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

Berlin, 19 February 2018 - ADLER Real Estate AG intends to acquire up to 70 percent 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 entered into a share purchase agreement with Redzone Empire Holding Limited for the acquisition of a 41.04 percent 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 percent into the so called special tender offer (STO), which ADLER intends to launch for the purpose of acquiring up to 25.8 percent of the shares in BCP. In total, ADLER is thus targeting a shareholding of up to 70 percent. 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 percent), Bremen (10 percent), Dortmund, Hannover and Kiel (each 9 percent), 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.