of vacant office space which is let for EUR 12.42 per sqm and the rent per sqm is planned to increase to EUR 14.00 per sqm. This should have a positive effect on Godewind’s rental income (Pareto estimate: EUR 0.04m). Godewind targets to increase rental income of the property to EUR 2.2m which should be driven by vacancy reduction and the increase of in-place rents. EUR 1.2m is planned to be invested into the property. According to an indicative valuation, the value of the property increased to EUR 43m (vs. net purchase price of EUR 40.0m) which translates into a multiple of 20.1x (vs. 21.7x at time of acquisition). Godewind targets to achieve a market value of EUR 45.9m for the property post the execution of asset management activities. The increase of WALT should also be positive to ensure a stable cash flow.

Year of construction 2002

Closing 31.10.2018

Net Purchase Price (EUR m) 33.5

per sqm (EUR) 2,060

Rental Income p.a. (EUR m) 2.0

Rental Yield 6.0%

Purchase Price Multiple* 16.4x

Lettable area (sqm) 16,264

Average Rent (EUR per sqm) 10.5

Upside vs. Market Rent 29%

WALT (yrs.) 3.1

Vacancy Rate 12.3%

Market Value (EUR m) 44.9


Rental Yield 5.1%

Calculated Investment need (EUR m) 1.5

Vacancy Rate 6.0%

Target net appreciation (EUR m) 7.6



Exhibit 14: KPIs of Airport bus. center DUS (at acq. date) Exhibit 15: Airport business center - targets

Source: Pareto Securities Research, Godewind *Multiple based on the net purchase price Source: Pareto Securities Research

Acquisition III: Sunsquare Kirchheim/Munich In October 2018, Godewind announced the acquisition of the office building “Sunsquare” in Kirchheim-Heimstetten (suburb of Munich) with a lettable space of 18,820 sqm. The property was acquired for EUR 30.5m (net purchase price) and was financed by cash. The acquisition was closed on 15 December 2018. At time of the acquisition, the rental income was at EUR 0.8m p.a. with a WALT of 3.7 yrs. The property has high vacancy rate of 62.8% which provides further upside to decrease the vacant space which should have a positive impact on Godewind’s rental income. Godewind is in advanced negotiations with one of the biggest rehabilitation center operators in Germany regarding the development of a convalescent home on the site with a long-term WALT. Note that avg. rent of EUR 11.47 is also below the market rent of EUR 12.00 per sqm which leaves further upside for rent increases. Assuming a fully let building and taking into account the development of c. 15,500 sqm Godewind expects to reach rental income of EUR 5.2m p.a. with a target market value of EUR 102.0m and a planned investment volume of EUR 43.4m, resulting in a NAV uplift of EUR 35.8m. According to an indicative valuation, the value of the property should amount to EUR 40.5m which represents a lucky-by effect of EUR 8.3m compared to the gross purchase price.

Exhibit 16: Sunsquare Kirchheim/Munich (at acq. date) Exhibit 17: Sunsquare – targets (incl. development)

Source: Pareto Securities Research, Godewind *Multiple based on the net purchase price Source: Pareto Securities Research, Godewind


Closing 30.11.2018

Net Purchase Price (EUR m) 40

per sqm (EUR) 3,059


Rental Yield 4.6%



Average Rent (EUR per sqm) 13


WALT (yrs.) 3.9

Vacancy Rate 16.6%



Rental Yield 4.9%


Vacancy Rate 3.0%



Closing 15.12.2018


per sqm (EUR) 1,621


Rental Yield 2.6%





WALT (yrs.) 3.7

Vacancy Rate 62.8%

Market Value (EUR m) 102


Rental Yield 5.1%


Vacancy Rate 5.0%




Exhibit 18: Sunsquare Center Kirchheim/Munich

Source: Pareto Securities Research, JLL

Acquisition IV: Frankfurt Airport Center

On 31 October 2018, Godewind acquired a 89.9% stake in Frankfurt Airport Center with a lettable space of 48,495 sqm and 183 parking spaces. The property is connected to Terminal 1 of the Frankfurt airport. The majority stake was acquired for a net purchase price of EUR 168.0m. The acquisition was financed with EUR 76m equity and existing financing of EUR 88m of which EUR 27m are planned to be used for capex measures and tenant fittings. At time of acquisition rental income amounted to EUR 10m with a vacancy rate of 19.5%. This should leave further upside for rental income. Tenants include service companies and airlines. As avg. rent of the property (EUR 20.70 per sqm/month) is below avg. market rent of EUR 21.00 per sqm/month, we see further upside for rents. As of January 2019 WALT amounted to 6.1 yrs. Note that Godewind has already closed two new anchor leases with tenants from the aviation industry for a space of 8,910 sqm which represents 18.5% of the lettable area. As a result income should increase by EUR 1.7m and the vacancy rate is expected to further decrease.

Exhibit 19: Frankfurt Airport Center (at acq. date) Exhibit 20: Frankfurt Airport Center – targets

Source: Pareto Securities Research, Godewind *Multiple including deduction of ground rents Source: Pareto Securities Research, Godewind

Initial refurbishments have started and are expected to be completed in July 2019, and this should increase the value of the property. Note that Godewind

Year of construction 1988/2016

Closing 28.12.2018


per sqm (EUR) 3,490


Rental Yield 5.5%





WALT (yrs.) 6.1

Vacancy Rate 19.5%



Rental Yield 5.0%


Vacancy Rate 1.0%




assumes investment costs of EUR 27.4m and targets to increase the market value of the property to EUR 245m with a rental income of EUR 12.3m (vs. EUR 10.0m at purchase time). As a result NAV is expected to increase by EUR 68.5m.

Acquisition V: Pentahof Hamburg

On 31 January 2019 Godewind closed the acquisition of the office property “Pentahof” in Hamburg with a lettable space of 24,747 sqm which was announced in November 2018. The property is located at Hamburg airport. The purchase price (net) of EUR 60.6m was financed with the proceeds generated via the IPO. The property generated rental income of EUR 3.0m p.a. (at acquisition time) with a WALT of 4.8 yrs. The property has a global petroleum company as anchor tenant (98% of the space). At an avg. rent of EUR 9.41 below the avg. market rent for office properties Godewind should be able to further increase the rent in the mid-term. According to an indicative valuation, the property value now stands at EUR 64.2m (multiple of 21.7x) which is higher than the net purchase price of EUR 60.6m. Overall, the increase of rents and lease extensions are expected to further increase the value of the property. Godewind targets rental income of EUR 3.1m and a market value of EUR 68.3m (vs. net purchase price: EUR 60.6m). Investments of EUR 0.4m are planned and NAV is expected to increase by EUR 10.8m. Note that Godewind evaluates alternative use scenarios for hotel, residential and micro living.

Exhibit 21: Pentahof Hamburg (at acquisition date) Exhibit 22: Pentahof Hamburg


Acquisition VI: Quartier am Zeughaus Hamburg In December 2018 Godewind signed the acquisition of a property (“Quartier am Zeughaus”) in Hamburg-Eppendorf with a lettable area of 43,522 sqm and 782 parking spaces. The acquisition has been closed on 30 April 2019 and the (net) purchase price amounted to EUR 153.0m. The property had a vacancy rate of 10.6% (at purchase time) and a WALT of 3.3 yrs. (as of January 2019). Major tenants include telecoms, media-groups, leasing companies, hospital services and other service providers.


