conwert Immobilien Invest SE Buy (old: Hold) Target: (old: 10.50)

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1 Buy (old: Hold) Target: (old: 10.50) 06 March 15 Price (Euro) weeks range / 8.40 Key Data ISIN AT Reuters CONW.VI Bloomberg CWI AV Reporting standard IFRS Market Cap (Euro million) 1, Number of shares (million) 82.8 Free Float 55.9% Free Float MarketCap (Euro million) 565 CAGR net profit ('13 -'16e) 105.9% Multiples e 2015e 2016e Market Cap/ revenues (gross) Market Cap/ revenues (net) PE-Ratio (not diluted) Dividend Yield 0.8% 1.0% 2.1% 3.0% Price-to-Book-Ratio Key Data per share (Euro) e 2015e 2016e Earnings per share (not diluted) Dividend per share (DpS) Book Value per Share (BVpS) Financial Data (Euro '000) e 2015e 2016e Total revenues (gross) 516, , , ,800 Total revenues (net) 269, , , ,500 t/o rental income 227, , , ,100 t/o net profit from property sale 27,300 13,800 20,000 23,500 Net property services revenues 15,200 9,100 7,200 6,900 Property expenses -85,900-89,200-87,100-98,200 Net gains fair value adjustments 9,100-5, ,800 Operating profit (EBIT) 123, , , ,900 net financial result -74, ,100-50,600-48,500 Pre-tax profit (EBT) 48,700-10,100 85, ,400 IFRS taxation (mainly non-cash items) -35,400 2,300-24,800-29,400 Net profit after minorities 7,500-11,500 54,900 65,500 Shareholders' equity (Euro million) 1,066,600 1,057,100 1,075,600 1,092,900 Property assets (Euro million) 2, Total usable space (sqm '000) 2, RoE (pre-tax) 4.7% -1.0% 8.0% 9.8% RoE (after tax) 0.7% -1.1% 5.1% 6.0% Main Shareholders Hans-Peter Haselsteiner (direct and indirect via Petrus) 24.4% Petrus Advisers LLP 6.7% Earnest Partners, LLC 5.0% FIL Limited (Fidelity) 5.0% Own shares 3.0% Financial calendar Annual results 2014 March 25, 2015 AGM May 14, Q 2015 report May 27, 2015 Analysts Internet Dipl.-Kfm. Stefan Scharff, CREA Thilo Gorlt, Exec. MBA (HSG), CIIA Scharff@src-research.de Gorlt@src-research.de conwert has lagged the German resi theme trade and in our view the DW offer might not be the last word we lift our rating to Buy and TP to Due to the right strategic measures of the Post-Meran era we strongly believe that conwert is now on the right path to drive its future profitability and improved efficiency without the help from third parties. After former chairman Johannes Meran left the firm one year ago in March 2014 without any major success in three years, the company took several important measures to improve efficiency and lift the FFO results as well as to streamline the portfolio after the wrong decision of buying ECO, in particular with regards to CEE. The good news after the first nine months of 2014 was that the company was able to ramp-up its rental income by 8% to Euro 181m. The firm delivered a very good success in the reduction of the vacancy rates, in all regions. For instance, vacancy rate in Leipzig dropped from 6.7% to 5.1%, Vienna dropped from 10.7% to 7.6% in the last twelve months. In addition, conwert reached a track record in gradually realizing reversionary potential. The residential market in Vienna has a reversionary potential of 33% for each rented sqm. The Berlin market of conwert has a reversionary potential of 21% for each rented sqm, speaking a clear language for the hidden reserves in the portfolio which are not reflected in the NAV. Looking at the full P & L picture the performance is impaired by lower proceeds from disposals of the hold and trading portfolio. Even more important, conwert suffers from the very low overall interest rate environment which translates into negative effects from interest hedging swaps which go through the group s P & L account. All in all, the 9M numbers delivered a loss on the bottom line despite an improving operating and rental picture and a much more healthy cost base than in former years. We might expect the firm to present again a negative bottom line for 4Q with 2014 numbers on 25 March. In our opinion, the negative bottom line might turn into black numbers from 2Q 2015 on. The Deutsche Wohnen offer for a full takeover of conwert for Euro per share might be justified in a short-term view for conwert shareholders and is very attractive for Deutsche Wohnen. conwert s average cost of debt is in a realistic range between 4.0% and 4.5%, while DW is able to gather new debt at only c. 1.5%. Thus, DW strongly profits from this refinancing advantage and might lift up his own group s operating performance by this deal. We calculated our DCF on a stand-alone conwert with undemanding assumptions and come up with a fair value of Euro conwert has lagged the German resi theme and we know that it is not a pure play due to the open ECO issue. Nevertheless, the new management took the right measures to quickly lift FFO and profits. Thus, we would refuse the DW offer. Our new TP is

