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BUWOG (BWO): BUWOG AG: Result of the first six months of the 2016/17 financial year

UNI - EN REPORT No44/2016

• Significant increase of Recurring FFO by 18.6% to EUR 57.6 million

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• Fair value adjustments grow compared to the 1st quarter of 2016/17 from EUR 146.5 million to EUR 173.8 million

• EPRA Net Asset Value per share improves by 6.3% to EUR 21.45 since 30 April 2016

• Reduction of average interest rate to 1.91% – further decrease expected to approx. 1.77% by the end of Q3 of the 2016/17 financial year

• Forecast for Recurring FFO for the 2016/17 financial year unchanged at a minimum of EUR 108 million.

Development of business at BUWOG AG was a success during the first half of the current 2016/17 financial year, once again confirming the feasibility of its strategic orientation. Significant increases in the contribution to results were generated, in particular, in the two business areas of Asset Management and Property Sales. The business area of Property Development also made gains compared to the previous half year. A significant increase in the results from Property Development is expected in the second half of 2016/17. The purchase of additional sites during the reporting period further expanded the BUWOG Group's development pipeline to a total investment volume of around EUR 2.55 billion, which was accompanied by an expansion of the basis for future revenue and organic growth. Recurring FFO, which serves as a central benchmark of the group, rose compared to the same period the previous year by 18.6% to a total of EUR 57.6 million. EPRA-NAV (net asset value per share on the basis of EPRA's calculation guidelines) was EUR 21.45 on the reporting day on 31 October 2016, thus 6.3% higher than at the end of the previous financial year (EUR 20.18).

"Comparing the targets for the 2016/17 financial year and the results of the first six months clearly shows the intensity with which the entire BUWOG Group team worked to implement our strategic objectives in every business area", says BUWOG CEO Daniel Riedl. "Our positioning with the three business areas of Asset Management, Property Sales and Property Development has once again proven to be a reliable model of success for ensuring a continuing high level of profitability in the future as well".

In the BUWOG Group's operational business, the biggest business area, Asset Management, generated operating results of EUR 78.5 million during the reporting period. In the business areas of Property Sales and Property Development operating results of EUR 25.5 million and EUR 2.1 million were generated, respectively. All total, the BUWOG Group generated an EBITDA of EUR 86.4 million in the first half of the 2016/17 financial year. Based on the semi-annual appraisal by CBRE, the fair value adjustments to investment property equalled EUR 173.8 million and reflect, in particular, the high yield compression in the core locations in Germany. The fair value of standing investments has consequently risen by 4.7% to EUR 3.9 billion since the reporting day of the 2015/2016 financial year. Earnings before taxes (EBT) came to EUR 179.2 million in the first half year. Net profit was EUR 146.2 million.

The annualised net in-place rent rose compared to the end of the previous financial year by 2.9% to EUR 207 million (30 April 2016: EUR 201 million). The like-for-like growth in rents came to 4.4% in the first half year; the vacancy rate remained low at a total of 3.5%.

After the reporting period the BUWOG Group also achieved another breakthrough in the pursuit of its aim to densify the portfolio in Austria. The agreement on the sale to an investment fund of its Tyrolean portfolio with 1,146 apartments and total floor area of approximately 89,000 sqm was signed on 7 December 2016. BUWOG anticipates free cash flow of around EUR 90 million from the sale, which is to be invested in further growth in Germany.

In addition to the successful development in Property Sales, where the number of units sold was increased by approximately 8% to 341 units at a margin of roughly 57% on the year and an operating result of EUR 25.5 million was generated, Property Development, which clearly distinguishes the BUWOG Group from competitors, also supplied good news in the half year reported. This is expressed primarily by the fact that the development pipeline was expanded, in particular, by the acquisition of sites to now 8,991 units, which is equivalent to a total investment volume of roughly EUR 2.55 billion. As of the reporting date on 31 October 2016, 1,387 units were already under construction; this was approximately 43% more than at the end of the previous financial year on 30 April 2016. After the results of operations in Property Development of EUR 2.1 million in the first half year, a contribution of at least EUR 13 million to Recurring FFO is anticipated for the year as a whole. In view of the increase in real estate prices, in order to successively develop its portfolio independently of the acquisition of further standing portfolios, the BUWOG Group is also building a growing number of rental apartments intended for inclusion in its own portfolio. At present, the construction of around 3,000 rental apartments in its own portfolio in the cities of Berlin, Hamburg and Vienna is planned. With additional site purchases in the near future this cluster is to be expanded to approximately 5,000 rental units for the company's own portfolio.

The BUWOG Group's conservative structure of financing was also maintained and further optimised in the first half of 2016/17. For example, the average interest rate on financial liabilities was reduced substantially since the balance sheet date of FY 2015/16 from 2.19% to 1.91%. A critical contribution to this was the issue of a EUR 300 million convertible bond in September 2016, which BUWOG placed at a premium of roughly 56% on the last-reported EPRA-NAV at the time of issue at an interest rate of 0.00%. A further decrease to an average interest rate of approximately 1.77% as a result from further refinancing measures is expected. The LTV improved, falling from 47.6% (30 April 2016) to 46.4% as of the reporting date of 31 October 2016.

"The positive first half of the year encourages the continued pursuit of our growth strategy. Based on our plans in the coming years, the BUWOG business model will generate significant increases in rental income, Recurring FFO and EPRA NAV and enable increasing dividend payments. The interest in BUWOG as a capital market product is also supported by the inclusion of our shares in the ATX five and in the Stoxx 600 index", explains Andreas Segal, Deputy CEO and CFO of BUWOG AG.

In view of the successful development in the first half year, the Executive Board confirms its forecast for Recurring FFO of at least EUR 108 million for the overall 2016/17 financial year.

BUWOG AG's report on the first half of 2016/17 has been published today on the company's website under https://www.buwog.com/en/investor-relations/financial-reports

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