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Thesis in a nutshell

Aareal Bank AG (“Aareal”) is a boutique lender to the international commercial real estate industry and also owns 70% in Aareon AG (“Aareon”), the European market leader in ERP software and digital solutions for the residential real estate industry. We believe the current strategy of Aareal is not sustainable:

+ Aareal Bank (defined as Aareal excluding Aareon) does not have a plan in place that will allow it to earn the cost of capital (defined as 8-10% post-tax return) in the mid-term without significant support from the regulator in the form of letting Aareal Bank return capital to shareholders

+ Excessive Management Compensation (high fix salaries, high bonuses independent of poor operating performance, very high pension claims) has to be rectified and incentives have to be re-aligned with the strategic needs of the bank

+ More Asset-Light Revenue Streams (i.e. earnings that do not require significant equity capital) have to be generated – especially in the core commercial real estate lending business

+ New Management Team: with CEO Herrman J. Merkens – following a sick leave since 7 November 2020 – according to Aareal’s ad hoc announcement on 20 April 2021 not returning and the contracts of two further Management Board members coming to an end, a new management team needs to be urgently put in place

+ Aareon Spin-off: Restructuring a bank and speeding up the international growth of a SaaS software business under one umbrella does not makes sense. The 70% in Aareon owned by Aareal should be distributed to Aareal shareholders in 2021 or the very latest 2022. Important: no sale of those 70% to third parties.

Why replace Marija Korsch, Christof von Dryander and Dietrich Voigtländer?

+ All three have been members of Aareal’s Remuneration Control Committee (Ms Korsch as Chairwoman, Mr von Dryander as Vice-Chairman) and have failed to stop the remuneration scandal at Aareal

+ Marija Korsch lacks relevant industry experience (commercial real estate lending, SaaS software) and has continuously backed management’s self-enrichment approach

+ As the Chairman of the Innovation and Technology Committee of Aareal, Dietrich Voigtländer has continuously failed to exploit Aareon’s growth and profit potential – instead, expensive Private Equity capital had to be brought on board to do this job

What do the three independent candidates bring to Aareal?

+ Heinz Laber:
Mr Laber is a renowned HR expert with highly relevant experience in managing efficiency projects, IT / digitization processes. Very importantly, he has real estate financing experience

+ Marion Khüny:
as a supervisory board member of Erste Bank and former senior banker at Unicredit and Commerzbank in Germany, Marion Khüny has excellent portfolio management, risk and governance experience

+ Thomas Hürlimann:
Mr Hürlimann brings a very broad industry background and will particularly help improve the areas of risk and regulation as well as technology / software and M&A