Letters to our Shareholders

Frankfurt/Main and Berlin, March 2017

Dear Sir or Madam,
Dear Shareholders,

The past financial year was a highly successful one for our company. Deutsche Wohnen not only exceeded all expectations; its earnings also reached new record levels. This is hardly surprising because in recent years we have attained a pre-eminent position in the German property market. Our strategy of focusing on conurbations within Germany, and in particular on Berlin, is bearing fruit and is being reinforced by positive developments with regard to rents, vacancy rates and selling prices.

Group profit exceeds EUR 1.5 billion mark

We once again recorded increases in all of our key figures in the financial year 2016. Accordingly, the Group profit amounted to EUR 1,623.2 million, an increase of just over 35% compared to what was already a high value in the previous year. With regard to property valuation, we also profited from the strong demand for housing in conurbations. As a result of our successful acquisitions and operational improvements, the key figure FFO I (Funds from Operations without disposals), which is of decisive importance for us, rose significantly by 26% to EUR 383.9 million. We also succeeded in increasing our EPRA NAV (undiluted) per share by 29% from EUR 23.02 to EUR 29.68. Our financing basis continues to be very solid. The LTV, at approximately 38%, remained constant at the previous year's level, while current interest expenses decreased by 16% as a result of the refinancing undertaken in 2015. The international rating agencies Standard & Poor’s and Moody’s have acknowledged this development by awarding us long-term issuer ratings of A- and A3, respectively, in each case with sound future prospects.

Our thanks go out to our entire team

Such success can only be achieved with a highly dedicated and qualified workforce. We would therefore like to take this opportunity to express our heartfelt thanks to all of the employees of Deutsche Wohnen – for their outstanding work and tireless endeavours for the benefit of the company and all of its stakeholders. We will also continue to do everything in our power, as a responsible employer, to implement diverse measures intended to foster and improve the dedication, qualifications motivation and sense of satisfaction of our employees.

Strong position on the capital markets as well

Deutsche Wohnen also remains a sought-after partner on the capital markets. The price of our share rose by approximately 19% in 2016, thus outperforming the EPRA Germany benchmark index once again and ranking third among the total of 50 MDAX companies in terms of both free-float market capitalisation and trading volume. The Management Board and the Supervisory Board propose the adoption by the Annual General Meeting of a resolution in favour of the payment of a dividend in the amount of EUR 0.74 per share for the financial year 2016.

Even greater alignment of our portfolio with our customers' requirements

Ladies and gentlemen, Deutsche Wohnen today has a portfolio comprising more than 160,000 residential and commercial units with a fair value of approximately EUR 15.7 billion at its disposal. Approximately 97% of our holdings are located in high-growth, prosperous conurbations within Germany. The appreciation in the value of our real estate assets in the amount of EUR 2.7 billion in 2016 alone represents a new record.

We want to participate in the growth in Germany's metropolitan areas in the future and actively work towards counteracting the current shortage of housing. To this end, we have significantly increased the scope of our long-term investment programme to approximately EUR 1.5 billion. We plan to modernise approximately 30,000 residential units, for the most part with a view to energy conservation, by 2021, and additionally intend to construct approximately 2,200 new residential units by 2020 to go some way towards meeting the urgent market demand for housing.

In all of this, we always remain true to our role as a market leader in terms of quality and innovation. Our primary goal is the creation of value over the long term, not the generation of short-term returns. Meeting the needs of our customers, who increasingly place greater value on sustainable and thus higher-quality products and materials, is of crucial importance for our company. Demand for the provision of special services in relation to properties is also very much on the rise. We will also strive continuously to anticipate the needs of our customers at an early stage and to proactively offer corresponding solutions with a high degree of customer value.

Sustained exploitation of market opportunities

We see considerable opportunities with regard to the expansion of our property-related services. As a result, we are restructuring our management of the energy-related aspects of our portfolio with a view to reducing both CO2 emissions and energy costs. A collaboration in the field of technical facility management has also strengthened our position in this context, enabling us to achieve an even higher degree of quality assurance as well as additional savings. As part of our multimedia activities, we are implementing forward-looking upgrades in our holdings, and thereby adding to our value chain, by means of investments both in the expansion of the cable network and in the glass fibre optic infrastructure.

We consider our Nursing and Assisted Living segment to be a further growth area, in which we have been well-positioned for many years thanks to KATHARINENHOF®. We also acquired properties comprising more than 4,600 additional nursing home beds in the second half of 2016. We believe the continued integration of our nursing and residential operations to be a strategic move which makes excellent business sense.

Ladies and gentlemen, as you can see: Deutsche Wohnen is a company with great potential. We firmly believe that the opportunities which lie ahead far outweigh any possible risks. We expect the market to once again experience growth in the financial year 2017. On the assumption of a baseline scenario, i.e. in the absence of any further acquisitions or opportunistic disposals, we expect to generate FFO I, including our most recent acquisitions, in the amount of approximately EUR 425 million.

You may rest assured that we will continue to focus on single-mindedly maintaining our successful growth trajectory – in the best interests of all of our stakeholders. Thank you for the trust you have placed in us!

Sincerely,

Unterschrift Michael Zahn       Unterschrift Lars Wittan       Unterschrift Philip Grosse
Michael Zahn
Chief Executive Officer
      Lars Wittan
Chief Investment Officer
      Philip Grosse
Chief Financial Officer

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