Closing 31.12.2018


per sqm (EUR) 2,449


Rental Yield 4.9%





WALT (yrs.) 4.8

Vacancy Rate 0.0%



Rental Yield 4.6%


Vacancy Rate 0.0%




Exhibit 23: Quartier am Zeughaus, Hamburg

Source: Pareto Securities Research, hellomonday

The asset offers upside potential for rents as vacancies should further reduce and due to further rent increases and lease renewals with anchor tenants. Note that avg. rent per sqm of EUR 12.90 per sqm/month is below avg. market rent (EUR 14.50 sqm/ month) and this would create an upside for rent increases. Godewind targets to reach rental income of EUR 7.8m p.a. with a target market value of EUR 187.7m which should increase NAV by EUR 39.0m. According to an indicative valuation, the property value should now amount to EUR 164m (multiple of 24.5x) which is above the net purchase price of EUR 153.0m.

Exhibit 24: Quartier am Zeughaus (at acquisition date) Exhibit 25: Quartier am Zeughaus – targets

Source: Pareto Securities Research *Multiple based on the net purchase price Source: Pareto Securities Research

Acquisition VII: Y2 Frankfurt In addition to the office property in Hamburg, Godewind had signed the purchase of the office property “Y2” in Frankfurt which was closed on 13 February 2019 for a net purchase price of EUR 52.0m. The property has a lettable space of 31,256 sqm and 567 parking spaces.

Year of construction 1927/'00/'08

Closing 30.04.2019


per sqm (EUR) 3,515


Rental Yield 4.8%





WALT (yrs.) 3.3

Vacancy Rate 10.6%



Rental Yield 4.2%


Vacancy Rate 4.0%




Exhibit 26: Y2 Frankfurt

Source: Pareto Securities Research, Colliers

At purchase time, rental income of the property amounted to EUR 2.7m with a WALT of 5.5 yrs. Major tenants of the property include Jobcenter Frankfurt, city of Frankfurt and other service providers. Due to its high vacancy rate of 35.3% (at purchase time) and its avg. rent (EUR 11.12 per sqm/month) which is below the avg. market rent of EUR 12.00 per sqm the rental upside potential is quite significant. Godewind expects rental income to increase to EUR 4.2m p.a. (vs. EUR 2.7m at purchase time) and the value of the property is expected to increase to EUR 75.0m. Overall, Godewind plans to invest EUR 6.8m. Post the planned measures Godewind assume NAV to increase by EUR 13.9m.

Exhibit 27: Y2 Frankfurt (at acquisition date) Exhibit 28: Y2 Frankfurt - targets

Source: Pareto Securities Research, Godewind *Multiple based on the net purchase price Source: Pareto Securities Research, Godewind

Acquisition VIII: Eight Dornach Aschheim (Munich)

In December 2018 Godewind announced the purchase of a further office property in Aschheim-Dornach (near Munich) for a net purchase price of EUR 30.0m. The transaction was closed on 31 January 2019. The lettable space of the property amounts to 17,612 sqm with 279 parking spaces. As the asset is characterized by a high vacancy rate of 51.1% and avg. rent (EUR 10.00 per sqm) below the avg. market rent (EUR 12.50) further upside is expected to result from vacancy reduction, the conclusion of new leases as well as rent increases. Post the vacancy reduction Godewind expects rental income to increase to EUR 2.2m p.a. (vs. EUR 1.1m p.a. at purchase time). The market value of the property is


Closing 13.02.2019


per sqm (EUR) 1,681


Rental Yield 5.2%





WALT (yrs.) 5.5

Vacancy Rate 35.3%



Rental Yield 5.5%


Vacancy Rate 5.0%




expected to increase to EUR 51m and investments of EUR 5.2m are planned. Overall, Godewind sees its NAV to increase by EUR 13.9m post the planned measures.

Exhibit 29: Eight Dornach Aschheim/Munich (at acq. date) Exhibit 30: Eight Dornach Aschheim/Munich – targets


Acquisition IX: Herzog-Terrassen Dusseldorf In January 2019 Goedwind announced the acquisition of an additional office property (“Herzogen-Terrassen”) in Dusseldorf for EUR 140.0m (net purchase price). The asset was the former head quarter of the bank WestLB and has developed into a multi tenant asset with tenants from international banks and trading companies such as Deutsche Bank, NRW Bank, Oddo and Mitsui.

Exhibit 31: Herzogterassen, Dusseldorf

Source: Pareto Securities Research, Cadman

With a lettable area of 55,717 sqm and 962 parking spaces the property generated rental income of EUR 6.7m at acquisition time. The high vacancy rate of 45.4% as well as the avg. rent of EUR 19.00 per sqm/month which is below the avg. market rent of EUR 20.50 per sqm/month offers further upside potential. Godewind plans to reposition the property through the creation of a diversified tenant mix and the provision of large lettable areas for medium sized national and international companies. Investments of EUR 15.7m are planned and rental


Closing 31.01.2019


per sqm (EUR) 1,703


Rental Yield 3.6%





WALT (yrs.) 4.2

Vacancy Rate 51.1%



Rental Yield 4.4%


Vacancy Rate 11.0%




income is expected to increase to EUR 7.8m with a target market value of EUR 250.0m.

Exhibit 32: Herzog Terassen, Dusseldorf (at acq. date) Exhibit 33: Herzog Terrasen – targets


Acquisition X: City Gate Tower in Frankfurt On 23 May 2019 Godewind announced the acquisition of City Gate Tower in Frankfurt for a net purchase price of around EUR 85m. The property has a lettable space of 23,308 sqm and generates rental income p.a. of around EUR 3.8m p.a. with a WALT of c. 6.7 yrs. The anchor tenant is the state of Hesse. Godewind sees further upside potential for rental income of the property to EUR 4.35m p.a. in case of full occupancy (vs. current vacancy rate of 13.4%). Overall, the value of the property is expected to increase by 2020 as a result of its active asset management approach by reducing vacancies, increase of rents and the extension of lease agreements with the property’s anchor tenants. With EUR 14.60 per sqm the rent of the property is below the market rent. Godewind expects attractive financing conditions to fund the property. The funding should be in line with its target Net LTV in the range of between 45% and 55%.

Exhibit 34: City Gate Tower Frankfurt (at acq. date) Exhibit 35: City Gate –targets


Year of construction 1980/2014

Closing 15.04.2019


per sqm (EUR) 2,513


Rental Yield 4.8%





WALT (yrs.) 6.4

Vacancy Rate 45.4%



Rental Yield 3.1%


Vacancy Rate 3.0%



Closing Q3 2019


per sqm (EUR) 3,647


Rental Yield 4.5%

Purchase Price Multiple* 22.2*



Upside vs. Market Rent up to 23%

WALT (yrs.) 6.7

Vacancy Rate 13.4%



Rental Yield 4.4%


Vacancy Rate 5.0%




Strategy

Godewind sees itself as a real estate owner as well as a real estate portfolio developer as it acquires properties with development potential. It focuses 100% on office and has no other asset classes in its portfolio and does not plan to do so. Currently (incl. the latest acquisition which was announced in May 2019) Godewind has a real estate portfolio of c. EUR 840m. It plans to further increase its portfolio to around EUR 3bn in the mid-term. Focus on TOP 7 Godewind prefers office properties which are located in attractive locations in the TOP 7 (Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart); note that it currently does not see Berlin as an attractive market and does not plan to make any investments there. The targets must be characterized by high vacancy rates and short WALTs. Godewind follows an asset by asset acquisition strategy i.e. it does not acquire large portfolios which include various asset classes, to ensure that it does not purchase any assets it does not want which then have to be sold which requires management attention and is time consuming. Apart from its large network Godewind benefits from its good reputation: it is well known for the reliability of transactions and implementation speed. Overall, the main part of potential assets are planned to stem from off-market deals and special portfolios and the remaining part is expected to stem from proposed assets by brokers.

