Conference Call on Acquisition of BauBeCon and Expansion in New Europe. 19 July, 2007

Transcription

1 Conference Call on Acquisition of BauBeCon and Expansion in New Europe 19 July, 2007

2 Disclaimer 2 This presentation contains forward-looking statements regarding future events and the future results of Pirelli RE that are based on expectations, estimates, forecasts and projections about the industries in which Pirelli RE operates and the beliefs and assumptions of the management of Pirelli RE on the current date. In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs, return on equity, risk management and competition are forward-looking in nature. Words such as expects, anticipates, targets, goals, projects, intends, plans, believes, seeks, estimates, variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Therefore, Pirelli RE s actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, the impact of competition, political and economic developments in the countries in which Pirelli RE operates, regulatory developments in Italy and internationally. Any forward-looking statements made by or on behalf of Pirelli RE speak only as of the date they were made. Pirelli RE does not undertake to update forward-looking statements to reflect any changes in Pirelli RE s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

3 Strategic Rationale for Pirelli RE 3 The transaction confirms Pirelli RE strategy to further strengthen its presence in the German Real Estate market Strategic Rationale of the Investment for Another attractive real estate portfolio Excellent fit with DGAG portfolio Create a residential portfolio with a critical size enabling to generate synergies and potential large capital markets transactions Combine and expand Baubecon with the already existing DGAG platform Create a leading management company with a truly innovative business model, well positioned to be the preferred provider of real estate related property and asset management services Increased future deal flow in a very attractive investment market Build credibility and negotiating power with investors in the German market Act as a consolidator in the German residential market

4 The Envisaged Business Model 4 With the acquisition of Baubecon Pirelli RE intends to implement a structure consistent with its business model The Business Model Comments 40% 60% ASSET MANAGEMENT / SERVICE PLATFORM Service Agreements 100% Propcos RE Services Acquisition of target together with DB RREEF for their investment into the property company (PropCos) After acquisition Pirelli RE will: Retain the 100% of the service activity Co-invest with RREEF with a minority stake in Propcos Retain the management of the Propcos Main current activities of the Asset Management and Service business comprise asset management and property management of own properties and of third party residential units DB RREEF

5 Structure of the deal 5 The total Enterprise Value of 1.690m, excluding closing costs of 30m, is funded through equity for 350m and through debt for 1.370m, of which 360m of non recourse bridge loan and approx m of collateralised real estate loans USES OF FUNDS SOURCES OF FUNDS Enterprise Value 1.690m Real Estate Portfolio 1.647m Secured Loan 1.010m Maturity: six years Fully hedged at closing with interest rate swaps Security: collateralised with real estate assets AM/Services 43m Closing Costs 30m Bridge Loan 360m Equity / Shareholders' Loans 350m Maturity: 24 mths Fully hedged at closing with interest rate swaps 264m at closing 85m in 5 years (vendor loan at 3% yield) Real estate portfolio: 40% Pirelli RE 60% RREEF AM/service business: 100% Pirelli RE

6 Geographical distribution of Baubecon portfolio 6 The major part of the Baubecon North portfolio Germanyis located in the Northern and Eastern part of Kiel Germany with Berlin (30%), Hannover (22%) and Magdeburg (8%) as main locations North Germany No. of Hamburg units: 1,238 Kiel Lübeck No. of units: 1,766 No. of units: 8,961 Hannover No. of units: 5,760 West Germany Berlin No. of units: 7,632 Braunschweig No. of units: 1,634 No. of units: 1,675 East Germany No. of units: 5,932 South Germany No. of units: 512 Baubecon: Total portfolio: Solaia: 26,149 units (a) 21,403 units

7 Baubecon portfolio description 7 Key Facts Geographcal distribution (n. units) Total portfolio surface (sqm) thereof subsidised Total n. units (residential) thereof subsidised Total n. of third party units Total n. of commercial units 507 Total rents ( m) 100,5 (a) Average rent per sqm pm ( ) 5,08 Brandenburg 2% Others 22% Wittenberg 3% Braunschwei g 6% Kiel 7% Magdeburg 8% Berlin 30% Hannover 22% Total portfolio vacancy 8% Asset Value Platform Value 43 /sqm (excluding parking) 960 Gross entry yield 6,1% Commercial 2% Destination of use (n. units) Other 1% Subsidised assets (n. units) Subsidised 17% Employees 262 FTE a)thereof 2.7m subsidised rents Residential 97% Non subsidised 83%

