Speymill Deutsche Immobilien Company plc ("SDIC") Investor Presentation - July 2008
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www.sdic.co.im
Speymill Deutsche Immobilien Company plc (“SDIC”)
Investor Presentation
July 2008
Highlights
www.sdic.co.im
Ordinary Shares (SDIC LN)
Interim dividend paid on 18 June 2008 of 7.62 Euro cents per share (equivalent to 6 pence per share)
NAV of €1.35 per share as at 31 December 2007
Annualised net rents as at notarisation represents initial yield of 7.1%
Majority of €32m refurbishment programme to be finished by September 2008 and expected to have
further positive effect on rental incomes and valuations
6.1% vacancy rate in available apartments, excluding approximately 6.7% of units in the refurbishment
programme
C Shares (SDCC LN)
NAV of €0.94 per share as at 31 December 2007
Total assets of €279m as at 31 December 2007
€569.5m properties notarised as at end of June 2008 with an anticipated leverage of 79%
Economic yield at notarisation of 6.7% on purchase price (excluding rental guarantees)
Refurbishment costs of €17.3m to be borne by the selling entities, with a further €15.4m refurbishment
program being undertaken by the fund
Merged Portfolio
Combined portfolio of approximately €1.5 billion in gross assets
Well-positioned to take advantage of opportunities created by current market conditions
1
Lowered leverage, reduced management fees and increased share liquidity
Investment Rationale
www.sdic.co.im
German residential remains one of the more attractive real estate markets in Europe as it emerges from 17
years of stagnation
Acquisition prices are below the cost of new construction
Rising German economic activity
Unemployment is falling and currently stands at its lowest rate since November 1992
Recent liberalisation of mortgage market
SDIC offers investors differentiated exposure to German residential
Strategy to buy „below radar screen‟ (smaller transaction sizes) has allowed SDIC/SDCC to avoid paying
larger portfolio premiums
At 31 December 2007, SDIC owned and had notarised a consolidated pan-German property portfolio of
approximately 24,000 units
SDIC shares appear attractively valued
Trading at approximately 60% discount to 2007 Ordinary Share NAV as of 30 June 2008
SDIC has a conservative valuation policy that offers a valuation cushion during times of turmoil
Creating further value through economies of scale
2
Results:
Income Statement
www.sdic.co.im
Completion of final acquisitions for Ordinary Share properties achieved at the end of November 2007
Adverse effect on the Company (due to its early stage of maturity) of absorbing higher than usual level of
fixed costs, including those for acquisition and refurbishment
Loss of €23 million from swap revaluation and over €5.5 million from non-recurring direct costs (refer to
page 4 for the Direct Cost breakdown)
Higher than expected vacancy rate is due to protracted period between notarisation and handover (4-6
months) and an extensive refurbishment program accounting for half the current vacancies
O-Share C-Share Aggregate SDIC
6 months ended 31 December 2007 (m €) (m €) (m €)
Rent and Related Income 48.6 3.0 51.6
Direct Costs (-31.5) (-2.0) (-33.5)
Gross Profit 17.1 1.0 18.1
Change in Fair Value of Investment Property (-3.9) (-5.6) (-9.5)
Administrative Expenses (-5.6) (-1.3) (-6.9)
Net Operating Profit/(loss) 7.6 (-5.9) 1.7
Net Financing (Expenses) / Income (-29.2) (-8.4) (-37.6)
(Loss) / Profit before Taxation (-21.6) (-14.3) (-35.9)
Retained (Loss) / Profit for the Period (-22.1) (-14.1) (-36.2)
3
Results:
Direct Cost Breakdown
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Non-recurring financing and maintenance costs of over €5.5m, accounting for 17.6% of total SDIC direct
costs
O-Share
6 months ended 31 December 2007 (€)
Auditing & bookkeeping SPVs 312,000
Bad debt expense 1,536,149
Financing 695,212
Of which recurring 71,972
Of which non-recurring 623,240
Insurance 663,881
Irrecoverable VAT 1,158,445
Land tax 1,345,979
€ 5,548,015
