Vivion - Letting some transparency in

All,

Please refer to our unchanged analysis here.

Underlining our comments about opacity in the company, Vivion’s sale of the Fuerst project was a little more complex than it first seemed. Whilst the headline price for the Fuerst assets in Berlin was €1,020bn, Immediate cash in the door is only €185m with a further €705m to be paid within one year. It underlines our view of transparency in the business. On the other hand it doesn’t shake our conviction that, in a world with a lot a cash, real assets will still command a premium. Finally, The delay in getting the full proceeds in the door will slow the transfer of risk from equity to debt holders that we are expecting but it will happen.

Fuerst proceeds only 20% cash:

- Vivion’s sale of the Fuerst project in Berlin had a headline figure of €1,020bn and completed in Q221. Vivion only received €185m in cash with a further €705m satisfied by way of a financial instrument. Maturity is <1 year although we do not know whether it just a bridge until alternate bank lines were arranged by the purchaser.

What are the net proceeds?

- Net Assets disposed €1,020m - €58m Net Liabilities - €51m minority interest (8.89%) = €911m.

- Cash Payment €185m + €704m Note = €889m.

- The €22m difference is equal to 6 months interest on the €704m note at the 6.5% discount rate applied in the accounts.

- The minority holder had 8.89% of the project according to Golden Partners 2019 accounts. (8.89% of €962m = €85m). On its own results call, Aggregate (the purchaser) confirmed that there was €775m of Senior debt in the Fuerst project, around €200m of equity and the remainder in subordinated debt. The sizing of the note issued to Vivion is likely to be linked to that. We will ask Vivion to clarify this in their webcast next week. We will update on the H1 results after the pre-recorded webcast is published next Monday.

Positioning:

- We will not be shorting the Vivion SUNs at this time. We have been unable to confirm the thesis that property valuations would be materially inflated because of the pandemic and certain sales of assets and operations over the last two years. Moreover, we are unable to identify a tangible trigger that would send valuations tumbling in the foreseeable future. We do not see the way Aggregate paid for Fuerst as a major concern. Risk to Vivion investors comes primarily from a potential management decision to buy out its co-investors in Golden at dilutive prices, using cash on balance sheet and thereby leveraging up Vivion and with that the SUNs. Further risk, albeit limited, would come from a general rise in German Bund yields. Finally, German office yields could widen if the shift to work-from-home proves materially lasting over a period of several years and UK assets are exposed to tourism. However, either asset class is strongly sought after in a world awash with liquidity, thus far fully making up for temporary operating losses incurred substantially at the OpCos, which are not directly part of Vivion.

Regards,

Aengus

E: amcmahon@sarria.co.uk

T: +44 203 744 7055

www.sarria.co.uk