LEG Immobilien : Speech by the CEO for the Annual General Meeting

LEG Immobilien SE Speech by the CEO Lars von Lackum Annual general meeting 23 May 2024, Düsseldorf

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Dear shareholders,

Dear customers,

Dear employees of our LEG,

Ladies and gentlemen,

There are many good reasons for virtual formats. For us, the Annual General Meeting is explicitly not one of them. We have therefore made a conscious decision to hold our Annual General Meeting in person again this year. Thank you for attending, and another warm welcome from me and the entire Executive Board team!

You can feel the buzz here in the hall:

Your company has once again proven to be resilient amid the major crises of recent years. We look to the future with great optimism.

I would like to address the following three questions:

• What has your LEG achieved in 2023?
• What's expected in 2024?
• What is our position on housing policy and on socio-political issues?

First, a brief look back: 2023 was truly not an easy year, due to the historically unprecedented decline in real estate values and the associated book losses in the billions.

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Nevertheless, your LEG has emerged stronger from the real estate crisis year of 2023. There are two main reasons for this:

On the one hand, our business model is incredibly stable.

The German residential real estate market continues to be characterized by increasing excess demand. This applies especially to the affordable housing market segment. It is precisely in this segment that we are active with our app. 167,000 apartments.

The most sought-after rental apartment in Germany has two rooms, 64 square meters and costs 556 euros rent. However, the apartments on offer are often larger and way more expensive. This was the result of an ImmoScout24 analysis (a major German property portal) published at the beginning of the month,

If that's not the perfect product pitch I don't know what is!

We offer half a million people in Germany a good and affordable home. The average basic rent is currently 420 euros for a standard LEG apartment, which has an average size of exactly 63 square meters.

This is precisely why our tenants remain loyal to us on average for about eleven and a half years.

This is also reflected in the record-high occupancy rate of 97 to 98 percent, which means that most of our properties are structurally fully rented.

On the other hand, we can proudly say that we simply did a lot of things right.

Already in November 2022, we were the first company in the sector to put together a package of measures aimed primarily at creating liquidity for internal financing. We have thus consistently prepared ourselves for an environment of higher inflation rates and higher refinancing costs.

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We have kept the money together and demanded a great deal from you, our shareholders, by suspending the dividend last year. All the more reason for us to express our gratitude for your patience.

Your sacrifice and our focus on creating liquidity have paid off:

• We met our ambitious financial and operational targets for 2023, and in some cases even exceeded them.
  Specifically, this means that we were able to increase our key performance indicator, AFFO, by 66.5 percent to 181.2 million euros. We were therefore once again slightly above our profit forecast, which over the course of 2023 was raised several times.
  AFFO is significantly more liquidity-oriented than FFO I, which has long been widely used in the industry and is strongly accounting-oriented. In our view, FFO I sends the wrong signal in times when a high level of spending discipline is essential. AFFO, on the other hand, is a much better reflection of the cash flow generated and freely available.
  Establishing a new key performance indicator is no easy feat. But it was worth it: the entire LEG team supported the changeover to AFFO with great commitment right from the start and thus significantly reduced expenses.
  This is anything but business-as-usual and deserves a huge thanks to our colleagues from all regions and departments!
  As a result, investments per square meter fell by around 14 percent in 2023 without compromising quality.
  We have also received a great deal of encouragement from you, our shareholders, for our cash-focused concept, which other real estate companies have since

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followed.