Legal 51,787
Maintenance 7,072,566
Of which recurring 2,147,791
Of which non-recurring 4,924,775
Other 920,196
Service 17,758,816
Total 31,515,032
4
Benefits of Merged Share Class
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Ordinarily happens when the Manager notifies the Board that 85% of the net proceeds have been invested in
accordance with the Company‟s investment policy
For C Share portfolio, 85% of net proceeds have now been invested (notarised and completed), with
approximately €30m cash left out of €250m on placement
Company has had to revise its FFO and Dividend forecasts due to changes in the economic environment
including less availability of debt finance, the reactions of the market to highly leveraged property funds and in
order to adopt a more appropriate prudent strategy which is appropriate in current conditions
The primary benefits of the merger will be:
Greater shareholder liquidity
Better strategic positioning for the Company
Reduced management fee on the combined portfolio
Larger resultant Ordinary Share portfolio
5
Portfolio Update:
Geography of Ordinary Share Units
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As at 31 December 2007, Ordinary Share portfolio had notarised 16,960* units
Mecklenburg-Vorpommern
Schleswig-Holstein Rostock 240
Total 179 Stralsund 88
Other 216
Hamburg Total 544
Total 533
Brandenburg
Bremen Cottbus 59
Total 309 Potsdam 511
Other 638
Lower Saxony Total 1,208
Cuxhaven 323
Hannover 335 Berlin
Delmenhorst 664 Total 1,391
Other 1371
Total 2,693 Saxony-Anhalt
Halle 236
NRW Magdeburg 111
Dortmund 627 Other 49
Duisburg 587 Total 396
Düsseldorf 435
Köln 314 Saxony
Other 3,606 Chemnitz 544
Total 5,569 Dresden 490
Leipzig 751
Other 453
Total 2,238
Hessen
Frankfurt 402 Thüringen
Kassel 102 Total 479
Other 16
Total 520 Bavaria
Kempten 74
Baden-Württemberg München 175
Total 282 Nürnberg 67
Other 303 6
Total 619
Source: SPG, * Excluding any reclassification of units
Portfolio Update:
Geography of C Share Units
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As at 31 December 2007, C Share portfolio had notarised 7,233* units
Schleswig-Holstein Hamburg
Total 36 Total 21
Bremen Mecklenburg-Vorpommern
Total 28 Total 207
Brandenburg
Lower Saxony Total 78
Total 889
Berlin
Total 669
NRW
Bonn 87
Dortmund 53 Saxony-Anhalt
Essen 233 Halle 310
Other 1,358 Magdeburg 202
Total 1,731 Other 530
Total 1,042
Hessen Saxony
Total 160 Görlitz 95
Dresden 67
Rheinland-Pfalz Leipzig 651
Total 78 Other 760
Total 1,573
Saarland Thüringen
Total 134 Total 92
Baden-Württemberg Bavaria
Total 99 München 16
Other 380
Total 396
7
Source: SPG, * Excluding any reclassification of units
Examples of Property Under SDIC
Management
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Berlin Dusseldorf Frankfurt
Paulstrasse 23/Flemingstrasse 9 Jägerstr. 55-63 Deutschherrnufer 29-30
Number of units: 26 Number of units: 80 Number of units: 57
Hamburg Leipzig Munich
Von-Essen-Str. 38-40 Credestr. 10-16 / Demmering Str.149 Franziskaner Strasse 19
Number of units:16 Number of Units: 64 Number of units: 16
8Property Valuation Uplift
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Ordinary Share Portfolio (SDIC.L)
Average overall portfolio valuation per square metre (see page 15) is at a discount of approximately 40% to
replacement cost, excluding any value for land
Average upside of 37% implicit in retail value ranges for SDIC‟s main cities (see below) if compared to the
levels at which SDIC‟s property is currently valued
6 Largest Cities Value / Sqm Retail Value Range Net Initial Current
Units
by Value (€)1 (€/sqm)2 Yield Vacancy
Berlin 1,391 1,104 1,250-1,900 6.2% 7.6%
Leipzig 751 829 1,000-1,400 5.8% 19.1%
Hamburg 533 1,249 900-2,200 6.3% 8.0%
Düsseldorf 435 1,251 1,600-2,250 6.6% 7.3%
Frankfurt 402 1,618 1,350-2,300 6.5% 13.5%
München 175 2,206 2,500-4,000 5.2% 5.0%
Total / Average3 3,687 1,195 1,643 6.2% 10.5%
9
1. Based on DTZ Valuation June 2007 2. Source: Goal Service, Plotz Immobilien mid-range properties 3. Weighted AveragesVacancy Levels
