EFTA01385509.pdf

> Financials Deutsche Bank Aroundtown Properties - Markus Scheufler, BUY, close €6.5, €7.50 tgt, 15% upside ■ We like Aroundtown as a play on a stronger German economy. Its portfolio Acquisition volume continues to surprise to the upside is primarily based in German cities (88% of portfolio) and is mostly geared towards commercial property (76% of assets). o rmAcquisrtion volume (in EURm) ,,,, ,,, Acquisition yield (%. RHS) 3.500 9 • Key driver #1: Acquisitions keep beating expectations. Aroundtown has 85 3.000 closed €3bn of acquisitions YTD at a 6.3% yield. 8 2,500 75 ■ We believe that Aroundtown should be able to continue making acquisitions 2,000 7 below replacement costs for the next two to three years. 65 ■ Refinancing could drive cash flow upside. 1.500 6 1.000 55 - Re-gearing the portfolio from 35% LTV at a low 1.5% marginal cost of debt 5 would lock in a 500bps spread 500 4.5 ■ Key driver #2: strong rental growth of >5% pa. We forecast a 23% FFO 0 4 2015 2016 2017 YTD CAGR to 2020E. This in turn is driven by: Source: Company data. Deutsche Bank estimates - Closing the 20% gap to market rents for c90% of the portfolio. Aroundtown's strategy is to acquire undermanaged assets, refurbish 20% upside to market rents drives LFL rental growth them and realise the market upside; - LFL rental growth of 4%; 100 OA) 88% 90 - A fall in vacancy rates to c5% from c7% 80 • Key driver #3: we expect a 12% NAV growth to 2020E, driven not just by 70 rental growth but also by: 60 50 - Revaluation — H1 revaluation to 5.5% yield was a positive surprise 40 - Better portfolio quality and thus yield compression 30 20 12% • Aroundtown currently trades on a discount to book value at 0.9x 2018E 10 ■ The next catalyst is potential inclusion in the MDAX in March 0 Below market rent At market rent Related DB Research: 3Q17 results: Strong growth continues: BUY (Scheufler) Soutco Company data, Deutsche Bank Deutsche Bank Research. European Equity Focus —Janson,' 21:18 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0086795 CONFIDENTIAL SDNY_GM_00232979 EFTA01385509