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3 Strengths Weaknesses Opportunities Threats conwert's new strategy with a clear focus on major cities in interesting markets like Germany and Austria offers constant rental income. The company holds a very attractive residential portfolio in Austria and Germany with total property assets of Euro 2.83bn. The management achieved significant reductions of the vacancy rates in Vienna and some major German cities and we strongly belief that conwert will achieve further improvements on that field. For the total portfolio conwert improved its vacancy rate to 8.4 (9M/2013: 9.2%). Despite the problems with the properties in the CEE portfolio and the negative impact of the swaps, conwert consist of a book value per share of Euro and an EPRA NAV per share of Euro which implies an upside potential for the stock of more than 25%. Despite conwert is in an active sales process for their commercial units and some properties in the CEE with relatively high vacancy rates, the company was not able to achieve its guidance of Euro m sales for Therefore, we see some risk for further write-downs especially in properties of the CEE portfolio which would have a negative effect on net profit. conwert highly benefits from a quick and ongoing increase of the interest rate curve. In that scenario, the company's will reach lower financial losses or even financial profits which will boost net profit in a positive direction. conwert showed in the past two quarters some significant cost reductions and we strongly belief that the management will outperform its guidelines for the following quarters of lower personnel costs as well as a significant reduction in other operating expenses. Although, the German real estate company Deutsche Wohnen AG (DW) offered Euro 11.5 per share we do not exclude that DW will improve its offer as the current stock price of conwert at the Vienna Stock Exchange shares is above Euro 12. In addition, we still see the possibility that another market participant could act as a "white knight" and offer a more attractive offer to conwert shareholders. As of 30 September 2014 conwert significantly reduced the total vacancy rate from 38.2% (9M 2013) to 31.7% in the property portfolio of other markets (CEE) which is in our view an important precondition to reach the goal of a complete sale of that portfolio in the upcoming quarters. Although we saw in the first nine months of 2014 some negative fair value adjustments for individual properties located in non core countries, due to the tense situation in these markets and specific segments we cannot exclude financial strains for the future. A long-term low interest rate, called the "Japanese scenario" would lead to further financial losses for the company and therefore stress net profit. Ongoing difficult market situation, in particular for the projected sale of commercial units in CEE could induce negative cash flow effects. As a negative consequence company can dissolve only a lower volume of financial swaps to unburden the negative financial result. 3 SRC Equity Research 3

4 Summary of the latest reported 9M 2014 figures For the first three quarters 2014 conwert reported comparatively mixed figures. Although the company realized slightly higher rental income of Euro 181.4m (9M/2013: Euro 168.6m) total revenues dropped sharply by nearly 26% (yoy) to Euro 259.1m (9M/2013: 348.4m). Despite further cost cutting measures, operating profit dropped by almost 19% to Euro 75.5m. According to the ongoing decrease in the interest curve, mainly negative non-cash effects from swaps stressed financial result in a very native direction. Mixed development in total revenues Principal reasons for that development were lower proceeds from disposal of properties held for sale as well as proceeds from the trading portfolio. According to the new strategy, to decrease the portion of rental income in Austria to about 20%, rental income of that segment slipped by 5% to Euro 47.8m. Otherwise, due to the acquisition of the GE-Portfolio, conwert was able to boost