www.sdic.co.im
At 31 December 2007 SDIC had vacancy of 12.7% (7.5% at 30 June 2007)
3-5 month period between notarisation and handover when, effectively, there is no property
management
Refurbishments. Over half of the vacant units are “unavailable” due to the refurbishment program
The vacancy level of units not in the refurbishment program is only 6%
Of the units being refurbished, c. 950 are being refurbished by Goal. The remainder are being refurbished
at the expense of the seller
SDIC refurbishment costs to 31 December 2007 were €4.9 million
Initial indications from refurbished units let to date, show that:
Average rent increases of up to 5% are being achieved
In some instances we see double figure percentage increases in rents
Let Units 14,784
Vacant – Available Units 1,032
Vacant – Unavailable Units 1,130
Total Units* 16,946
10
Source: SPG, * Including some reclassification as at 31 December 2007Summary
www.sdic.co.im
Challenges such as reducing vacancy, raising rents and optimising operating expenses lie ahead
Despite troubles in the global real estate market, German residential property values have remained fairly
stable
The Ordinary Shares have a weighted average debt maturity of 5.3 years, C Shares just under 7 years
Throughout the next 6 to 9 months, the results of our active portfolio management policies and
refurbishment program will start to become apparent
Target yields in SDIC admission documents are based on a stabilised portfolio
Portfolio is not due to become stabilised until approximately 12 months after investments have been
completed (i.e. acquisition and refurbishment)
Stabilised yield on invested capital of 7.2% on Ordinary shares and 7.1% on C Shares
Merger of Ordinary and C Shares will create German residential market champion
Amongst the largest free float and highest levels of liquidity in listed German residential sector
Decreased leverage for existing Ordinary Shares
Management fee lowered to 65 bps on c. €1.5 billion portfolio
Substantial funds available for continued refurbishment programme
Access to cheap financing for C Share holders 11Appendices
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Appendix 1: C Share Conversion Process and Timeline
Appendix 2: Potential FFO Growth Levers
Appendix 3: Additional NAV Analysis
Appendix 4: Germany – An Attractive Residential Market
12Appendix 1:
C Share Conversion Process and Timeline
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Overview:
New Ordinary Shares are issued to the holders of C Shares based on the relative net asset values of
the two classes of shares (“the Conversion Ratio”) as at the Calculation Date (“the Calculation Date”)
“Calculation Date” :
The accounting reference date on which the NAVs are struck is the year-end 30 June 2008
“Conversion Date”:
The date on which the C Shares are cancelled and New Ordinary Shares are issued of an equal
attributable net asset value is the date of announcement of SDIC‟s annual results but no later than 31
October 2008
As a result of this timeline:
The Conversion Ratio is based on audited, rather than un-unaudited numbers
The process is less expensive, with only one valuation fee incurred
New shares are released only after the close period
13Appendix 2:
Potential FFO Growth Levers
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SDIC has various potential levers to deliver FFO growth over the medium term
Components of Growth Impact
• Increase • Rent level currently at or slightly • Revenue potential of approx. €0.7m p.a. for each
Rent below market level 1% increase in rent
• Additional upside from potential • Annual rental growth of 3% or approx. €2m p.a.
market rent increase
• Refurbishment program should
increase future rental level
• Reduce • Current portfolio vacancy of 12% • Revenue potential of approx. €1m p.a. for each
Vacancy (of which approximately half is due 1% drop in vacancy
to refurbishments)
• Reduce • Net rent currently 70% of gross • 10% decrease in operating costs equals approx.
