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19 May 2014

Terra Firma announces that investors in the Terra Firma Deutsche Annington Fund will be given direct share holdings in Deutsche Annington

Guernsey, 19 May 2014 – Terra Firma, one of Europe’s leading private equity firms, announces that investors in the Terra Firma Deutsche Annington Fund (TFDA) will be given direct shareholdings in Deutsche Annington Immobilien SE (Deutsche Annington) pro rata to their interests in TFDA. TFDA is a €2.1 billion fund set up in 2006 to hold the 82.5% interest in Deutsche Annington managed by Terra Firma.

Following Deutsche Annington’s IPO in July 2013 on the Frankfurt Stock Exchange and a subsequent sell-down, TFDA’s holding was reduced to 67.3%. This will result in TFDA’s investors having direct ownership of Deutsche Annington Ordinary shares, pro rata to their interests in TFDA.

Terra Firma formed Deutsche Annington in 2001 when it acquired 64,000 residential properties from the German Federal Railways. Deutsche Annington owns, maintains and rents the properties and sells individual units to tenants and third parties. Through add-on acquisitions, Deutsche Annington has almost tripled in size under Terra Firma’s management, and it is now the number one private residential landlord in Germany with nearly 180,000 owned units and a proven record in privatisation.

Tim Pryce, CEO of Terra Firma, along with Robbie Barr and Arjan Breure, Managing Directors at Terra Firma, all of whom represent TFDA on the Board of Deutsche Annington, will stand down from the company’s Board in due course, following an orderly handover of their positions.

As a result of this, investors in TFDA will now enjoy the opportunity to take advantage of stock market liquidity to realise returns over their own desired holding period. However, over 90% of them have agreed to a 90-day lock-up. The allocation of the Ordinary shares to TFDA’s investors will also result in the free-float rising to approximately 90% according to Deutsche Börse’s free-float definition criteria, promoting increased liquidity in the company’s shares on the Frankfurt Stock Exchange.

Guy Hands, Chairman and Chief Investment Officer of Terra Firma, said: "Today’s announcement demonstrates Terra Firma’s commitment to promoting the best interests of its investors. In converting our investors’ interests in TFDA into Deutsche Annington shares, they now enjoy the choice of continuing to participate in the future growth of the business, or of crystallising some or all

of the value that we have created in the business since we launched TFDA in 2006. Flexibility is of enormous benefit to investors, and this demonstrates how Terra Firma is constantly seeking creative ways to drive value for our investors."

Terra Firma is a leading investor in residential real estate, as the manager not just of funds which have owned Deutsche Annington since 2001, but also Annington Homes in the UK. In 1996 Annington Homes acquired 57,400 residential properties, making it one of the largest private owners of residential property in England and Wales. Currently Annington owns almost 42,000 homes, with most still leased to the UK’s Ministry of Defence.

This marks the end of a 13-year period during which Terra Firma has managed the investment in Deutsche Annington on behalf of its investors. Since the company was formed in 2001, Terra Firma has driven an operationally intensive value-creation strategy that has resulted in a significant valuation uplift, reflected in the company’s market capitalisation of €5.1 billion, as at the market close in Frankfurt today.

Arjan Breure, Financial Managing Director at Terra Firma, said: "Residential property is an asset class that provides stable, recurring and visible cash flows with inflation protection, backed by physical assets. The returns we have delivered through the Deutsche Annington investment illustrate that Terra Firma’s operational approach to the real estate sector provides significant value for our investors."

Terra Firma was able to leverage its operational expertise to drive a significant portion of value creation at Deutsche Annington. Since 2001, the business has deployed more than €1.1 billion in capital expenditure to modernise and improve the quality of Deutsche Annington’s properties, allowing increased rents and reducing vacancy rates. In October 2013, Private Equity International recognised Terra Firma’s operational successes at Deutsche Annington, awarding the company its Operational Excellence Award in the European Large-Cap category.

Robbie Barr, Operational Managing Director at Terra Firma, said: "The successful transformation of Deutsche Annington perfectly demonstrates the value of Terra Firma’s operational model. The business has been transformed from a set of undermanaged assets into Germany’s leading residential real estate company run by a top quality management team with best-in-class operational practices. Deutsche Annington is now well positioned for an independent future and we wish it every success."

TFDA’s investors will be allocated direct shareholdings in Deutsche Annington tomorrow, 20 May.

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