• LEG remains strongly positioned in terms of financing. And in times like these, this is more important than ever. Your company benefits from excellent access to all participants in the financial market.
  Neither covered nor uncovered maturities are due until mid-2025 - that means, neither expiring loans nor maturing bonds.
  Our average financing costs are currently 1.59 percent, with an average debt maturity of 5.9 years. Our LTV is 47.9 percent.
  Despite falling inflation and a slight upturn in the transaction market, we do not expect a return to the low-interest phase of recent years in the foreseeable future.
  To reflect the higher interest rate level, we have therefore raised our medium-term target for the loan-to-value ratio, or LTV, to 45 percent.
• We have also made great progress in the area of sustainability. In November 2023, we were the first German residential real estate company to receive scientific confirmation of our decarbonization targets from the Science-Based Targets initiative. In 2023, once again we were able to reduce our carbon footprint - this time by four percent - to 27.3 kg of CO2 equivalents per square meter.
• And we are also delivering again in terms of dividends: the Executive Board and Supervisory Board will propose a dividend of 2.45 euros per share today. We are offering this to you as a cash dividend or in full or in part as a scrip dividend.
  The proposed dividend corresponds to the distribution of 100 percent of AFFO and thus to the new dividend policy adopted in November 2022. However, the dividend proposal does not include proceeds from disposals. With our dividend proposal, we are taking account of the strong operating result while at the same time strengthening our balance sheet by retaining the net sales proceeds of 55

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million euros in the company.

In short: the 2023 financial year was difficult, but we mastered it successfully. We are very satisfied with the result and hope that you share this assessment. We would be happy to engage in a personal dialogue about this later.

This brings me to the second part of my speech:

What's on the agenda for 2024?

The review shows: We made the right decisions in November 2022 to permanently align your LEG with the "new normal" of higher interest rates. True to the motto "Never change a running system", in 2024 we will therefore continue our four-point plan to focus on capital efficiency and have once again set ourselves ambitious targets.

Point one of our liquidity-oriented strategy concerns the improvement of cost structures and operating business optimization.

Given the high demand for housing, we expect rents to continue to grow dynamically while remaining affordable in view of rising wages and household incomes.

In concrete terms, this means that we expect rents to grow by 3.2 to 3.4 percent this year. Unlike 2023, there will be no adjustment to cost rents in the subsidized portfolio, which will thus remain stable. With an increase of 3.5 percent in the overall portfolio in the first quarter of 2024 and 4.1 percent in the privately financed sector, we believe we are on target here.

We remain cautious when it comes to investing in our portfolio and plan to spend around 32 euros per square meter. This means that we will continue to invest significantly in maintaining and improving the quality of our holdings - around five months' cold rent - which is significantly more than most private owners in Germany. We are making greater use of the extended public funding opportunities for energy-related improvements. This

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benefits our tenants and us as a company in equal measure.

Point two concerns the further implementation of our LEG sales program with over 5,000 apartments.

We want to sell - but not at any price. On the one hand, this is to be understood literally, as we do not sell below book value.

Secondly, to optimize our portfolio, we are disposing of properties that are below or above our normal quality standards. For example, these are properties in need of refurbishment on the one hand and completed new buildings on the other.

Despite our strict price discipline, we also managed to sell several properties in the previous year. But, thanks to our successful liquidity-preserving measures, we were not under any pressure to sell. And that was - and is - a good thing.

Fortunately, the transaction business is currently picking up speed again. Not all buyers are back on the market yet, but interest is noticeably rising. We have seen increasing momentum - particularly in recent weeks. In contrast, last year the market was still largely frozen.

Since the beginning of the year until mid-may, we have already sold a total of around 2,200 units and realized sales proceeds of over 200 million euros - following 155 million euros in the previous year as a whole. And that is by no means the last word for this financial year.

As usual, our sales focused on the utmost price discipline, so that the sales were realized above book value overall.

Currently, the average square meter is on our books at 1,624 euros, corresponding to a gross yield of 4.8 percent.

In this context, allow me to say a few words about the valuation of our portfolio.

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The net tangible asset - NTA for short - stands today at EUR 127.69 per share.

As usual, LEG's residential portfolio will be revalued in the second and fourth quarters. Based on the slight upturn in transaction activity and the foreseeable bottoming out of residential property prices, we expect a moderate decline of the asset value of our portfolio in the range of 1 to 3 percent in the first half of 2024.

Like many industry experts, we assume that the valuation of residential real estate will bottom out in the course of 2024. This development could result in a further closing of the still significant gap between NTA and market value per share.

With an increasing number of transactions, the basis for the valuation of portfolios is also improving. Of course, this also applies to our own LEG valuation model. But it also applies to the external valuation to which we regularly subject the LEG portfolio. The external neutral valuation - previously done by CBRE and in future by PWC - is important for us to underline the validity and credibility of our assumptions.