Exhibit 36: Acquisition Strategy

Source: Pareto Securities Research, Godewind

Value creation through active asset management Once it has acquired the assets Godewind focuses on value creation through inhouse active asset management; note that it has outsourced property and facility management. Thus it makes sure that it implements necessary tenant improvements to reduce vacancy and increase rents. WALT extension is another important strategic measure as it has a direct positive impact on the asset value as well. In case Godewind has acquired some non-strategic assets as part of a portfolio transactions, these assets are sold as fast as possible. Godewind’s portfolio is split between core (+) with 45% of the total portfolio which should be characterized by a stable and high cash flow which should also be used for dividend payments and value-add properties, which are characterized by higher vacancy rates and higher valuation upside make up 55% of the portfolio. In terms of its expansion strategy Godewind has set its net-LTV target of between 45% and 55% (vs. Q1 2019: 24%). This means that further acquisitions will be only possible with additional capital raisings. Note that Godewind plans to pay at least 60% of its FFO I as dividends.

1) Focus on pure office properties in TOP 7

2) Assets with substantial value potential or stable cash flows

3) High vacancy, short WALT, attractive locations

4) Asset by asset strategy - no legacies

5) Godewind as reliable partner

6) High implementation speed

7) Focus on off-market transactions and bidding processes



Funding

Godewind’s current financial debt (June 2019) amounted to EUR 453m. The financial debt consists of 4 bank loans and one planned financing which were used to fund its portfolio growth. Compared to its peers Godewind’s funding costs are with 1.39% comparably low (avg. cost of debt peer group: 2.2%). With an average debt maturity of c. 4.4 years we see no major refinancing risk over the next years. Note that Godewind executed a share buyback program between December 2018 and February 2019. During this period in time Godewind bought 1.5m shares in total (at an average price of EUR 3.32). We do not expect Godewind to execute any additional share buybacks but to rather invest its cash into the acquisition of further real estate properties. Godewind’s equity ratio of 50.2% and the net LTV of c. 50% show that its funding structure is rather conservative which leaves scope for further acquisitions. Note that avg. LTV of its peers amounts to 42.8% (see Appendix). Note that Godewind targets LTV in the range of between 45% and 55%. Godewind also targets to receive a rating in the future. We expect Godewind to tap the bond market for future funding needs to better diversify its funding mix.

Exhibit 37: Maturity Profile (EUR m) Exhibit 38: Overview of Financing Banks (EUR m)

Source: Pareto Securities Research, Godewind Source: Pareto Securities Research, Godewind

88

030

336

00

50

100

150

200

250

300

350

400

2021 2022 2023 2024 2025

EUR m

174

110

88

25

56

Bank 1

Bank 2

Bank 3

Bank 4

Planned financing



Risks to our Investment Case

Recession in Germany: A recession in Germany would lead c.p. to an increase of the unemployment rate and probably to a lower demand for office space which would most likely result in higher vacancy rates and lower rents. This would it make more difficult for Godewind to reach its financial targets, in particular reducing the vacancy rate. Under such a scenario Godewind’s rental income, NAV etc. would be negatively impacted.

No suitable assets available: If Godewind does not find any suitable assets it will not be able to reach its EUR 3bn portfolio target. A lack of suitable assets could also mean that Godewind has to pay higher prices and/or accept higher vacancy rates for the assets.

CEO leaves the company: Godewind is highly dependent on Stavros Efremidis as his good reputation among equity investors and real estate investors and his extensive network is of utmost importance to further grow the portfolio. In case of his departure from the company the growth story of the company would be dead in our view.

Strong increase in interest rates: Although Godewind’s financial expenses should be less affected by rising interest rates as its funding costs are comparably low (1.38%) with an avg. debt maturity of c. 4 yrs. a strong increase in long-term interest rates can negatively affect Godewind’s real estate portfolio value as prices should come under pressure. This can result c.p. in lower valuation gains and lead to lower NAVs.

High vacancy rates are due to structural reasons: Godewind has acquired assets with a high vacancy rate under the assumption that the vacancy is not high due to structural reasons but rather due to a bad management. If the vacancy rate is however so high because of structural reasons, e.g. a bad location, lower demand for office space in this area, an old property which does not meet today’s requirements for office space and has to be completely refurbished, Godewind may not succeed in reducing vacancy rates as fast as expected which would mean that the NAV target will be not reached.



Market environment

As Godewind focuses on the Office segment in Germany, we discuss in the market part only the German office market as the relevant market for Godewind. The office market in Germany has shown a favorable development in recent years as can be seen by the positive development of various KPIs. Vacancy rates have e.g. declined, average rents have increased and last but not least office transaction volumes have increased over the last ten years quite significantly.

Exhibit 39: Dev. transaction volumes in office Exhibit 40: Development of office KPIs (in % of total space)*

Source: Colliers, Pareto Securities Research Source: vdp *Blue line: vacancy rate (%), Red line: take up, Purple line: new constructions

As can be seen from the JLL office clock the market is however in a rather late cycle in the German TOP 7, i.e. rent growth is slowing down.

Exhibit 41: Office clock of the European market

Source: Pareto Securities Research, JLL

Nevertheless we expect the market environment to remain positive for the following reasons: 1) Investors’ interest in real estate should remain high. German government bond yields have declined by around 200 bps since 2013 and remain at record lows at around -10 bps. This has increased pressure for classical fixed income investors like insurers or pension funds to look for alternative asset classes to offset the yield decline. These alternative assets classes include e.g. private equity, infrastructure and real estate assets. Despite the decline of government bond

2014 2015 2016 2017 2018

0

5

10

15

20

25

30

35

EUR bn

We do not foresee interest rates to rise significantly in the short to mid-term



yields the yield spreads of real estate assets (vs. government bond yields) of the various real estate classes have hold up and remain well above 200 bps and go up to 500 bps for riskier real estate classes like warehouses. This makes real estate assets still attractive for investors despite the strong decline in yields of real estate assets in recent years. As we do not expect overall interest yields to increase significantly in the next two years we expect investors’ interest in real estate assets to remain high, even if we expect the continuous positive yield development of recent years to slow down.

Exhibit 42: Development German government bond yields Exhibit 43: Spread dev (real estate vs. GER gov. bond yield)

Source: Pareto Securities Research. Bloomberg Source: Pareto Securities Research, Bloomberg, JLL

2) The economic situation in German should remain positive. Office is the segment in the real estate sector which depends the most on the overall economic situation in Germany as demand for office space is mainly driven by the number of office workers which is again driven by the overall economic situation. The German economy has grown strongly in recent years with an average GDP growth of 2.1% between 2010 and 2018. Since summer 2018 growth rates have however come down due to fears of global trade war and the problems of the German automobile industry. The clouding of the business outlook can also be seen by a weaker reading of the IFO index, the leading German business sentiment indicator.

Exhibit 44: GDP Development Germany Exhibit 45: Development of IFO index

Source: Pareto Securities Research, Statista Source: Pareto Securities Research, ifo Institute

3) Employment situation should remain favorable. Overall unemployment rate in Germany has declined by one third since 2008 and has fallen with 4.9% to new record lows in recent months. In line with the overall positive development of

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0.00%

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Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019Spread Office Spread Retail: Shopping CenterSpread Retail: Warehousing parks Spread Retail: Warehousing solus units

0.0%

0.5%

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1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2010 2011 2012 2013 2014 2015 2016 2017 2018



the German labour market, the number of office employees have continuously increased in recent years. Going forward we expect this trend to continue, i.e. demand for office space should remain high.

