Downgrade to Accumulate, target price unchanged

– Downgrade to Accumulate: Based on unchanged estimates and valuation parameters, we left our 12-month target price unchanged at EUR 5.2. Relative to a current price of EUR 4.5 for Immoeast shares our DCF valuation indicates an upside potential of 15%. We therefore downgrade the stock to Accumulate from Buy.

– Premium to peers: At 0.71x BV09e Immoeast is currently traded with a premium to its closest peers. Based on EV/EBITDA it is perfectly in line and looks even cheap taking the finalization of development projects and some disposals of non-core assets into account in 2009 and 2010 into account.

– Merger scheduled for 1H10: A capital increase and a merger of Immofinanz and Immoeast are the next planned steps in the restructuring process. A merger should be carried out as quickly as possible in the first half of 2010. Only afterward will a decision concerning capital measures of Immofinanz be made.

– Delay of capital increase unfavorable: We regard the decision of the management to delay the capital increase clearly in favor of Immofinanz shareholders, as the dilutive effect of a possible capital increase will be shared with Immoeast minority shareholders.

– Main upside triggers: Nevertheless, we remain positive concerning the stock of Immoeast as the restructuring story is still in place. The completion of development projects and the restart of frozen projects remain the main upside trigger, beside an overall optimization of the portfolio and cost cutting efforts.