rental revenues in Germany by 14% to Euro 129.5m. Despite the positive development in rental income, the company's proceeds from the disposal of properties held for sale decreased by 26% to Euro 44.3m and the proceeds from the investment property portfolio dropped even sharply by 75% to only Euro 26.6m. Therefore, the planned reduction in sales income led to a 25.5% decline in conwert revenues to Euro 259.1m (9M/2013: Euro 347.5m). The focal point of the sales activities was Germany with sales revenue totaling Euro 46.4m followed by Austria with Euro 23.3m and Euro 1.2m in other countries. based on the total sales volume of Euro 70.9m (9M/2013: Euro 167.3m) we do not believe that the company is able to keep up its guidance of generating Euro m sales proceeds by year-end Key figures of the operating performance Q HJ M 2013 GJ 2013 Q HJ M Total revenues EBIT Financial result Net profit/ loss Company reached further improvements in cost cutting measures According to the new strategy, conwert was able to transcribe further cost cutting measures during the first three quarters Although, other operating expenses remained almost unchanged at Euro 28.8m (9M/2013: Euro 28.9m) management stick to its assumption of a significant decrease for the full year Personnel expenses showed a very positive development and dropped by almost 17% from Euro 24.5m (9M/2013) to a promising level of only Euro 20.4m. 4 4 SRC Equity Research

5 Weak EBIT followed from higher property expenses Active management of financial result is the key factor for better net profit Although the management achieved a significant reduction in vacancy rates and an increase in rental income, higher property expenses related to the portfolio purchased in Germany 2013 was the key factor of poor performance in operating profit (EBIT). Property expenses climbed by 14% to Euro 68.5m (9M/2013: Euro 60.0m). In addition, negative fair value adjustments of around Euro 6m (9M/2013: Euro 0m) for individual properties in Czech Republic, Slovakia and Ukraine was another factor for the disappointing development of the 9M/2014 operating performance. Despite the above mentioned operating developments, key factor to generate better net profits for the future is an active management of the financial result. As the company suffers under the ongoing decline of the interest rate curve, financial revenue dropped sharply to only Euro 3.2m after Euro 31.4m due to higher expenses from the change in value of ineffective derivatives(swaps). After the first three quarters of 2014 finance costs add up to a loss of Euro m after Euro -56.3m in the comparison period of Management countersteered with a partial liquidation of short-dated swaps in order to reduce the risk of further losses. Influence of fincacial loss to net profit Q HJ M 2013 GJ 2013 Q HJ M EBIT Financial revenue Financial costs Financial result Net profit/ loss Lower proceeds from disposal in all portfolio segments caused lower revenues Aside from the negative development of the financial result, another key factor for lower revenues in all portfolio segments was the planned but partly sharp decline of proceeds from the disposal of properties. In the Austria segment in particular, revenues nearly cut into half to only Euro 83.2m (9M/2013: Euro 159.9m) due to the drop of proceeds by 75% from Euro 94.3m (9M/2013) to Euro 23.3m. Although the management was able to reduce the overall vacancy rate to 12.2% (9M/2013: 13.8%), the planned vending of residential and commercial units could unfortunately not compensate that positive development and finally resulted in lower rental income to Euro 47.8m (-5% yoy). In contrast to the other two portfolio segments, the German portfolio benefitted from the portfolio purchase in August 2013 and generated an increase of rental income to Euro 129.5m. This adds up to a plus of 14% (yoy). However, as a consequence of the reduction of proceeds from the sale of properties by 32% (yoy) to Euro 46m, revenues fro that portfolio segment declined by 7.2% to Euro 195.8m (9M/2013: Euro 211.0m). 5 5 SRC Equity Research