Exhibit 46: Development of unemployment rate in Germany Exhibit 47: Development of office workers in Germany (change in employees 2018 vs 2009)

Source: Pareto Securities Research, Bundesagentur für Arbeit Source: Pareto Securities Research, RIWIS/bulwiengesa

4) Construction activity should not increase significantly in the short term: Demand for office space is only one side of the coin, supply i.e. construction is the other side of the coin. In the TOP 7 office markets office construction has increased by 150,000 sqm yoy in 2018 to 800,000 sqm which is on the five/ten-year historic average. At the same time demolition and/or building conversion remained on significant levels with 540,000 sqm for the total office market, which was however down by 18% yoy and on the lowest level since 2013. For the TOP 7 office locations the volume of demolition and/or building conversion declined by 7% yoy to 460,000 sqm in 2018, i.e. the positive net effect from new constructions amounted to only 360,000 sqm in 2018. TOP 7 Office markets As Godewind focuses on the TOP 7 locations in Germany we want to give a short update on these seven metropolitan areas. Generally these market have all benefited from the positive economic development in Germany in recent years which can be seen by a strong decline in vacancy rates and an increase in average rents. There remain however quite significant differences between those seven locations regarding rent levels, vacancy rates etc (pls note that all data cited below is from JLL). Berlin Berlin is the second largest office market in Germany with 20.28m sqm. Berlin’s office market has taken an impressive development during the last ten years which has been driven by the positive overall economic development and by Berlin having become the hot spot for start up companies in Germany. Vacancy rate has dropped to below 2% to 1.9% in Q1 2019, the lowest level among the TOP 7 office markets. Prime office rents have remained stable qoq at EUR 34 per sqm in Q1 2019 but are expected to further grow which is no surprise given the record-low vacancy rates. Completions have doubled yoy to EUR 74,700 sqm, by far the highest level among the TOP 7. Currently more than 1.3 sqm are under construction. Total take-up stood at 217,500 sqm in Q1, unchanged yoy. Cologne Cologne is the smallest market among the TOP 7 with only 7.79m sqm office space. It is also the market with the lowest rents (together with Stuttgart) with average prime office rent of only EUR 24.00 per sqm, slightly up by EUR 0.50 qoq. Vacancy rate has declined by 30 bps qoq to 3.0% and is expected to further decline. In Q1 2019 there have been basically no completions with only 2,000 sqm. Total take-up amounted to 76,000 sqm in Q1, which is an increase by 23% yoy, but in line with the quarterly average in 2018.

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2010 2011 2012 2013 2014 2015 2016 2017 2018

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Düsseldorf Despite a decline by 40 bps qoq (-150 bps yoy) Düsseldorf remains with a vacancy rate of 6.5% the market among the TOP 7 with the highest vacancy in the office market. Average prime office rents remained stable qoq at EUR 28.00. With a stock of 9.16m of office space Düsseldorf is one of the smaller markets. There were quasi no completions in Q1 2019 with 1,600 sqm (2018: 91,800 sqm) but take-up was up by 22% yoy to 109,700 sqm, slightly above the quarterly average in 2018. Frankfurt Frankfurt has remained the most expensive office market in Germany with an average prime rent per sqm of EUR 40.0, stable qoq. Vacancy rate has slightly increased by 10 bps qoq to 6.4% (-100 bps yoy). With 11.6m sqm of office space Frankfurt is a mid-sized market in Germany. There were no completions in Q1 2019 (2018: 88,200 sqm) and take-up amounted to 105,700 sqm in Q1 2019, down by 31% yoy and one third below the quarterly average in 2018. Generally the Frankfurt office market is seen positively by many experts because of the possible upside from the Brexit, which could lead to a significantly higher demand for office space by banks.

Exhibit 48: KPIs Frankfurt Office Market Exhibit 49: KPIs Düsseldorf Office Market

Source: Pareto Securities Research, JLLh Source: Pareto Securities Research, JLL

Hamburg Hamburg is the third largest market among the TOP 7 with a total office space of 15m. Vacancy rate declined by 40 bps qoq to 3.5% (-120 bps yoy). Average prime office rent amounted to EUR 28.00 per sqm, stable qoq. Completions were in Q1 2019 down by 9% yoy to 16,500 sqm, take-up increased by 11% yoy to 135,000 sqm (-7% vs. the quarterly average in 2018). Munich Munich is the largest office market in Germany with 20.37m sqm. Prime office rents increased by EUR 0.50 qoq to EUR 39.50 the second-largest level among the TOP 7. Vacancy rate dropped by 30 bps qoq to 2.6% (-80 bps yoy). Like in other TOP 7 cities the level of completions was rather low in Q1 2019 with 4,200 sqm (2018: 290,500 sqm). Take-up declined by 16% qoq to 192,000 sqm, 21% below the 2018 quarterly average. Stuttgart Stuttgart is the office market with the second-lowest vacancy rate among the TOP 7 with only 2.2%, stable qoq (-20 bps yoy). Prime office rents have slightly increased by EUR 0.50 qoq to EUR 24.00. Completions were with EUR 61,300 sqm on a very high level, almost as high as the total 2018 level (75,200 sqm). Q1 2019 was also were active regarding take-up which declined by 4% yoy to 85,500 sqm, which was however more than one third of the total 2018 volume.



Financials

Godewind’s Financial Targets Godewind does not have any financial targets for the current year but has quite concrete financial targets for 2021 as can be seen from the table below.

Exhibit 50: Key Financial Targets


NAV is targeted to grow by c. 80% to EUR 684m. Main drivers should be 1) organic growth (mainly driven by the rent indexation of 1.5% to 2.0%), 2) capitalization of Godewind’s tax loss carryforwards and 3) Godewind’s asset management activities. The latter should contribute more than 80% to the targeted increase of EUR 304m. The smaller part should come from core (+) uplift, i.e. from vacancy reduction and uplift of the rents to market levels. The main part of the total increase is targeted to come from the value-add uplift from vacancy reduction and rent increases. With an average vacancy rate of 34.5% of the value-add portfolio the upside potential is quite meaningful.

Exhibit 51: NAV Bridge


We see these targets as ambitious but achievable if the market environment remains favourable. Nevertheless we do not overrate these targets as Godewind targets to further grow its portfolio via acquisitions i.e. NAV is likely to be well above the 2021 target of EUR 684m if Godewind succeeds in making additional property acquisitions. Rental Income Having started operations in May 2018 and having concluded the first transactions in Q4 2018, rental income was in 2018 with only EUR 0.6m on a very low level and did not reflect at all the profitability of the company’s real estate portfolio. In Q1 2019 Godewind booked a rental income of EUR 4.1m; as many

Portfolio as of May 2019 Projected Upside (2021e) change %

# assets 10 10 0%

Lettable Area 293.137 sqm 293.137 sqm 0%

Annualized Rental Income EUR 41.7m EUR 51.5m 24%

Vacancy Rate 23.60% 4-5% -81%

Gross Yield 4.30% 4.40% 2%

380

684

37

58

209

IPO NAV Organic Capitalisation of

TLCFs

Net Appreciation Target NAV 2021

0

100

200

300

400

500

600

700

800

EUR m



transactions were closed in Q1 2019, we expect Q2 to give a more adequate picture of Godewind’s portfolio. For 2019 we forecast a rental income of EUR 27.0m, the strong increase yoy being driven by Godewind’s portfolio expansion – note that we have not included any additional possible acquisitions in our forecast. Our rental income estimate is based upon an average vacancy rate of 20%. As Godewind has bought most of the properties in Q4 2018 and Q1 2019 we still calculate with a relatively high vacancy rate as it should take some time to reduce vacancies. With an average vacancy rate of 24% (as of June 2019) Godewind is well above the market average of between 2% and 7% of the TOP 7 locations (Q1 2019). For 2020e we expect rental income to increase by 61% yoy to EUR 43.5m. Key driver should be a reduction in the vacancy rate, we forecast a decline by 8%-pts. yoy to 12%. Additionally we forecast Godewind to be able to close the gap of its average rent vs. market rent levels. This should be driven by renting out new space at market rent level (which is above the average portfolio rent) and being able to increase the rent for those contracts which mature in 2019. For 2021e we expect a similar development like in 2019e i.e. vacancies should further decline by 7%-pts. yoy to 5% while average rent per sqm should continue to increase. Hence, we forecast rental income to increase by 10% yoy to EUR 47.9m.