Operating rent €3m p.a. saving
Costs
• Privatisations • Potential to sell 1% of portfolio • Going forwards, based on realistic assumptions,
p.a. (approx. 200 units), starting privatisations could result in FFO uplift of approx.
2008 €3m p.a.
14Appendix 3:
Additional NAV Analysis – NAV Sensitivity
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Estimated at
Ordinary Share Portfolio At Notarisation Scenario 1 Scenario 2
Handover
Square Metres 1,122,549 1,122,549 1,122,549 1,122,549
Occupancy 92.5% 88.0% 90.5% 93.0%
Average Rent psm (€) 5.40 5.40 5.67 5.94
Total Rent (€ millions) 67.3 64.0 69.1 74.4
Net Yield 6.8% 6.5% 6.1% 6.1%
Asset Value (€ millions) 987.6 987 1,125 1,211
Net Debt (€ millions) -811 -811 -811 -811
Other Value (€ millions) 77 54 4 4
NAV (€ millions) 254 230 318 404
Number of Shares 170,000,000 170,000,000 170,000,000 170,000,000
NAV per Share (€) 1.49 1.35 1.87 2.38
Average Value psm (€) 880 880 1,002 1,079
Scenario 1: 2.5% increase in Occupancy 5% increase in Average Rent psm
6.1% Net Yield €50 million reduction in Other Value
Scenario 2: 5.0% increase in Occupancy 10% increase in Average Rent psm
6.1% Net Yield €50 million reduction in Other Value
15
Source: Speymill Property GroupAppendix 3:
Additional NAV Analysis – NAV Gearing
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Should values per square metre rise to half way between purchase price estimated replacement cost, net asset
values would rise substantially
Indicative NAV Progression(1)
Average Ordinary Est. Replacement Cost
Medium Term
Share Purchase Price (excluding land)
1,600 €1500
1,400
NAV
€1200
1,200 Debt
837
€/ sqm
1,000
€829 537
800
166
600
400
663 663 663
200
0
Potential Net Asset Value per Share: 1.00 3.24 5.05
16
Source: Speymill Property Group (1) Based on 80% Loan to ValueAppendix 4:
Germany – An Attractive Residential Market
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German house prices have barely increased since 1990
Inexpensive residential real estate relative to other major European cities
German House Price Growth Relative to European Average Residential Sales Prices
Other Countries (1990=100)
Berlin
Year-end 2005 Prices (as % of 1990 Prices) Frankfurt
Ireland 518 Munich
Spain 339 Dublin
Netherlands 337 Oslo
US 294 Zurich
Denmark 275 Geneva
UK 260 Rome
Australia 251 Amsterdam
Italy 194 Other London
France 187 Paris
Sweden 184 Prime London
Finland 134 Moscow
Monaco
Germany 114
Switzerland 100 - 5,000 10,000 15,000 20,000 25,000
Japan 63 (€/square metre)
17
Source: Pramerica Real Investors Source: Global Property GuideAppendix 4:
Germany – An Attractive Residential Market
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Number of German households is expected to grow by 5% over the next 10 years
Residential construction is down approximately 80% from peak levels and nearly 40% from 2000
German Construction Order Volumes
German Household Formation Growth
Residential building orders
42
Non-Residential building
Millions of households
39 orders
36
33
30
1990 1995 2000 2005 2010 2015 2020
18
Source: German Federal Statistics Office Source: Morgan Stanley researchAppendix 4:
Germany – An Attractive Residential Market
www.sdic.co.im
German house prices have historically stagnated during recessionary periods
Current sales price for average German apartments is € 1,631 /sqm* according to Hypoport.com, having
barely moved over the past 3 years
SDIC‟s average valuation of €880 / sqm is at a significant discount to this price
House Price Index 1915 - 2005 German Apartment Prices since 2005
€ 3,000
€ 2,000
Unification Cycle
€2,000
downturn
House Price / sqm
€ 1,500
€1,800
€ 1,000
Apartment Price / sqm
80's recession
€1,600
€ 500 1st German
€1,400
Post War
Recession
€1,200
€ 100 €1,000
1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 01/05 07/05 01/06 07/06 01/07 07/07
19
Source: Hypo Real Estate Research Source: Hypoport.com as at 31 December 2007Contact Details
www.sdic.co.im
Investment Manager
Speymill Property Group Ltd. www.spg.co.im
1st Floor Global Chief Investment Officer
Regent House Floris van Dijkum
16-80 Ridgeway Street f.vandijkum@speymill.com
Isle of Man
IM1 1EN
T: +44 1624 640 860
F: +44 1624 618 280
Property Manager
GOAL Service GmbH. www.goalservice.com
Spandauerdamm 73 CEO
D14059 Berlin Andy Wallis
Germany anw@goalservice.com
T : +49 3030 301 9101
F : +49 3030 301 9111
20Disclaimer
