(MENAFN- EQS Group)
AFFO on track at EUR 152 million – confirmation of raised outlook for 2024 to EUR 190 to 210 million
Operating business characterised by high demand for residential space:
- Vacancy rate (l-f-l) down by a further 10 basis points to 2.4 %
- Rent per square metre (l-f-l) increased by 3.8 % in the free-financed segment
Disposals above book value of 3,400 units (EUR 330 million) in 2024
Stabilised property values: NTA per share at EUR 124.41 – valuation effect expected between 0 and +0.5 % in H2-2024
Increase in AFFO to EUR 205 to 225 million expected in 2025
Further earnings potential from BCP acquisition planned in the medium term
LEG Immobilien SE performed extremely well in the third quarter of 2024. The company can therefore confirm its profit forecast for 2024, which was raised at the end of the first half of the year and is looking ahead to 2025 with confidence. Demand for affordable housing in Germany continues to grow. This was reflected in a very good letting result in the first nine months of 2024. Successful disposals and the stabilisation of property values round off the positive picture on LEG's balance sheet. With the acquisition of a majority stake in Brack Capital Properties, the company is also set to make an attractive addition of more than 9,000 units to its residential portfolio at the beginning of 2025, which will fit in perfectly with LEG's existing portfolio.
Lars von Lackum, CEO of LEG Immobilien SE, says: "We are extremely satisfied with our business performance. We expect growth in AFFO per share of around 10 per cent for the current year and a further 7.5 per cent for 2025 - in each case based on the mid-point of our earnings forecast, i.e. the base case. Our operating business is doing extremely well, our finances are solid and portfolio valuations have reached a turning point. Against the backdrop of market stabilisation, we have now also succeeded in acquiring Brack Capital Properties at an attractive price at the beginning of November, which was already planned for 2022."
AFFO amounts to EUR 152 million
AFFO, the company's key financial indicator, totalled EUR 152.0 million in the first three quarters of 2024 (Q3-2023: EUR 176.9 million). This is 14.1 per cent less than the previous year's figure, which was, however, significantly influenced by a one-off effect from the forward sale of green electricity (EUR 19.9 million) and disproportionately low investment expenditure in the first three quarters. Since this financial year, the company has successfully endeavoured to distribute investments more evenly across all four quarters.
Operating business reflects high demand for affordable housing
The EPRA vacancy rate (l-f-l) fell by a further 10 basis points year-on-year to 2.4 per cent.
The 3.3 per cent increase in net cold rent to EUR 643.8 million (Q3-2023: EUR 623.5 million) is solely due to rental growth in the free-financed segment, as the cost rents for subsidised housing remained stable following the regular adjustment in the previous year. The average basic rent for comparable space is therefore now EUR 6.78 per square metre and has risen by 3.2 per cent compared to the same period last year (Q3-2023: EUR 6.57 per square metre). If only the free-financed segment is considered, this results in rental growth of 3.8 per cent. The company is therefore on track to achieve the forecast rental growth of 3.2 to 3.4 per cent for the full year.
Despite the high rental price dynamics in LEG's core regions, the company's flats remain affordable for broad sections of the population. For example, the basic rent for an average LEG flat measuring around 65 square metres is around 440 euros per month. LEG thus continues to focus clearly on the "affordable housing" segment.
Property valuations stabilise - LEG sells around 3,400 units for a total of EUR 330 million
The EPRA NTA per share was EUR 124.41 as of 30 September 2024 and thus slightly below the value on the balance sheet date of 31 December 2023 (EUR 126.57 per share).
The gross yield on LEG's real estate portfolio as of 30 September 2024 was around 5 per cent, offering an attractive premium over the yield on risk-free 10-year German government bonds.
As usual, LEG's residential property portfolio is revalued in the second and fourth quarters. Based on the noticeable improvement on the residential property markets, LEG expects the revaluation of its property assets to have an effect of 0 to +0.5 per cent in the second half of 2024.
The upturn on the transaction market is also continuing. Since the beginning of the year, LEG has agreed or completed the sale of around 3,400 flats for around EUR 330 million, slightly above book value overall. The transfer of ownership will take place in the fourth quarter of the current financial year and in the first quarter of the following year.
Acquisition of Brack Capital Properties: synergy potential and future prospects
As part of a strategic acquisition, LEG concluded a purchase agreement on 4 November 2024 for 52.68 per cent of the shares held by Adler in Dutch company Brack Capital Properties (BCP) for a cash-financed purchase price of around EUR 219 million. Together with the 35.52 per cent of the shares in BCP already acquired in 2021/2022, LEG will initially increase its stake to 88.20 per cent upon completion of the share purchase agreement. The transaction is expected to be completed at the beginning of 2025, whereby the company has secured the acquisition of the remaining shares in Adler in the following months by means of a so-called tender commitment.
The price of EUR 45 per share represents a discount of 48 per cent on the most recently reported net asset value of BCP, resulting in a slightly positive effect on the NTA per LEG share for 2025. No effects on LEG's leverage ratio are expected.
