Deutsche Annington Immobilien SE plans IPO in 2013

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Bochum, 10.06.2013. Deutsche Annington Immobilien SE plant Börsengang in 2013

• Germany’s largest privately held residential real estate company plans its initial public offering (“IPO”) and listing on the Frankfurt Stock Exchange in 2013
• Post-IPO free float of around 25% of total shares outstanding envisaged
• Offering to consist of approximately EUR 400 million gross proceeds from the sale of primary shares in addition to secondary shares from the selling shareholder
• Preliminary investment grade corporate rating from a leading international credit rating agency expected
• EUR 2.5 bn term loan arranged; GRAND CMBS intended to be fully paid back in 2013
• New supervisory board structure incorporated; Dr. Wulf Bernotat to take over as Chairman of the Supervisory Board, all committees chaired by newly elected independent board members
• Strong operational performance in 2012 continued in Q1 2013

Deutsche Annington Immobilien SE (“Deutsche Annington”), Germany’s largest privately held residential real estate company in terms of portfolio value and number of units owned, announces its intention to list on the Prime Standard of the regulated market of the Frankfurt Stock Exchange in 2013.

Deutsche Annington owned more than 180,000 residential units in Germany with an aggregate fair value of EUR 10.4 billion as of 31 March 2013. The Company operates nationwide with the majority of its portfolio being situated in the old German Federal States (Alte Bundesländer) including Berlin. Deutsche Annington is headquartered in Bochum and employs about 2,400 employees.

A post-IPO free float of around 25% of total shares in issue is planned, made up of new shares from a capital increase and secondary shares placed by its current sole shareholder Monterey Holdings I S.à r.l., Luxembourg, a holding company owned by funds advised by Terra Firma Holdings Limited (85.33%) and by funds advised by CPI Capital Partners Europe GP, LLC (14.67%). The expected gross proceeds to Deutsche Annington from the sale of the new shares will amount to approximately EUR 400 million. Deutsche Annington intends to use these proceeds to strengthen its balance sheet.

Financing strategy enhanced with preliminary investment grade corporate rating expected
In the second quarter of 2013, Deutsche Annington decided to pursue a strategy to improve the efficiency and flexibility of its funding. Deutsche Annington intends to refinance maturing debt with new loans, by extending such debt and by potentially using other debt instruments, including the issuance of senior unsecured corporate bonds, in order to move towards a balanced mix of secured and unsecured funding over the near to mid-term future. To facilitate the issuance of such bonds at attractive conditions, Deutsche Annington expects to obtain a preliminary corporate investment grade rating from a leading international credit rating agency shortly.

In particular, Deutsche Annington has taken or intends to take the following steps to prepare for such bond offerings and accelerate the implementation of its financing strategy:

- In addition to the refinancing of EUR 720 million since the beginning of 2013, Deutsche Annington has taken out several secured loans to further refinance approximately EUR 940 million with several parties – including lenders from the insurance and pension sector, and mortgage banks. Deutsche Annington intends to close these loans at earliest in July and at latest in October 2013, subject to the fulfillment of customary conditions precedent;

- At the beginning of June, Deutsche Annington entered into an unsecured EUR 2.5 billion term loan facility with J.P. Morgan and Morgan Stanley, as arrangers;

- Subject to no significant change in market conditions and the fulfillment of customary conditions precedents, the term loan enables Deutsche Annington, together with the signed refinancings, to fully repay the outstanding obligations under the GRAND CMBS by 21 October 2013 at the latest;

- To diversify its funding sources Deutsche Annington is considering to refinance some of its secured loans, including a portion of subsidized loans, in order to create a pool of unencumbered assets of more than 50% of Deutsche Annington’s properties (measured by fair value); and

- Deutsche Annington intends to have the instruments and mechanisms in place, following the IPO, to access, among other financing options, the unsecured bond market for long term funding.

New supervisory board structure incorporated and new chairman elected
On June 9, 2013, the shareholder meeting of Deutsche Annington decided on the future structure of Deutsche Annington’s supervisory board. The new supervisory board of Deutsche Annington will consist of nine members, of which five were proposed by Monterey Holding I S.à r.l. and related with Terra Firma and four will be independent members. Dr. Wulf Bernotat, former CEO of the power and gas company E.ON, has been designated to act as chairman of the supervisory board. All supervisory board committees will be chaired by independent board members going forward.

“We are absolutely delighted that Dr. Wulf Bernotat has accepted to become the chairman of the supervisory board of Deutsche Annington. As an independent and highly experienced manager, Deutsche Annington will benefit from his tremendous expertise in leading positions, both on executive and non-executive levels”, says Guy Hands, chairman and chief investment officer of Terra Firma Capital Partners. “He also brings an in-depth understanding of international capital markets which will be of growing importance for Deutsche Annington in the future.”

“I am extremely pleased to become the chairman of the supervisory board of Deutsche Annington,” said Dr. Wulf Bernotat. “Deutsche Annington has made significant developments in recent years and is well positioned for the future. The market for affordable housing in Germany continues to be highly attractive and Deutsche Annington is set to capture the value of this market. I am very much looking forward to becoming a part of this development.”