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The information contained in this document has been prepared by Speymill Property Group Limited (“Speymill”). It has not been independently verified and is subject
to updating, revision and further amendment. This document has not been approved for the purposes of Section 21 of the FSMA and therefore will only be distributed
in accordance with an exemption to Section 21 of the FSMA. This document is being delivered for information purposes only to a very limited number of persons who
are persons who have professional experience in matters relating to investments and who fall within the category of person set out in Articles 19 or 49 of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) or who are otherwise permitted to receive it. Any other person who receives this
document should not rely or act upon it. By accepting this document, the recipient represents and warrants that they are a person who falls within the above
description of persons entitled to receive it. This document is not to be disclosed to any other person or used for any other purpose.
Information contained in this document is confidential information. It and any further confidential information made available to any recipient must be held in complete
confidence and documents containing such information may not be reproduced, used or disclosed, directly or indirectly, without the prior written consent of Fairfax.
This document shall not be copied, reproduced or distributed in whole or in part at any time without the prior written consent of Fairfax.
While the information contained herein has been prepared in good faith, neither Speymill or any of their respective
shareholders, directors, officers, agents, employees or advisers give, have given or have authority to give, any representations or warranties (express or implied) as
to, or in relation to, the accuracy, reliability or completeness of the information in this document, or any revision thereof, or of any other written or oral information
made or to be made available to any interested party or its advisers (all such information being referred to as "Information") and liability therefore is expressly
disclaimed. Accordingly, neither Speymill or any of their respective shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will
accept any liability whether direct or indirect, express or implied, contractual, tortuous, statutory or otherwise, in respect of, the accuracy or completeness of the
Information or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this document.
Neither the issue of this document nor any part of its contents is to be taken as any form of commitment on the part of Speymill to proceed with any transaction and
the right is reserved to terminate any discussions or negotiations with any prospective investors. By accepting delivery of this document, the recipient agrees to return
it to Speymill at the request of Speymill. In no circumstances will Speymill be responsible for any costs, losses or expenses incurred in connection with any appraisal
or investigation of the Proposal. In furnishing this document, Speymill does not undertake or agree to any obligation to provide the recipient with access to any
additional information or to update this document or to correct any inaccuracies in, or omissions from, this document which may become apparent. This document
should not be considered as the giving of investment advice Speymill or any of their respective shareholders, directors, officers, agents, employees or advisers. Each
party to whom this document is made available must make its own independent assessment of the Proposal after making such investigations and taking such advice
as may be deemed necessary. In particular, any estimates or projections or opinions contained herein necessarily involve significant elements of subjective
judgment, analysis and assumptions and each recipient should satisfy itself in relation to such matters.
Neither this document nor any copy of it may be (a) taken or transmitted into Australia, Canada, Japan, South Africa or the United States of America, their territories
or possessions; (b) distributed to any U.S. person (as defined in Regulation S under the United States Securities Act of 1933 (as amended)) or (c) distributed to any
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