8 Baubecon acquisition - Strategy and value enhancement 8 REAL ESTATE PORTFOLIO The 7-year business plan envisages: (average life 5years) Yearly passing rent growth (from 101m to 125m in 7 years) through: Renewal of old contracts showing rents below market level (12% of portfolio to be renewed yearly) Vacancy reduction to 5%- 3% also through capex on vacant assets Efficiencies in maintenance costs, through a more selective management Target IRR 18% (base case)

9 Some Baubecon assets 9 Düsseldorf Köln Berlin-Tempelhof Berlin-Prenzlauer Berg

10 Some Baubecon assets 10 Essen Lübeck Hannover Hannover

11 Baubecon and DGAG combined 11 Key company facts (only residential) Geographical breakdown by number of units (only residential) BAUBECON DGAG COMBINED Total portfolio surface (sqm) thereof subsidised Total n. units thereof subsidised Total n. of third party units Total rents ( m) 100,5 (a) 71,0 171,5 Total portfolio vacancy 8% 3,6% 6,1% Others 22% Brandenburg 2% Wittenberg 3% Braunschwei g 6% Kiel 7% Magdeburg 8% BAUBECON Berlin 30% Hannover 22% Braunschwei g 8% Hamburg 15% North Germany 15% DGAG Berlin 1% Kiel 20% Lubeck 41% Asset Value Platform Value Others 12% COMBINED Lubeck 19% /sqm (excluding parking) Gross entry yield 6,1% 6,8% 6,4% North Germany 19% Employees 262 FTE 283 (b) 545 Brandenburg 1% Berlin 16% Wittenberg 2% Magdeburg 4% Braunschweig 7% Hamburg 7% Kiel 13% a)thereof 2.7m subsidised rents b) Without caretakers (92)

12 Asset Management and Services Platform of Baubecon 12 Service activities are provided: on own properties Asset management Property management / letting Facility management Administration on third party assets : Property management/letting Complementary services: urban development and insurance brokerage services

13 Strategy on Baubecon and DGAG combined service platform 13 Creation of a leading asset management and service platform, leveraging on efficiencies resulting from the integration of Baubecon and DGAG Growth of assets under services from 5bn to 7bn in 3 years Limited owned portfolio rotation in the range of 4%-6% p.a. Revenues target of around 60m Savings of 10%-12% on a cost base of 50m ROS target in the range of 12%-15%

14 New Europe: Poland, Romania and Bulgaria

15 Pirelli RE: Evolution of geographic presence GERMANY Pirelli RE Deutschland AUM > 3 bn 2006 POLAND Pirelli Pekao RE sqm Development area 2007 ROMANIA Pirelli RE Romania JV PRE Romania (80%) & Unicredit Tiriac Bank (20%) 2007 BULGARIA Pirelli RE Bulgaria JV (Pirelli RE Bulgaria (75%) & Unicredit Bulbank (25%)

16 POLAND: Pirelli Pekao Real Estate business model in place 16 Open Market Asset Management & Service Provider Financial Services 75% 25% 60% Cypress Grove JV 40% Asset Management & Service Provider Investment SPV s 88% 12% Financial Services Final Client of the Investment SPV