Exhibit 52: Development of Vacancy rates Exhibit 53: Development of rental income


EBIT In 2018 Godewind achieved an EBIT of EUR 3.9m which was mainly driven by valuation gains of EUR 10.8m. For 2019e we expect EBIT to strongly increase to EUR 88.8m, mainly driven by valuation gains which should amount to EUR 76.6m (9% of its property value). These should be mainly driven by portfolio improvements, measured by a reduction in vacancy rates, higher WALT and higher average rents. An improved underlying earnings performance should also contribute positively but to a much smaller extent. Despite the strong increase in rental income, administrative costs should increase by only 16% yoy to EUR 8.7m. There are several reasons for this less than proportionate increase in costs:

1. Base effect I: In 2018 personnel expenses were negatively impacted from costs for share-based payments in an amount of EUR 1.27m (equivalent to 31% of total personnel expenses). We expect costs for share-based payments to be significantly below the 2018 level in 2019.

2. Base effect II: Godewind booked EUER 1.3m costs of aborted transactions in 2018 (equivalent to 38% of other operating expenses). It should be quite normal that not all planned acquisitions are successfully executed but the 2018 costs of EUR 1.3m were extraordinarily high in our view. Hence, we expect them to come down in 2019e.

0%

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25%

30%

2018 2019e 2020e 2021e

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EUR m



3. High scalability of the business model: As Godewind has outsourced its property/facility management it has a lean cost structure which is highly scalable, i.e. additional real estate properties require only limited additional costs, mainly some headcount investments.

Valuation gains should decrease by EUR 13% yoy to EUR 66m in 2020e (7% of its property value) as the portfolio improvements should be somewhat less pronounced than in 2019e. This P&L line tends to be volatile and therefore difficult to forecast. Hence, we prefer being too cautious rather than too optimistic.

Exhibit 54: EBIT Development (EUR m) Exhibit 55: Development of valuation gains (EUR m)


Funding costs and LtV As of Q1 2019 (i.e. excluding the acquisition of City Gate in Frankfurt) net LtV stood at 48% at Godewind. Total debt amounted to EUR 397m with a maturity of around 4 years, average interest cost stood at 1.39%. Taking into account the latest acquisition in Frankfurt we forecast funding costs of EUR 6.2m for 2019e, for 2020e we expect a slight increase to EUR 6.6m, as some properties have been bought in Q1/Q2 2019 i.e. the full funding costs will become only effective in 2020e. Note that we have once again not included any additional acquisitions in our forecasts. We forecast a net LtV of c. 50% for 2019e, for 2020e we forecast a slight improvement to c. 47% due to valuation gains and earnings retention. With a net LtV of below 50% we see Godewind conservatively funded to secure low funding costs going forward. We would prefer Godewind to keep its funding costs at 50% or slightly below as we have the impression that investors prefer real estate companies with a rather modest LtV. Net Profit & Dividend In 2018 Godewind reached a net profit of EUR 9.4m. For 2019e we forecast net profit to increase to c. EUR 80m, the strong valuation gains being the main driver. Due to Godewind’s high level of tax loss carry-forwards we forecast a tax rate of only 5% for 2019e and of 7% for 2020e. Minorities which result from Godewind’s 90% stake in FAC, should remain insignificant below EUR 1.0m. In 2020e net profit should increase by 5% yoy to EUR 84m, the increase in the rental income should be offset by a lower valuation gain. Godewind targets to pay out at least 60% of its FFO as dividend to shareholders. Assuming a payout ratio of 60% for 2019e and 2020e each we forecast a dividend per share of EUR 0.04 and EUR 0.13 for 2019e and 2020e, respectively. NAV Godewind’s NAV amounted to EUR 396m at the end of 2018. For 2019e we expect an increase by 24% yoy to EUR 493m which should be mainly driven by valuation gains following the first-time consolidation of most of the acquired assets in 2019. Additionally Godewind’s annual regular valuation of its investment portfolio should lead to valuation gains given the fact that Godewind

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seems to be quite successful in reducing vacancy rates and increasing average rents and WALTs – improvements of these KPIs have a direct positive impact on the calculated value of the investment properties. For 2020e we forecast an increase of the NAV by 16% yoy to EUR 573m. valuation gains being the main driver; once again we have not taken any additional acquisitions into account. On a per share basis we expect Godewind’s NAV to increase by 18% to EUR 6.01 (CAGR 2018-2021e).

Exhibit 56: NAV development Exhibit 57: NAV per share development


FFO Godewind reported a negative FFO I of EUR 3.8m for 2018, in Q1 it has already reached a positive FFO I of EUR 1.6m as the acquired real estate properties contributed positively. For 2019e we expect an increase of the FFO I to EUR 6.6m, higher rental income being the main driver. In 2020e we expect the FFO I to strongly increase by 250% yoy to EUR 23.2m due to the increase in rental income while general administrative costs should remain more or less stable yoy.

Exhibit 58: FFO I development Exhibit 59: FFO I per share development


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Appendix I: Overview peer group

Exhibit 60: Overview figures listed German commercial real estate companies


Portfolio value Number of properties

Company Value in EUR m Rep. Date Company # Rep. Date

alstria office 3,885 Q1 '19 alstria office 115 Q1 '19

Aroundtown 14,803 Q1 '19 Aroundtown n.a. Q1 '19

DEMIRE 1,141 Q1 '19 DEMIRE 84 Q1 '19

Deutsche EuroShop 5,100 Q3 '18 Deutsche EuroShop 21 Q3 '18

DIC Asset 1,700 Q1 '19 DIC Asset 100 Q1 '19

Godewind Immobilien 837 June 2019 Godewind Immobilien 10* June 2019

Hamborner REIT 1,600 Q1 '19 Hamborner REIT 78 Q1 '19

TLG Immobilien 4,099 Q1 '19 TLG Immobilien 391 Q1 '19

VIB Vermoegen 1,196 Q1 '19 VIB Vermoegen 108 Q1 '19

*inclusing the acquisition of City Gate Tower which will be closed in Q3 2019 *Acquisition of City Gate Tower will be closed in Q3 2019

Domestic proportion of portfolio Lettable space in '000 sqm

Company Domestic share Rep. Date Company in '000 sqm Rep. Date

alstria office 100% Q1 '19 alstria office 1,533 Q1 '19

Aroundtown 87% Q1 '19 Aroundtown 6,236 Q1 '19

DEMIRE 100% Q1 '19 DEMIRE 926 Q1 '19

Deutsche EuroShop 81% Q1 '19 Deutsche EuroShop 1,087 Q3 '18

DIC Asset 100% Q1 '19 DIC Asset 902 Q1 '19

Godewind Immobilien 100% June 2019 Godewind Immobilien 293 June 2019

Hamborner REIT 100% Q1 '19 Hamborner REIT n.a. n.a.