6 Weak performance in CEE portfolio At September 2014 revenues of the other countries segment declined by almost 22% to only Euro 8.2m. Despite a respectable increase in rental income by 34% to Euro 6.3m, which was a consequence of lower vacancy rates, proceeds from the disposal of properties plunged by 77% to only Euro 1.2m and overcompensate the positive development in rental income. conwert's new corporate strategy in summary Focus on profitable residential markets in Germany and Austria Due to the difficult market situation, the disappointing development of the low property sales and the still high vacancy rates in CEE portfolio, management announced a new strategy to bring the company back to profitability. In future, conwert will focus on the profitable residential markets in Germany and Austria particularly on strong and stable metropolitan areas, as well as to boost the sale of the relatively unprofitable commercial and residential units in other countries like Czech Republic and Slovakia, which make up about half of the remaining assets in other countries (CEE). Based on the actual segment composition, conwert is willing to boost the portfolio in Germany to 80% and Austria to 20% in respective and tries to change the new composition of the portfolio by further divestments of non-core and commercial assets to 80% residential and 20% commercial properties. Furthermore, conwert focus besides Vienna on strong and stable metropolitan areas like Potsdam, Dresden, Leipzig, Berlin, Core NRW which consist of growing population and partly represent the backbone of Germany's economic stability. Hereby, Management expects a stronger growth rates in average rent as well as lower vacancy rates and finally faster increase in value of the property units. Cost cutting measures to stimulate operating profit On the cost side, the company concentrates besides better cost control mainly to reduce operating costs by focusing on selected mandates and core markets. Based on the 2013 figures, for other operating expenses management forecast a total cost cutting potential of about Euro 10m and is willing to realize 75% of that potential until year end Cost cutting potential in personnel expenses according to 2013 figures is specified at about Euro 4.0m until year end In addition, due to further vacancy reduction company estimates a potential of about Euro 16.5m and plans to realize another Euro 4.1m. All in all, and under consideration of lower service revenues management plans cost cutting potential of about Euro 10m. Due to the negative influence of the financial swaps, management plans to boost further divestments of unprofitable property investments and to dissolve step-by-step short-term swaps Assumptions of SRC Research for the upcoming quarters New strategy brings conwert back on track In our view, the above mentioned measures could only be one step of a successful long-term strategy and we expect that this is not the end but just the beginning of the implementation of slender processes and more efficient cost structures in the company. In consideration of the fact that the company is confronted with serious challenges we strongly believe that conwert is on the right way to manage its actual problems. We also feel very confident with the new strategy and already expect for the next quarters significant improvements in top and bottom line figures. 6 6 SRC Equity Research

7 Cost cutting measures, lower vacancy rates and higher rental income will boost EBT As the management is already in advanced sales negotiations with potential buyers for the portfolio in the Czech Republic and some assets in Slovakia, we expect some positive news for the first half of Firstly,, we suppose in our forecast further improvements concerning vacancy rates in all portfolio segments and lower negative fair value adjustments for individual properties. Secondly, we expect that interest rate level will find in 2015 its bottom and that we possibly see in the second half of the year even a slight increase from that low level. For rental income we expect the figures are mainly driven by the strong development of the German portfolio. For Austria and other countries we assume a slight decrease in rental income. Based on our assumption of a total revenue of Euro 374.4m for 2015 we estimate further reduction in property expenses as well as lower expenses from the disposal in the trading and hold portfolio. Regarding the company's guidance for possible savings in personnel expenses of about Euro 4m until 2015, we expect that conwert could reach that target already in 2014 and assume additional cost cutting potential for Detail assumptions for your forecast are summarized in the following table: SRC Research assumptions Q H M e Rental income 248,000 60, , , ,900 Austria 62,600 15,600 32,000 46,900 61,800 Germany 178,300 43,900 90, , ,900 Other countries 10,100 1,800 3,800 5,500 8,100 Subtotal trading portfolio 13,400 3,100 7,400 12,400 16,300 Subtotal hold portfolio ,300 2,900 3,700 Total revenues 367,300 81, , , ,400 Presonnel expenses 27,200 6,500 13,100 19,400 26,200 Other operating expenses 40,100 7,100 17,200 25,300 36,100 EBIT 111,000 32,000 65, , ,700 Financial costs 128,100 30,800 47,400 59,900 57,700 Financial result 121,100 29,800 45,500 55,400 50,600 Pre tax result (EBT) 10,100 2,200 19,500 45,600 85,100 Net profit/ loss 11,500 1,200 12,900 30,700 54, SRC Equity Research

