The Art of Asset ManagementDr. Florian Sander, COO

CMD - 12 September 2019

Capital Markets Day – 12 September 2019 2

Asset ManagementThe Corestate Approach

Asset /Portfolio

Management

Property Management

Facility Management + External Partners (Architects, Construction

companies,…)

Strategic Involvement

Operational Involvement

Monitoring Information

flow / processing

Investment / Fund

Manager

Asset 1 Asset 2 Asset 3 Asset n

Fully

inte

grat

ed re

al e

stat

e va

lue

chai

n

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Asset ManagementWhat is AM? | Connection between internal and external stakeholders

Asset Management

AccountingControlling

Transaction

Investment Management

Debt Finance

Marketing / PR

ESG

Tax / Structuring

Risk Management

Technical AMProperty

Management

Architects

Contractors

Valuers

Tenants

City administrators

Expansion Managers

Center Management

Investors

External Property Mgt.

Facility Management

Legal advisors

Financial advisors

Broker

…..Lender

Leasing

Acquisition Management Letting

Asset Management Value Chain

Strategic development and enhancement of portfolio / asset strategy, business case, budget

Asset ManagementOne integrated approach all across the value chain

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Disposal

• Input for underwriting• Onboarding• Fulfillment CS• Handling SPA

completion• Control ancillary cost

settlement (Erwerbeabrechnung)

• Capex planning/budget• Concept development • Award external services

(architects, etc.) • Lead project / involved parties • Set contract standards

• Change of use• Expansion / densification• Fundamental change of tenant mix• Restructuring of structural vacancy• Change of appearance

• Award CM/PM/FM• Manage & Control

CM/PM• Controlling rent

collection • Controlling &

optimization non-recs

• Care for tenants • Prolongation existing

lease contracts • Letting vacant spaces • Select / control

brokers • Close contracts • Fit out lettable area • Preparation

• Creation/ maintenance of data room

• Support disposal process Q&A• Controlling utility

invoicing• Controlling repairs &

maintenance• Assessment asset

condition • Process Insurance /

claims

• Identifying key value drivers• Adjusting strategy to fund business plan• Close feedback loops, KPIs and monitoring systems• Pro-active operating strategy

Added value

5Capital Markets Day – 12 September 2019

Asset ManagementCase Study I – Galerie Am Alten Markt, Lörrach

The Object

Key Value DriversHighly attractive purchase price due to CORESTATE sourcing network

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

Significant increase of WAULT with new tenants and prolongations

Initial Exit

Entry / Exit 2016 2017

Vacancy 26% 3%

WAULT 3.7 y 7.1 y

Net Rental Income € 2.0m € 2.3m

Purchase/Sale Price € 24.7m € 48.0m

€ / sqm € 3,090 € 6,000

PP-Multiple 12.2x 20.1x

IRR >100%

1

2

3

6Capital Markets Day – 12 September 2019

Asset ManagementCase Study II – Linden Arcaden, Lübeck

Initial Current Target

Entry / Exit 2016 2019

Vacancy 6% 0% 0%

WAULT 7.5 y 7.1 y 7.1 y

Net Rental Income € 3.6m €4.1m € 4.1m

Purchase/sale price € 54.5m € 75.0m

€ / sqm € 2,113 € 2,941

PP-Multiple 15.0x 18.2x

Key Value Drivers

Highly attractive purchase price due to CORESTATE sourcing network

Creation of new office space through conversion of structural vacancy

Increase of rent roll quality due to attractive new leases and prolongations

1

2

3

The Object

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Asset ManagementHot topic: vertical expansion

Source: TU Darmstadt & pestel Institut, Deutschlandstudie 2019

Suitable real estate

In order for a non-residential asset to be suitable for densification with affordable housing various factors need to be taken into consideration. Deutschlandstudie 2019 looked at three different types of buildings, in order to analyze their potential for densification, conversion or replacement:

• Unheated functional building (parking decks, gas stations, government buildings etc.)

• Heated functional buildings (schools, kindergardens, gyms etc.)

• Residential type but non-residentially used buildings (offices, hotels, shopping centres etc.)

= replacement

= conversion

= vertical expansion

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Initital Exit (FC)

Year of purchase / planned exit 2017 2021

Year of construction 2009

Net Lettable Area (NLA) 5,557 sqm 12,057 sqm

Net Rental Income € 1.05 m

Occupancy / WAULT 99.9% / 4.9 yrs

Purchase Price / Transaction Costs €16.0 m / €0.5m

Purchase Price (€ / sqm) 2.879

IRR 13.8%

Exit Multiple 18.5x

Required Equity / Debt €11.5m / €6.5m

HS VII – Kesseldorfer Straße 1, Dresden

Asset ManagementCase Study – Vertical expansion through modular construction

Area available for development 5,500 sqm

Est. total additional area 13,000 sqm

Est. additional lettable area 6,500 sqm

Est. realisable units 180

Est. costs € / sqm 2,805

Capital Markets Day – 12 September 2019 9

Asset ManagementSummary

The Corestate Approach Fully integrated, group-internal real estate value creation chain, from

facility management to fund managementProfound real estate expertise all across the risk spectrum (from core to

opportunistic)Pro-active approach, looking for innovations beyond the “classical” asset

management categoriesAhead of the curve in asset management innovation (digitalization; ESG;

tools)