TLG Immobilien 100% Q1 '19 TLG Immobilien 1,887 Q1 '19

VIB Vermoegen 100% Q1 '19 VIB Vermoegen 1,123 Q1 '19

Gross Rental Yield Vacancy ratios

Company % Rep. Date Company % Rep. Date

alstria office 3.9%* Q1 '19 alstria office 9.2% Q1 '19

Aroundtown 4.1%* Q4 '18 Aroundtown 8.9% Q1 '19

DEMIRE 6.5% Q1 '19 DEMIRE 8.3% Q1 '19

Deutsche EuroShop 5.0%* Q4 '18 Deutsche EuroShop 1.0% Q4 '18

DIC Asset 5.8% Q1 '19 DIC Asset 8.4% Q1 '19

Godewind Immobilien 5.3% June 2019 Godewind Immobilien 23.6% June 2019

Hamborner REIT 4.6%* Q4 '18 Hamborner REIT 2.0% Q1 '19

TLG Immobilien 4.5%* Q1 '19 TLG Immobilien 3.4% Q1 '19

VIB Vermoegen 6.65%* Q4 '18 VIB Vermoegen 0.6% Q1 '19

*EPRA Net initial yield

Weighted Average Lease Term Loan-to-Value Overview (based upon market values)

Company Years Rep. Date Company % Rep. Date

alstria office 4.9 Q1 '19 alstria office 28.5% Q1 '19

Aroundtown 8.2 Q1 '19 Aroundtown 37.0% Q1 '19

DEMIRE 4.3 Q1 '19 DEMIRE 38.6% Q1 '19

Deutsche EuroShop 5.1 Q4 '18 Deutsche EuroShop 30.9% Q1 '19

DIC Asset 5.8 Q1 '19 DIC Asset 49.8% Q1 '19

Godewind Immobilien 5.2 June 2019 Godewind Immobilien* c. 50% June 2019

Hamborner REIT 6.6 Q1 '19 Hamborner REIT 42.00% Q1 '19

TLG Immobilien 6.1 Q1 '19 TLG Immobilien 33.60% Q1 '19

VIB Vermoegen 5.4 Q1 '19 VIB Vermoegen 50.30% Q1 '19

*excl. City Gate

Average cost of debt Debt maturities

Company % Rep. Date Company Years Rep. Date

alstria office 1.8% Q1 '19 alstria office 5.5 Q4 '18

Aroundtown 1.8% Q1 '19 Aroundtown 7.5 Q1 '19

DEMIRE 3.0% Q1 '19 DEMIRE n.a. Q3 '18

Deutsche EuroShop 2.5% Q1 '19 Deutsche EuroShop 5.9 Q1 '19

DIC Asset 1.8% Q1 '19 DIC Asset 4.0 Q1 '19

Godewind Immobilien 1.4% June 2019 Godewind Immobilien 4.4 June 2019

Hamborner REIT 2.1% Q1 '19 Hamborner REIT 5.7 Q1 '19

TLG Immobilien 1.8% Q1 '19 TLG Immobilien 5.2 Q1 '19

VIB Vermoegen 2.3% Q1 '19 VIB Vermoegen n.a. Q3 '18



Exhibit 61: Listed German commercial real estate companies: Portfolio split by asset class


Alstria Office Aroundtown*

*in terms of value

Source: Alstria Office, Pareto Securities Source: Aroundtown, Pareto Securities

DEMIRE Deutsche EuroShop

*in terms of rental income

Source: DEMIRE, Pareto Securities Source: Deutsche EuroShop, Pareto Securities

DIC Asset* Hamborner Reit

*in terms of rental income *in terms of rental income

Source: DIC Asset, Pareto Securities Source: Hamborner Reit, Pareto Securities

TLG Immobilien VIB Vermögen*

*in terms of property value *in terms of annualized net rental income

Source: TLG, Pareto Securities Source: VIB Vermögen, Pareto Securities

Office65%

Retail

20%

Other

commercial use (e.g. logistics)

13%

Res idential

2%

Office100%

Office68%

Retail

24%

Logistics

6%

Other

2%

Shopping centers

100%

Office

53%

Retail

6%

Logistics/

Wholesale/ other11%

Hotel

25%

Office54%

Retail

29%

Hotel8%

Other

1%

Highstreet/

Reta il

13%

Large-scale

reta il48%

Other reta il

2%

Office

33%

Other

4%

Logistics/ Light

Industry65%

Retail28%

Office

4%

Commercial

bui ldings/

others3%



Exhibit 62: Listed German commercial real estate companies: Portfolio split by region


Alstria Office* Aroundtown

*in terns of investment volume *geographical breakdown of the commercial portfolio by value

Source: Alstria Office, Pareto Securities Source: Aroundtown, equinet Research

DEMIRE* Deutsche EuroShop

*Distribution by asset class in terms of rental income

Source: DEMIRE, Pareto Securities Source: Deutsche EuroShop, Pareto Securities

DIC Asset Hamborner Reit*

*in terms of market value *in terms of number of properties

Source: DIC Asset, Pareto Securities Source: Hamborner Reit, Pareto Securities

TLG Immobilien* VIB Vermögen*

*in terms of property value (solely strategic portfolio)

*Focus on Southern Germany

Source: TLG, Pareto Securities Source: VIB Vermögen, Pareto Securities

Bavaria10%

Other22%

North Rhine Westphalia

19%

Saxony

14%

Baden-

Wurttemberg13%

Hesse

12%

Mecklenburg Western-

pomerania10%

Germany81%

Austria4%

Czech Republic

5%

Hungary5%

Poland5%

North Rhine Westphalia

35%

Bavaria

13%

Baden-Wurttemberg

13%

Hesse11%

Lower Saxony

8%

Others

20%

Hamburg

31%

Berl in

6%

Others3%Stuttgart

13%

Rhine-Main19%

Rhine-Ruhr28%

NRW11%

Berl in21%

Frankfurt12%Munich

7%Hamburg

5%

London4%

Others

39%

Others35%

North

11%East

8%

West22%

Centra l Region

44%

South

15%

Berl in42%

Dresden/

leipzig/

Rostock21%

Rhine-Main17%

Other20%



Appendix II: Management

Stavros Efremidis, CEO Godewind’s CEO Stavros Efremidis has more than 30 years of experience in the residential and commercial real estate sector and more than 10 years of experience as CEO at listed real estate companies. From 2014 to 2017 he served as CEO of WCM Beteiligungs- und Grundbesitz AG which were taken over by TLG Immobilien in 2017 with a premium of 18% on EPRA NAV. WCM’s market cap increased from EUR 19m to EUR 500m. Before joining WCM he was the CEO of conwert SE (acquired by Vonovia in 2017) from 2013 until 2014 and managed a portfolio of c. EUR 1.8bn. From 2007 until 2013 he was CEO of KWG Kommunale Wohnen AG which has grown from 92 units to c. 10,000 units under his leadership within few years. Note that conwert Immobilien Invest SE acquired a majority stake in KWG. At Godewind he is responsible for the strategy, capital markets, investor relations and M&A. Ralf Struckmeyer, CFO Ralf Struckmeyer (CFO of Godewind) has more than 17 years of experience in the commercial real estate sector and the finance industry and more than 11 years of real estate M&A experience. During his career he worked on real estate transactions and financings of more than EUR 20bn. He started his career at GE Capital Real Estate in 2001 working for on real estate transactions. From 2016 until 2017 Ralf Struckmeyer acted as CFO of WCM Beteiligungs- und Grundbesitz AG and was responsible for M&A and corporate finance. Prior to his position at WCM he was director at the M&A boutique Kuna & Co. (taken over by Evercore) from 2004 until 2015 where he acted as an advisor for real estate portfolio, financing and restructuring transactions. At Godewind he is responsible for acquisitions and disposals. Financings, portfolio and asset management.



