PRESS RELEASE

TAG to enter the Polish residential-for-rent market; acquisition of Vantage Development via tender offer secured by 100% commitment of selling shareholders

- Vantage Development shareholders have entered into an investment agreement with TAG to sell all their shares for a total net consideration of c.EUR 85m following the carve-out of Vantage Development commercial real estate business back-to-back to the selling shareholders

- Mid-term target of c. 8,000 to 10,000 residential rental units in Poland; Vantage Development's pipeline includes c. 5,300 residential units, thereof up to c. 3,400 units available for the letting business

- Growing Polish residential-for-rent market as a regional expansion of TAG's business model focusing on strong cash returns; early market entry is expected to provide TAG a competitive advantage in terms of scale, market knowledge, penetration and position; Vantage Development as a nucleus of TAG's rental portfolio in Poland

Hamburg (8 November 2019) - Today, TAG Immobilien AG ("TAG") signed via TAG Beteiligungs- und Immobilienverwaltungs GmbH, a 100% owned subsidiary, an investment agreement to acquire 100% of the shares in Vantage Development S.A. ("Vantage Development") with a simultaneous carve-out of its commercial real estate business which will be repurchased by the selling shareholders. Based on a tender offer price of PLN 11.50 per share, the total transaction consideration (calculated on the basis of a PLN/EUR exchange rate of 0.234) amounts to c. EUR 131m, of which c. EUR 46m relate to the commercial real estate business unit. As a result, the total net consideration for TAG amounts to c. EUR 85m for the residential business and platform of Vantage Development. The total transaction consideration will be fully paid by TAG's existing cash. The selling shareholders have committed to tender 100% of the shares outstanding. Closing of the transaction is expected in Q1 2020 and remains subject to mandatory anti-trust clearance. After completion of the transaction, delisting of Vantage Development's shares, currently listed on the Warsaw Stock Exchange, is intended.

Vantage Development is a leading real estate developer focused on the economically strong region of Wroclaw in the western part of Poland with proven track record of more than 4,000 units completed and delivered. The secured residential pipeline currently consists of several residential projects in Wroclaw representing a total of c. 5,300 units. Thereof, according to TAG's assumptions, up to c. 3,400 units could be held upon completion as yielding assets on the balance sheet to form the nucleus of TAG's rental portfolio in Poland, whilst the remainder of the development pipeline is already in the process of being sold down against cash between 2019 and 2021.

TAG expects that Vantage Development will realize sales revenues from c. 1,900 units from the current pipeline in the years 2019-2021. Based on selling prices estimated by TAG and historical margins of Vantage Development in 2018 of c. 20% (EBIT margin) and c. 15% (net income margin), this would lead to net cash flows to TAG from the 2019 result acquired and to TAG's 2020 and 2021 FFO II (funds from operations including net income from sales before potential effects from IFRS purchase price allocation) of nearly EUR 30m in total. According to TAG management's estimates, the secured build-to-hold pipeline of up to c. 3,400 units will result in an estimated annual net rent of c. EUR 25m, an EBITDA margin of more than 70% and a gross yield on cost of 7-8% upon completion and lease-up, increasingly contributing year by year to TAG's rental FFO (FFO I) in the years 2021-2026, when the last projects from the current project pipelines are finished. Following the all cash settlement, TAG's LTV will continue to remain well below the current LTV target of less than 50%.

The Polish residential market is characterized by a supply shortfall in rental housing. It is one of the least saturated residential markets in Europe with an increasing housing gap of over 3.5m apartments¹⁾. Furthermore, the absolute size of the Polish market (c. 38m inhabitants, 6th largest EU country by population), coupled with a rising service sector and favorable demographic development ("generation rent" - growing preference for rental housing), is paving way TAG's market entry in Poland. The early market entry is expected to provide TAG a competitive advantage in terms of scale, market knowledge, penetration and position.

"We are excited to acquire the residential platform of Vantage Development. We have been impressed by its experienced management team and product quality and are looking forward to working together to build a leading player in the growing Polish residential-for-rent market across the property value chain", says Claudia Hoyer, COO of TAG.

The medium-term growth target, i.e. within the next 3-5 years, of TAG amounts to c. 8,000-10,000 residential units in Poland, with investment focus on developments and newly built stock in large cities with favourable demographics, university exposure and a high level of infrastructure. This shall correspond to approximately 10% of TAG's current total residential portfolio.

Martin Thiel, CFO of TAG, comments: "This transaction is another example of TAG successfully executing its focus on strong cash returns. The Polish residential-for-rent market is a perfect fit with TAG's strategic, operational and financial objectives which we will pursue with the same level of commitment and discipline as we will continue to do in the German portfolio regions of TAG".

VICTORIAPARTNERS acted as sole financial advisor to TAG. Noerr, Grant Thornton and DIL acted as legal, tax and technical advisor to TAG in Poland. The selling shareholders were assisted by Santander (financial advisor) and White & Case (legal advisor).

¹⁾ Based on 2.6 people per household in Poland vs. 2.1 EU (ex Poland) average, total housing stock of c. 14.6m apartments and population of c. 38m inhabitants in Poland.

Contact
TAG Immobilien AG
Dominique Mann
Head of Investor & Public Relations
Phone +49 (0) 40 380 32 305
Fax +49 (0) 40 380 32 390
irtag-agcom

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