8 Undemanding assumptions at our DCF lead to a Fair Value of 14 conwert Immobilien Discounted Cash Flow model WACC (weighted average cost of capital) 6.5% CoE 9.0% (long-term share: 45%) years until first pay-out 0.8 CoL 4.5% (long-term share: 55%) growth rate for Terminal Value 1.0% Market risk premium 5.0% Beta 1.3 Risk free interest rate 2.5% Euro ' e 2016e 2017e 2018e 2019e Terminal Value Rental income 187, , , , , ,594 yoy 12% -10% 8% 8% Net proceeds from property sale 37,700 49,100 34,400 36,120 37,926 38,305 yoy 30% -30% 5% 5% Proceeds from service revenues 7,200 6,900 6,800 6,664 6,531 6,596 yoy -4% -1% 15% 15% Cash earnings 232, , , , , ,495.1 yoy 14.4% -13.8% 7.3% 7.3% 1.0% cash margin 24.3% 29.7% 24.3% 43.0% 43.0% 40.0% cash margin on revenues Operating expenses -176, , , , , ,897.1 Operating cash-profit after staff and material expenses and other expenses 56,600 78,900 55, , , ,598.1 Tax rate on operating cash profit 29.1% 27.6% 28.3% 30.0% 30.0% 30.0% Net operating profit after tax (NOPAT) 40,106 57,099 39,963 74,026 79,421 74, /- Change in Working Capital 5,000 7,000 3,000-2,000-4,000-5,000 Free cash flow 45, , , , , ,618.6 Free Cash Flow margin 19.4% 24.1% 18.7% 29.3% 28.6% 26.1% Present Value of Free Cash Flows 42, , , , , ,306.0 Total of Free Cash Flows 1,178,716 + non operating assets 0 Enterprise Value 1,178,716 + cash and cash equivalents (as of Sept. 2014) interest bearing liabilities (as of Sept. 2014) 1,401 - market value of minorities -10 Current Equity Value 1,180,213 number of shares ('000) 82,783 Fair Value Per Share SRC Equity Research

9 SRC Research - The Specialist for Financial and Real Estate Stocks - SRC - Scharff Research und Consulting GmbH Klingerstr. 23 D Frankfurt Germany Fon: +49 (0)69/ Mail: scharff@src-research.de Internet: Rating Chronicle Date Rating former share price former target conwert 22/ Jan/ 13 Hold Please note: The conwert share price mentioned in this report is from 5 March Conwert Immobilien Invest SE mandated SRC Research for covering the conwert share. Disclaimer 2015: This equity research report is published by: SRC-Scharff Research und Consulting GmbH, Klingerstr. 23, D Frankfurt, Germany (short name: SRC Research). All rights reserved. Although we feel sure that all information in this SRC report originates from carefully selected sources with high credibility, we cannot give any guarantee for accuracy, trueness and completeness. All opinions quoted in this report give the current judgement of the author which is not necessarily the same opinion as SRC- Scharff Research und Consulting GmbH or another staff member. All the opinions and assessment made in this report may be changed without prior notice. Within the scope of German regulative framework the author and SRC-Scharff Research und Consulting GmbH do not assume any liability for this document or its content being used. This report is solely for information purposes and does not constitute a request or an invitation or a recommendation to buy or sell any stock that is mentioned here. Private clients should obtain personal advice at their bank or investment house and should keep in mind that prices and dividends of equities can rise and fall and that nobody can give a guarantee of the future development of equities. The author of this report and the SRC-Scharff Research und Consulting GmbH commit themselves on a unsolicited basis to having no long or short-positions in equities or derivatives related to equities mentioned in this report. Reproduction, distribution or publishing this report and its content as a whole or in parts is only allowed with approval of SRC management written form. With acceptance of this document you agree with all regulations mentioned here and all general terms and conditions you will find at anytime at our website SRC Equity Research