Appendix III: WCM Historic development

Exhibit 63: WCM Historic share price development (Mr. Efremidis started as CEO at WCM in October 2015, the takeover of WCM was announced on May 10, 2017)

Source: Pareto Securities Research, FactSet

Exhibit 64: Development of WCM’s lettable space (in ´000 sqm)

Source: Pareto Securities Research, WCM

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2014 2015 2016 Q2 2017



Appendix IV: Management team

Exhibit 65: Financial calendar

Source: Godewind

Appendix V: Corporate Events Calendar

Exhibit 66: Financial calendar


Financial calendar

10 May 2019 Publication of Q1 2019 results

06 August 2019 Annual General Meeting

13 August 2019 Publication of half year results

12 November 2019 Publication of Q3 2019 results



PROFIT & LOSS (fiscal year) (EURm) 2018 2019e 2020e 2021e

Rental income 1 27 44 48

Sales 1 35 57 63

Operating costs (0) (14) (17) (17)

Net operating income 1 22 39 46

Management and administrative costs (4) (5) (5) (6)

Other operating income / (expense) (3) (3) (4) (4)

EBITDA (7) 13 30 36

Depreciation fixed assets (0) (1) (1) (1)

EBITA (7) 12 30 36

EBIT (7) 12 30 36

Net interest (0) (6) (7) (7)

Chg. in value properties unrealised 11 77 66 62

Profit before taxes 4 83 89 91

Current tax - (10) (17) (17)

Deferred tax 6 8 12 11

Taxes 6 (2) (5) (6)

Profit after tax for the period 10 80 85 85

Minorities 1 1 1 1

BALANCE SHEET (EURm) 2018 2019e 2020e 2021e

Fair value properties 301 927 1,014 1,096

Associated companies and JVs - - - -

Goodwill - - - -

Other fixed assets 35 36 36 36

Total fixed assets 343 978 1,068 1,154

Other current assets - - - -

Cash and cash equivalents 158 19 13 7

Total current assets 160 30 23 17

Total assets 503 1,008 1,090 1,170

Total equity 397 478 559 631

Deferred tax liability - 1 5 9

Non-current interest bearing liabilities 88 504 508 512

Other non-current liabilities 11 11 11 11

Total non-current liabilities 99 517 524 532

Current interest bearing liabilities - - - -

Other current liabilities 2 12 6 6

Total current liabilities 7 13 7 7

Total liabilities 106 529 531 539

Total liabilities and total equity 503 1,008 1,090 1,170

CASH FLOW (EURm) 2018 2019e 2020e 2021e

Funds from operations (4) 7 23 29

Cash flow before change in working capital (6) 11 26 30

Change in working capital 3 2 (6) (1)

Cash flow post change in working capital (2) 13 20 29

Property divestments - - - -

Other capex items (1) (12) - -

Cash flow from investment activities (223) (562) (20) (20)

Dividend paid (10) - (4) (14)

Share capital issuance / (buybacks) 375 1 1 1

Debt issuance / (repayment) - 416 4 4

Other financing inflow / (outflow) - (6) (7) (7)

Cash flow from financing activities 365 411 (6) (16)

Cash flow 139 (139) (6) (6)



SHARE DATA (million) 2018 2019e 2020e 2021e

Average number of shares 86.7 107.5 107.3 107.3

No. of shares end of period 108.5 107.3 107.3 107.3

Avg. number of shares not fully diluted 86.7 107.5 107.3 107.3

No. of shares end of period not fully diluted 108.8 107.3 107.3 107.3

Share price year-end (EUR) 2.9 3.8 3.8 3.8

PER SHARE DATA

DPS (EUR) - 0.04 0.13 0.18

Chg DPS (%) +chg 251 35

EPRA NAV per share (EUR) 3.7 4.6 5.3 6.0

Chg EPRA NAV per share (%) 25.7 17.2 14.8

EPS (EUR) 0.1 0.7 0.8 0.8

EPS adj (EUR) 0.1 0.7 0.8 0.8

Funds from operations per share (EUR) (0.0) 0.1 0.2 0.3

CAPITALISATION & VALUATION (EURm) 2018 2019e 2020e 2021e

Market cap 314 405 405 405

Net interest bearing debt (70) 485 495 506

Minority interest 4 5 6 6

Enterprise value 406 914 919 924

Dividend yield (%) - 1.0 3.4 4.6

Premium/discount to book value (%) (20.2) (14.3) (26.8) (35.1)

Premium/discount to EPRA NAV (%) (20.9) (17.7) (29.3) (37.1)

Premium/discount to GAV (%) (27.5) (9.4) (16.6) (21.8)

EBITDA/EV (%) - 1.4 3.3 3.9

PROFITABILITY & DEBT 2018 2019e 2020e 2021e

ROCE (%) 2.0 3.0 3.3

Net operating income margin (%) 82.4 61.7 69.8 73.8

EBITDA margin (%) - 36.8 53.3 58.0

Market capitalisation/enterprise value (%) 77.3 44.3 44.1 43.9

LTV (%) (19.7) 50.4 47.2 44.7

Interest bearing debt/EBITDA (x) 10.3 37.3 16.3 13.9

EBITDA/interest expense (x) (26.8) 2.1 4.6 5.5

SUPPLEMENTAL DATA (EURm) 2018 2019e 2020e 2021e

Number of properties 4 10 10 10

Lettable space sqm 96,655 293,137 293,137 293,137

Economic occupancy (%) 76.2 79.8 87.8 94.7



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C o mpanies N o . o f shares H o ldings in % C o mpanies N o . o f shares H o ldings in %

Helgeland Sparebank 2,010,630 9.63% SpareBank 1 Østfo ld Akershus 1,140,010 9.20%

Pareto Bank ASA 10,852,450 18.51% Sparebanken Vest 4,507,960 7.64%

C o mpanies N o . o f shares H o ldings in % C o mpanies N o . o f shares H o ldings in %

Helgeland Sparebank 2,010,630 9.63% SpareBank 1 SM N 1,878,192 1.45%

NHST M edia Group AS 21,475 1.85% SpareBank 1 Østfo ld Akershus 1,140,010 9.20%

Pareto Bank ASA 10,852,450 18.51% Sparebanken M øre 311,739 3.15%

Selvaag Bolig ASA 2,174,147 2.32% Sparebanken Sør 460,589 2.94%

SpareBank 1 BV 1,639,640 2.61% Sparebanken Vest 4,507,960 7.64%

SpareBank 1 Nord-Norge 1,684,007 1.68% Totens Sparebank 79,246 1.29%

A nalyst T o tal A nalyst T o tal A nalyst T o tal

C o mpany ho ldings* ho ldings C o mpany ho ldings* ho ldings C o mpany ho ldings* ho ldings

AF Gruppen 0 1,675 Golden Ocean Group 0 1,824 REC Silicon 0 357,742

Aker 0 702 Grieg Seafood 0 970 SalM ar 0 280

Aker BP 0 8,480 Helgeland Sparebank 0 4,127 Sandnes Sparebank 0 23,832

AKVA Group 0 1,500 Höegh LNG 0 6,514 Scatec Solar 0 35,735

American Shipping Company 0 3,105 Jæren Sparebank 0 500 Schibsted ASA B Aksjer 0 357

Archer 0 60,770 Komplett Bank 0 105,684 Seadrill 0 12,642

Atea 0 450 Kongsberg Gruppen 0 5,901 Selvaag Bolig 0 5,000

Atlantic Sapphire 0 5,305 KWS 75 75 SpareBank 1 BV 0 17,700

Austevoll Seafood 0 5,780 Lerøy Seafood 0 37,095 SpareBank 1 Nord-Norge 0 26,500

Avance Gas 0 6,645 M agseis Fairfield 0 12,379 SpareBank 1 Ringerike Hadeland 0 500