Strong operational performance in 2012
Deutsche Annington delivered a strong operational performance for the financial year ended 31 December 2012. Compared to the financial year ended 31 December 2011, the vacancy rate of the residential portfolio was further reduced from 4.1% to 3.9% and the residential in-place rent per square meter increased by 2.1% to EUR 5.28. At the same time, Deutsche Annington spent a total of EUR 217 million in maintaining and improving the quality of its portfolio. Deutsche Annington continues to focus on improving the service it offers to its tenants and has established a dedicated in-house craftsmen organization comprised of almost 800 people solely focused on the performance and maintenance work related to Deutsche Annington’s portfolio. Despite a reduction in portfolio size from 186,530 units to 181,669 in the course of 2012, Deutsche Annington reported a stable Adjusted EBITDA of EUR 474 million compared to EUR 477 million at year-end 2011 (-0.7%), and an improved FFO 2 (comprises results from Deutsche Annington’s rental and sales business) of EUR 198 million compared to EUR 179 million at year-end 2011 (+10.7%).

Continued improvements during first quarter of 2013
Deutsche Annington continued its strong performance in 2013 with all major key performance indicators further improving in the quarter ended 31 March 2013 when compared with the quarter ended 31 March 2012. Vacancy rates improved by 0.4 percentage points compared with the first quarter of 2012. Adjusted EBITDA in Q1 2013 improved from EUR 119 million to EUR 121 million (+1.3%) compared with the first quarter of 2012 and FFO 2 grew to EUR 56 million, a nearly 17% increase compared to the first quarter 2012. As of 31 March 2013, the Net Asset Value amounted to EUR 4,253 million and the Loan-to-Value ratio (LTV) amounted to 54%.

“The investments and improvements in our operations and properties made by Deutsche Annington in recent years are currently paying off,” said Rolf Buch, CEO of Deutsche Annington. “We will continue to focus on providing affordable housing to our customers across Germany and believe we are extremely well positioned to continue to create value for all of our stakeholders.”

J.P. Morgan and Morgan Stanley are acting as Joint Global Coordinators and Joint Bookrunners. BofA Merrill Lynch and Deutsche Bank are acting as Joint Bookrunners, Berenberg Bank and Kempen & Co are acting as Joint Lead Managers, and COMMERZBANK, Erste Group Bank and SOCIÉTÉ GÉNÉRALE Corporate & Investment Banking are acting as Co-Lead Managers.

About GRAND CMBS
Deutsche Annington has historically raised debt by issuing commercial mortgage-backed securities (“CMBS”) and by borrowing from commercial banks, mortgage banks, the Kreditanstalt für Wiederaufbau, and other lenders. In particular in 2006, several entities of Deutsche Annington raised debt capital in the total of EUR 5.8 billion through the issuance and sale of collateralized real estate funding notes (so-called “REF Notes”) to German Residential Asset Note Distributor P.L.C. (“GRAND”). GRAND funded the purchase price paid to the REF Note issuers by issuing independent secured notes to institutional investors (the entire transaction “GRAND Securitization”). Following successful negotiation with the noteholders, the Grand Securitization was restructured in December 2012. Thereby, the maturity of the outstanding REF Notes was extended to July 2018, including annual amortization targets.

These materials may not be published, distributed or transmitted, directly or indirectly, in or into the United States, Canada, Australia or Japan. These materials do not constitute an offer of securities for sale or a solicitation of an offer to purchase securities of Deutsche Annington Immobilien SE (the “Company”) in the United States, Germany or any other jurisdiction. The securities of the Company may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”). The securities of the Company have not been, and will not be, registered under the Securities Act or under the applicable securities laws of Australia, Canada or Japan.

Any offer will be made solely by means of, and on the basis of, a securities prospectus which is to be published. An investment decision regarding the publicly offered securities of the Company should only be made on the basis of a securities prospectus. The securities prospectus will be published promptly upon approval by the German Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) and will be available free of charge from Deutsche Annington Immobilien SE, Philippstrasse 3, 44803 Bochum, Germany, or on the Company’s website.
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The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. The information in this announcement is subject to change.

This announcement does not constitute a recommendation concerning the potential offering of securities described in this announcement (the “Offering”). Acquiring investments to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. Potential investors should consult a professional advisor as to the suitability of the Offering for the person concerned.

The Underwriters are acting exclusively for the Company and the Selling Shareholder and no-one else in connection with the Offering. They will not regard any other person as their respective clients in relation to the Offering and will not be responsible to anyone other than the Company and the Selling Shareholder for providing the protections afforded to their respective clients, nor for providing advice in relation to the Offering, the contents of this announcement or any other matter referred to herein.

In connection with the Offering, the Underwriters and any of their affiliates, acting as investors for their own accounts, may subscribe for or purchase securities of the Company and may otherwise deal for their own accounts. Accordingly, references in the Prospectus, once published, to the securities being issued should be read as including any issue or offer to the Underwriters and any of their affiliates acting as investors for their own accounts. In addition certain of the Underwriters or their respective affiliates may enter into financing arrangements and swaps with investors in connection with which such Underwriters (or their affiliates) may from time to time acquire, hold or dispose of the Company’s shares. The Underwriters do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

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