17 Pirelli Pekao Real Estate key highlights after 1 year of operation 17 Pirelli RE s distinctively innovative approach to real estate management and synergy-focused partnerships at the Management Company and SPV level have resulted in the achievement of a leading position in Poland s real estate market in only 1 year Investment SPVs launched in partnership with Cypress Grove are expected to reach the 3-year target of 100 million AUM in less then 12 months from the launch date In 2006 already achieved Euro 6.5m of EBIT (in less then 1 year) in 2007 we forecast a 100% growth Built up portfolio of sqm of residential development projects (3.300 units) in the most attractive real estate segment in Poland. Estimated price Market Value approx Euro 500m Average Price per sqm are in excess of Euro 1500 and are constantly increasing Obtained non-revolving financing package unique to the Polish market as a result of the strong partnership with Bank Pekao with a total drawing amount of 377 million Built up a local dedicated team of 80 people Original IRR target> 25% and performance above original target Acquisitions under negotiation for areas covering in excess of sqm in major cities

18 Main ongoing projects in Warsaw 18 Okopowa Street, Warsaw Residential and Offices Banderii Street, Warsaw Residential and Retail Residential Area: sqm Residential Area: sqm Offices Area: sqm Retail Area: sqm SOLD:70% SOLD: 70% Total estimated Revenues: 28,0 Mn Total estimated Revenues: 43,1 Mn Total Investment: 21,5 Mn Total Investment: 31,1 Mn Price per sqm: / sqm Price per sqm: / sqm Preliminary contracts 2007: 21,1 Mn Preliminary contracts 2007: 16,9 Mn Grzybowska Street, Warsaw Residential Residential Area: sqm Total estimated Revenues: 71,7 Mn Total Investment: 59,2 Mn Price per sqm: / sqm Preliminary Project in 2007 Ostrobramska Street, Warsaw Residential and Retail Residential Area: sqm Retail Area: sqm Total estimated Revenues: 239,1 Mn Total Investment: 163,4 Mn Price per sqm: / sqm Preliminary project in 2007

19 Main ongoing projects in Gdansk 19 Szarfania Street, Gdansk Residential and Retail Angielska Grobla, Gdansk Residential Residential Area: sqm Retail Area: m2 Total estimated Revenues: 34,0 Mn Total Investment: 23,1 Mn Price per sqm: /sqm Preliminary contracts 2007: 7,4 Mn Residential Area: sqm Retail Area: sqm Total estimated revenues: 51,5 Mn Total Investment: 35,9 Mn Price per sqm: /sqm Preliminary Project in 2007 GDANSK WATERFRONT DEVELOPMENT CASE STUDY The initiative aimed to re-qualificate a wide ex-industrial site, near to the old town area, through the development of the waterfront. The residential estate is located in Gdansk, in the historic city centre. The development enjoys the close proximity of the Motlawa River, one of the largest rivers in the region, and it has become a representative example of the revitalization of Gdansk s waterfront. The low height construction and décor styled in line with Gdansk ancient architecture will fit into the character of the terraced houses in the area. The exceptional view of Gdansk and the closeness of Motlawa river is maximized by the project s architecture. The project would activate a morphological and environmental reality which will positively exploit the area s location, offering an outline of the waterfront in Gdansk, between urban renovation, economic and infrastructure opportunities & threats, and high quality of daily life.

20 ROMANIA: Pirelli RE Romania 20 Open Market Asset Management & Service Provider Financial Services 80% 20% Pirelli RE Romania Asset Management & Service Provider Investment SPV s 39.2% 9.8% Financial Services Investors 51% Final Client of the Investment SPV

21 Pirelli RE Bulgaria 21 Open Market Asset Management & Service Provider Financial Services 75% 25% Pirelli RE Bulgaria Asset Management & Service Provider Investment SPV s 36,75% 12,25% Financial Services Investors 51% Final Client of the Investment SPV

22 Pirelli RE international expansion: Romania & Bulgaria 22 Key factors Pirelli RE track record and business model which has been successfully applied in CEE Unicredit Group is the strongest financial partner in Romania and Bulgaria The strategy: global expertise and local management know-how Market opportunities Real Estate sector outlook is strongly positive, due to favorable risk/profitability ratio High demand and scarcity of quality properties Large potential customer base/real estate market PIRELLI RE ROMANIA & BULGARIA A new reliable player, part of a leading real estate group in Europe, with a distinctive approach ready to catch market opportunities: Creating a local platform for asset management and specialist services Attracting primary international investors Promoting high quality development projects supply still underdeveloped