The transaction will enable LEG to acquire around 9,100 residential units and increase its overall portfolio by around 5 per cent. In particular, the company is strengthening its market position in key core markets - around half of the BCP portfolio is located in LEG's home state of North Rhine-Westphalia and a further 40 per cent is located in newer LEG markets such as Kiel, Hanover, Göttingen and Bremen. LEG is also establishing another attractive location in the up-and-coming Leipzig rental market.
LEG plans to increase the profitability of BCP, in particular through synergies in the areas of financing, management and administration. The transaction will thus contribute to earnings growth in the medium term. A neutral effect on AFFO per share is initially expected for 2025. For 2027, an AFFO contribution of at least EUR 5 million is expected from the realisation of synergies and taking into account the increased capex level.
No refinancing requirement before the end of 2025
The average financing costs as of 30 September 2024 were 1.61 per cent with an average term of the liabilities of 5.8 years as at the reporting date (30 September 2023: 1.42 per cent;
6.6 years).
The ratio of net debt to property assets (loan to value/LTV) as of 30 September 2024 was 48.5 per cent (31 December 2023: 48.4 per cent). The medium-term target for the LTV ratio remains unchanged at 45 per cent. The focus therefore remains on reducing the LTV ratio.
The company benefits from its good access to all capital market participants. At the end of August, LEG successfully placed a EUR 500 million convertible bond with a term until 2030 and an annual cash coupon of 1 per cent.
Considering its high liquidity with cash and cash equivalents of over EUR 860 million and upcoming sales proceeds, the company can strictly arithmetically address all maturities until the end of 2025. This includes the purchase price of the BCP shares. Liquidity is supported by the aforementioned convertible bond, among other things.
This shows the great solidity and robustness of the company's financing structure.
From green innovation to day-to-day business: termios starts field tests
With the installation of 1,000 termios Pro smart thermostats in LEG properties, termios, the young joint venture between LEG, heating industry expert Oventrop and Munich-based mantro, has passed the last major milestone before the start of serial production. termios Pro enables AI-controlled continuous hydraulic balancing in water-based heating systems. The cost-effective and low-maintenance thermostats not only carry out the one-off hydraulic balancing of heating systems required by regulations, but also optimise the ongoing heating output and thus save up to 30 per cent energy and CO2. The initial test results are very promising.
The company will provide a comprehensive update on LEG's ESG strategy at the beginning of 2025.
Positive outlook for 2024 and 2025
Based on the satisfying performance in the first nine months of 2024, LEG considers itself to be very well positioned overall and therefore confirms its forecast for AFFO of EUR 190 to 210 million, which was only raised in August 2024 (previous range of EUR 180 to 200 million). Based on the mid-point of the range, this corresponds to earnings growth of around 10 per cent compared to the AFFO per share achieved in the 2023 financial year.
LEG also expects further significant earnings growth in the 2025 financial year. The forecast for 2025, presented for the first time, sees AFFO, the company's most important earnings indicator, in a range of EUR 205 to 225 million. This means that AFFO per share could increase by a further 7.5 per cent compared to 2024 - in each case based on the mean value of the AFFO forecast. Effects from future portfolio optimisations are not yet considered here.
LEG's dividend policy remains unchanged: LEG still intends to distribute 100 per cent of AFFO as well as a share of net proceeds from property disposals to its shareholders. The dividend proposal will be approved on a regular basis in March 2025 and published with the 2024 annual financial statements.
In view of the continuing high demand for affordable housing and the resulting rental price momentum, the company anticipates rental growth of 3.4 to 3.6 per cent in 2025. LEG plans to invest at least EUR 35 per square metre in 2025, slightly more than in 2024.
Lars von Lackum, CEO of LEG Immobilien SE, says: "We can look to the future with optimism: We are characterised by our strong operating business, consistent earnings growth per share and our solid financing structure. We deliver what we promise. If attractive opportunities arise as a result of the brightening trends on the property market, we will take advantage of them - but always with great caution."
Key figures Q3 2024
About LEG
With around 167,000 rental flats and around 500,000 residents, LEG SE is a leading listed housing company in Germany. The company has eight branches and is also represented at selected locations with personal contacts on site. LEG SE generated income of EUR 1.241 billion from its core business of letting and leasing in the 2023 financial year, with an average rent of EUR 6.58 (l-f-l) per square metre. With a share of around one fifth of social housing and its ongoing commitment to efficient climate protection in the housing industry, including the establishment of green, digital start-ups for the smart control of existing heating systems (termios), the installation and maintenance of highly efficient air-to-air heat pumps (dekarbo) and digital, serial full refurbishment (RENOWATE), LEG underlines its sustainable commitment in various areas.
Contact Investor Relations:
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Disclaimer
This publication constitutes neither an invitation to buy nor an offer to sell securities.
To the extent that we express forecasts or expectations in this document or make forward-looking statements, these statements may involve known and unknown risks and uncertainties. These statements express the intentions, opinions or current expectations and assumptions of LEG Immobilien SE. The forward-looking statements are based on current plans, estimates and forecasts that LEG Immobilien SE has made to the best of its knowledge, but do not claim to be correct in the future. Actual results and developments may therefore differ materially from the expectations and assumptions expressed.
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