Axactor 0 12,724 M onobank 0 1,371,000 SpareBank 1 SM N 0 15,490

BASF 270 270 M owi 0 2,639 SpareBank 1 SR-Bank 0 29,391

B2Holding 0 5,500 NEXT Biometrics 0 10,976 Sparebank 1 Østfo ld Akershus 0 450

Bonheur 0 46,535 Nordic Semiconductor 0 6,000 SpareBank 1 Østlandet 0 4,042

Borr Drilling 0 7,685 Norsk Hydro 0 127,415 Sparebanken M øre 0 6,550

BW LPG 0 5,569 Northern Drilling 0 6,060 Sparebanken Sør 0 43,280

DNB 0 34,587 Norwegian Air Shuttle 0 60,996 Sparebanken Vest 0 1,900

DNO 0 33,377 Norwegian Energy Company 0 350 Sparebanken Øst 0 1,500

Entra 0 14,362 Ocean Yield 0 33,967 Stolt-Nielsen 0 900

Equinor 0 9,231 Odfjell Drilling 0 6,149 Storebrand 0 5,565

Europris 0 10,850 Okeanis Eco Tankers 0 1,738 Subsea 7 0 6,007

Fjord1 0 50,000 Orkla 0 24,176 Telenor 0 2,311

Fjordkraft Holding 0 4,132 Panoro Energy 0 5,670 TGS-NOPEC 0 2,050

Flex LNG 0 1,032 Pareto Bank 0 976,577 XXL 0 10,115

Frontline 0 13,003 Pioneer Property 0 2,050 Yara International 0 18,366

Gjensidige Forsikring 0 8,601 Protector Forsikring 0 15,567 Zenterio 0 78,865

This overview is updated monthly (last updated 17.06.2019).

*Analyst holdings ref ers t o posit ions held by t he Paret o Securit ies AS analyst covering t he company.

Appendix A

Disclosure requirements pursuant to the Norwegian Securities Trading Regulations section 3-10 (2) and section 3-11 (1), letters a-b

The below list shows companies where Pareto Securities AS - together with affiliated companies and/or persons – own a portion of the shares exceeding 5 % of the total share capital in any company where a recommendation has been produced or distributed by Pareto Securities AS.

Pareto Securities AS or its affiliates own as determined in accordance with Section 13(d) of the US Exchange Act, 1 % or moreof the equity securities of :

Pareto Securities AS may hold financial instruments in companies where a recommendation has been produced or distributed by Pareto Securities AS in connection with rendering investment services, including Market Making.

Please find below an overview of material interests in shares held by employees in Pareto Securities AS, in companies where arecommendation has been produced or distributed by Pareto Securities AS. "By material interest" means holdings exceeding a value of NOK 50 000.



Af r ican Pet roleum Corporat ion Gf init y Plc Okeanis Eco Tankers

Agder Energi GG. St . Kongensgade 100 og 106 Panoro Energy

Akva Group Gulf Keyst one Pet roleum Pet ro Mat ad Limit ed

American Tanker Haf slund E-CO Pet roleum Geo-Services

Andf jord Salmon Hert ha BSC GmbH Pet roTal

APC Forsikr ingsmæglere A/ S HKN Energy Lt d Pioneer Public Propert ies Finland Oy

Arnarlax Hunt er Group Point Resources AS

Avida Holding AB Hörmann Indust r ies Quant AB

Bank Norwegian Ice Group Quest erre Energy Corporat ion

Bluewat er Holding Jact el AS Rødovre Port Holding A/ S

DNO ASA Klaveness Ship Holding SAS

Dof Subsea AS Lundin Pet roleum Scat ec Solar

Eco At lant ic Oil and Gas Magseis Shamaran

Eland Oil & Gas Monobank ASA Shamaran Pet roleum

Exmar NV Navig8 Sparebank 1 Øst landet

FFS Bidco NGEx Resources SpareBank1 Buskerud-Vest f old

Flex LNG Nort hmill Group AB Sparebanken Vest

Float el Norwegian Air Shut t le Union Mart ime Limit ed

Fort um Odf jell Vant age Drilling

Genel Energy Okea AS

This overview is updated monthly (this overview is for the period 31.05.2018 – 31.05.2019).

Appendix C

Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11 (4)

R ecommendat ion % d ist r ibut ion

Buy 64%

Hold 32%

Sell 4%

R ecommendat ion % d ist r ibut ion

Buy 92%

Hold 8%

Sell 0%

* Companies under coverage with which Pareto Securit ies Group has on-going or completed public investment banking services in the previous 12 months


D ist r ibut ion o f recommendat ions

D ist r ibut ion o f recommendat ions ( t ransact ions*)

Appendix B

Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11, letters e-f, ref the Securities Trading Act Section 3-10

Overview over issuers of financial instruments where Pareto Securities AS have prepared or distributed investment recommendation, where Pareto Securities AS have been lead manager/co-lead manager or have rendered publicly known not immaterial investment banking services over the previous 12 months:



Azelio Climeon Jetpak Top Holding AB ShaM aran Petroleum

Bionvent Green Landscaping Holding Sedana M edical Vostok New Ventures

Cavotec Saltängen Property Invest Sedana M edical Tethys Oil

Cibus Nordic Real Estate SciBase Holding ShaM aran Petroleum Vostok Emerging Finance

Isofol M edical

2G Energy * Gesco * M erkur Bank SCOUT24

Aixtron * GFT Technologies * M LP * Siemens Healthineers AG

Baywa Gigaset * M OBOTIX AG SM T Scharf AG *

Biotest * Heidelberg Pharma * OVB Holding AG Surteco Group *

Brenntag Hypoport AG Procredit Holding * Syzygy AG *

CORESTATE Capital Holding S.A. init* PSI SOFTWARE AG * TAKKT AG

Demire Intershop Communicat ions AG PWO * Vapiano

Epigenomics AG* Leifheit * RIB Software * va-Q-tec *

Euromicron AG * Logwin * S&T AG * Viscom *

Eyemaxx Real Estate M anz AG * Schaltbau Holding AG windeln.de

Freenet M AX Automation SE *

Adler M odemaerkte Eyemaxx Real Estate Intershop Communicat ions AG OVB Holding AG

Baywa First Sensor M erkur Bank Schaltbau Holding AG

BB Biotech Hypoport AG M OBOTIX AG Siegfried Holding AG

comdirect Godewind Immobilien AG OHB SE Vapiano

Daldrup & Söhne

Appendix D

This section applies to research reports prepared by Pareto Securities AB.

Disclosure of positions in financial instruments The beneficial holding of the Pareto Group is 1 % or more of the total share capital of the following companies included in P areto Securities AB’s research coverage universe: None

The Pareto Group has material holdings of other financial instruments than shares issued by the following companies included in Pareto Securities AB’s research coverage universe: None

Disclosure of assignments and mandates Overview over issuers of financial instruments where Pareto Securities AB has prepared or distributed investment recommendation, where Pareto Securities AB has been lead manager or co-lead manager or has rendered publicly known not immaterial investment banking services over the previous twelve months:

Members of the Pareto Group provide market making or other liquidity providing services to the following companies included in Pareto Securities AB’s research coverage universe:

Members of the Pareto Group have entered into agreements concerning the inclusion of the company in question in Pareto Securi ties AB’s research coverage universe with the following companies: NoneThis overview is updated monthly (last updated 17.06.2019).

Appendix E

Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11, letter d, ref the Securities Trading Act Section 3-10

Designated SponsorPareto Securities acts as a designated sponsor for the following companies, including the provision of bid and ask offers. Th erefore, we regularly possess shares of the company in our proprietary trading books. Pareto Securities receives a commission from the company for the provision of the designated sponsor services.

Appendix F

Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11, letter g, ref the Securities Trading Act Section 3-10

Sponsored ResearchPareto Securities has entered into an agreement with these companies about the preparation of research reports and – in return - receives compensation.

* The designated sponsor services include a contractually agreed provision of research services.


100% office exposure at a discount EUR · 2019-06-18 · Godewind Immobilien AG Company Profile...

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