ADLER Real Estate AG: Acquisition of stakes in Brack Capital Properties N.V.

ADLER Real Estate AG: Acquisition of stakes in Brack Capital Properties N.V.

- ADLER intends to acquire up to 70 % in Brack Capital Properties N.V.

- 440 New Israeli Shekel per share offered to all shareholders

- ADLER portfolio quality enhanced, property portfolio overlap and scale create operational synergies

- Further improvement of financial metrics

- Fully funded with proceeds from recent sales and cash with no Capital Increase intended

Berlin, 19 February 2018 - ADLER Real Estate AG intends to acquire up to 70 % of Brack Capital Properties N.V. (BCP), a public limited liability company incorporated under the law of the Netherlands and listed on the Tel Aviv Stock Exchange with total assets amounting to c. EUR 1.6 billion.

For this purpose, ADLER has today entered into a share purchase agreement with Redzone Empire Holding Limited for the acquisition of a 41.04% stake in BCP. In addition, senior management members of BCP have irrevocably undertaken vis-a-vis ADLER to tender their respective shareholdings of a combined 5.62% into the so called special tender offer (STO), which ADLER intends to launch for the purpose of acquiring up to 25.8% of the shares in BCP. In total, ADLER is thus targeting a shareholding of up to 70%. A majority above 50 percent will trigger full consolidation.

440 New Israeli Shekel per share offered to all shareholders

In the purchase agreement with Redzone, ADLER has agreed on a purchase price of 440 New Israeli Shekel (ILS) per share. This is also the price ADLER will offer to all remaining shareholders in the course of the intended special tender offer. On the assumption that the maximum number of shares will be tendered, the acquisition volume amounts to ILS 2.381 billion corresponding to c. EUR 539 million at the current exchange rate.

Portfolio quality enhanced, property portfolio overlap and scale create operational synergies

BCP owns a real estate portfolio containing more than 11,000 residential units in Germany of which two thirds are located in A-locations. The portfolio is concentrated in major German cities, among them Leipzig (30 %), Bremen (10 %), Dortmund, Hannover and Kiel (each 9%), overlapping with the existing ADLER portfolio. "With the acquisition we have not only significantly grown our portfolio, but have also initiated a profound quality transformation", said Tomas de Vargas Machuca, Co-CEO of ADLER Real Estate AG. "The overlap and the new scale allow us to generate operational synergies of around EUR 3 million annually, as we can integrate the property and facility management into our already existing operational structures." The acquisition also enhances all operational KPIs due to its quality and location as the BCP's portfolio has a higher average rent and a higher occupancy rate than ADLER's current portfolio.

BCP also holds development projects in central Düsseldorf and Aachen for nearly 2,000 residential units which ADLER intends to develop further. De Vargas Machuca: "This is a great bolt on to the different kind of projects which we have recently initiated like the "Wasserstadt Mitte-Riverside" in central Berlin where, by way of a forward purchase, we are going to add 700 high-quality apartments, or like the project in Göttingen where we expect to add more than 200 new units by building rooftop apartments on already existing buildings from our portfolio."

Further improvement of financial metrics

The acquisition will have a positive impact on nearly all financial metrics. It will contribute an annual rental income of c. EUR 45 million, thus increasing ADLER's topline by more than 25 percent. "As we can expect an additional EUR 20 million in FFO I per annum", de Vargas Machuca said, "we will boost our earnings by around 50 percent. What is equally important, other key financial metrics such as LTV and ICR will also improve in line with our financial policy. We see further opportunities for financial synergies amounting to a further c. EUR 3 million driven by refinancing and additional value through enhanced credit quality of the combined company." Moreover, the transaction will increase the value of our property portfolio by more than EUR 1 billion.

Fully funded with proceeds from recent sales and cash

The acquisition and the special tender offer will be financed from existing cash in ADLER, the proceeds from the recent sale of its stake in ACCENTRO Real Estate AG and the sale of non-core residential assets in ADLER. These amount to a total of c. EUR 350 million. The balance funds are provided under an in-place bridge loan financing agreement. ADLER does not rule out that it may decide to acquire all remaining shares in BCP in the mid- to long-term. No Capital Increase is intended in connection with this transaction.

"This", concludes Maximilian Rienecker, Co-CEO of ADLER Real Estate AG, "is a major step for ADLER to grow further and at the same time improve both its earnings and financial standing. It will thus be greatly benefitting to the interests of our shareholders."

In the transaction, ADLER is being advised by the following institutions: Kempen is financial adviser to ADLER jointly with J.P. Morgan who is also acting as sole provider of acquisition financing to ADLER.

For enquiries, please contact:

Dr Rolf-Dieter Grass
Head of Corporate Communication
ADLER Real Estate AG
Telephone: +49 (30) 2000 914 29
r.grass@adler-ag.com

Important Information

This announcement has been issued by Adler Real Estate AG ("Adler") solely for the purpose of publishing the intention to make a special tender offer. Moreover, it is neither an offer to purchase nor a solicitation to sell securities of Brack Capital Properties N.V. ("BCP"). The final conditions and further provisions relating to the special tender offer will be published in the offer memorandum. Adler as bidder reserves the right to deviate from the basic terms presented herein in the final terms and provisions of the special tender offer. Investors and holders of shares in BCP are strongly advised to review the offer document and all other documents related to the special tender offer, as they will contain important information. In accordance with Israeli law, the special tender offer will be conducted solely on the basis of the applicable provisions of the Israeli law, in particular the Israeli Companies Law, 1999 and the Israeli Securities Regulations (Tender Offers), 2000 ("Tender Offer Regulations"). The intended special tender offer is not made or intended to be made pursuant to the laws of any jurisdiction other than those of Israel. Notifications and the publication of information on the intended special tender offer are intended to be made in Israel only in accordance with the requirements of the Tender Offers Regulations, unless a notification or other publication is required or permitted under the respective laws of other jurisdictions.

To the extent permissible under applicable law or regulation, Adler or its brokers may purchase, or conclude agreements to purchase, shares in BCP directly or indirectly, outside of the scope of the intended special tender offer, before or after the period in which the special tender offer remains open for acceptance. This also applies to other securities which are directly convertible into, exchangeable for, or exercisable for BCP shares, such as convertible bonds, except that Adler and its broker may also exercise such convertible securities during the acceptance period under the special tender offer, provided that such convertible securities were purchased prior to the date of the Special Tender Offer Memorandum. These purchases may be completed via the stock exchange at market prices or outside the stock exchange at negotiated conditions. Any information on such purchases will be disclosed as required by law or regulation in Israel.

This announcement may contain statements, assumptions, opinions and predictions about the anticipated future development of Adler or BCP (forward-looking statements) that reproduce various assumptions regarding results derived from Adler's or BCP's current business or from publicly available sources that have not been subject to an independent audit or in-depth evaluation by Adler and that may turn out to be incorrect at a later stage. All forward-looking statements express current expectations based on the current business plan and various other assumptions and therefore come with risks and uncertainties that are not insignificant. All forward-looking statements should not therefore be taken as a guarantee for future performance or results and, furthermore, do not necessarily constitute appropriate indicators that the forecast results will be achieved. All forward-looking statements relate solely to the day on which this ad hoc announcement was issued to its recipients. It is the responsibility of the recipients of this ad hoc announcement to conduct a more detailed analysis of the validity of forward-looking statements and the underlying assumptions.