Point 3 concerns the run-off of the small but capital-intensivenon-core business of project development.

We are moving faster here than originally expected.

In plain language, this means that we currently still have three construction projects in progress. These will be finished with remaining investments of 67 million euros by the middle of next year. After that, it's done!

New build rents of 20 euros and more are just not our product.

And the climate issue in the building sector is also decided in existing buildings and not new ones.

Our focus will therefore be 100 percent on existing buildings in the future.

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Point four on our strategic agenda concerns our affordable solutions for decarbonizing the housing industry.

Our green innovations are developing rapidly, so I will only briefly touch on a few highlights here:

• In December 2023, our smart, AI-supported termios Pro thermostat received official certification for hydronic balancing. Optimizing existing heating systems with termios is the climate protection measure with the best ratio of invested euros to reduced tons of CO2.
• In September 2023, together with an experienced installation company we founded dekarbo GmbH. Where the optimization of existing heating systems is not possible, the company manages the professional installation and maintenance of highly efficient air-to-air heat pumps within two days - in LEG's own portfolio and in third-party business.
• Speaking of third-party business: at RENOWATE, our expert for serial refurbishment, this is clearly gaining traction, with six well-known external customers from the housing industry.

Close cooperation and intensive dialogue with our partner companies are key success factors for our LEG start-ups.

This is exactly what I would like to see in public discourse - which brings me to the third part of my speech: Our position on social and housing policy issues.

Housing policy in recent years and decades has been characterized by ever increasing and stronger state intervention in the housing market.

Has it moved us forward? Not at all!

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• The national legislator has completely removed the steering effect from the rent, protecting both needy and wealthy tenants instead of focusing on cushioning social hardship.
• The granular requirements of the German Heating Act (Gebäudeenergiegesetz GEG) and Heating Planning Act (Wärmeplanungsgesetz WPG) stand in the way of a technology-open search for decarbonizing existing buildings the best way.
• When it comes to climate protection in the building sector, the German government and the EU are focusing primarily on increasing energy efficiency. Emission efficiency must be the focus of all efforts. Only actual CO2 tonnage unreleased into the atmosphere protect the climate - not the tons of CO2 that are saved based on the extrapolation of the energy demand certificate.

Hence, my bottom line: We need less regulation and more market in the housing industry. The ecological transformation will not succeed without private investment - especially not in times of tight public budgets.

I have great respect for the many challenges facing housing policy. That is why today I would like to reiterate our unconditional willingness to work together. We have over half a century of expertise in the housing industry and many good solutions up our sleeves. We are happy to bring them to the table.

Our society also needs more dialogue and better cohesion. The recent attacks on politicians from various political groups, emergency services and law enforcement officers are a cause of great concern to me. They are a further sign of the brutalization of social discourse, which our employees also feel when they are out and about in our neighborhoods. This is one of the reasons why we at LEG are involved in initiatives that promote respect, openness, and diversity.

I would like to conclude my speech with the financial outlook for your company for 2024.

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Due to the steady high demand for affordable housing and the continuation of our successful cash-focused business strategy, we expect AFFO in the range of 180 to 200 million euros for 2024 - without taking into account possible acquisitions or sales during the rest of the year. Relative to the mid-point of the range, this represents an increase of around 5 percent.

The AFFO remains highly relevant for you as our shareholders, as our dividend policy remains unchanged. This policy stipulates that we distribute 100% of the AFFO and - taking into account market conditions - part of our net sales proceeds realized in 2024 to you.

Stabilizing interest rates and the foreseeable opening of the transaction markets are good news for the sector and for LEG. The excess demand will remain and the increase in rents thereby continue beyond 2024.

Today, I have explained how we managed to adapt to this new normality better than many of our competitors since the fall of 2022. And you have my word: It will stay that way.

Our resilience and operational and financial success - even in tough times - are no coincidence, but instead the result of hard work by a strong community: your LEG team.

On behalf of the entire Executive Board, I would like to thank all LEG colleagues for their great personal commitment.

And we would like to thank you, our shareholders, for your trust.

That being said: We really look forward to the rest of the discussions.

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