LEG Immobilien AG: Significant upturn in earnings and value growth in first half; acquisitions in sight for second half of year

• FFO I rises significantly by 9.3% to EUR 171.0 million in first half of year
• Pro forma NAV rises to EUR 99.57 (+6.6%year-to-date) on the back of portfolio appreciation of 5.1%
• Like-for-like rent per square metre develops well, up +2.9% as forecast
• Sale of portfolio of around 2,700 residential units successfully completed; acquisition pipeline still suggests moderate portfolio growth in 2019
• FFO I forecast confirmed at EUR 338-344 million for 2019 and EUR 356-364 million for 2020

LEG Immobilien's positive business performance continued in the second quarter of 2019. Key drivers of the upturn in profitability remain structural organic rental growth, effects from acquisitions and a further increase in operating efficiency. LEG's portfolio is excellently positioned within the current property cycle, a fact that is reflected in a portfolio uplift of 5.1%. Additional prospects for the year as a whole also remain positive.

'Taking into account our acquisition and sale activities, we are well on track to achieve our targets. The prospects for improved profitability and value appreciation remain positive. Acquisitions also remain an important element of our business model. However, we intend to intensify our new construction activities in future as a contribution to easing the housing markets by attacking the problem at the roots,' commented Lars von Lackum, CEO of LEG Immobilien AG.

Substantial growth in FFO I continues

Funds from operations (FFO I), a key performance indicator for the company, amounted to EUR 171.0 million in the first half of 2019, thereby increasing by a substantial 9.3% year-on-year (H1 2018: EUR 156.4 million). FFO I per share saw similar development, also rising by 9.3% year-on-year to EUR 2.71 on an unadjusted basis (previous year: EUR 2.48).

The operating EBITDA margin improved substantially to 74.5% (previous year: 72.1%), meaning that LEG maintains a leading profitability in the German housing sector. As a result, the target of an increase in the EBITDA margin in 2019 (around 73.0%) can be confirmed despite cost inflation and slightly higher than expected maintenance expenses in the second half of the year.

In the reporting period, in-place rent rose by 2.9% year-on-year on a like-for-like basis to an average of EUR 5.77 per square metre. This means LEG continues to provide good, affordable housing for broad sections of society. Like-for-like rental growth is expected to amount to between 3.0% and 3.2% for 2019 as a whole. Despite slightly higher tenant turnover due to modernisation, the like-for-like vacancy rate remained largely stable year-on-year at 3.6%. The vacancy rate is expected to decline slightly for the year as a whole.

Significant rise in NAV on the back of positive value development

Pro-forma NAV (not including goodwill) amounted to EUR 99.57 per share as at 30 June 2019. This corresponds to an increase of 6.6% year-to date (31 December 2018: EUR 93.40 per share). Including the distributed dividend of EUR 3.53 per share, the total return in the first half of the year was 10.4%. The major driver for the increase was the revaluation of the property portfolio midway through the year, which identified average appreciation of 5.1% or EUR 550.2 million. The value of the property portfolio (excluding the sales portfolio) corresponds to a gross rental yield of 5.2% and a value of EUR 1,287 per square metre.

Based on the high level of demand for German residential property and the good operating performance, further portfolio appreciation is forecast for the second half of the year. LEG's portfolio is also benefiting from the catch-up effects that are being observed in many B cities.

Portfolio optimisation strengthens future growth prospects

A portfolio of around 2,700 residential units in locations with higher investment requirements was successfully sold as part of a portfolio optimisation. The funds are earmarked for future growth. The acquisition of more 1,000 residential units has currently been signed. The development of the acquisition pipeline suggests that the portfolio will grow slightly in the year 2019 as a whole accompanied by a further improvement in portfolio quality.

Strong balance sheet secures low risk profile

As at 30 March 2019, the average remaining term of the company's liabilities was 7.3 years. Average interest costs are at a low 1.60%. This contributes to a high degree of security for stable medium-term earnings and dividend growth.

Net debt in relation to property assets (loan-to-value/LTV) amounted to a low level of 40.0% at the end of the quarter. This serves to underline LEG's low risk profile and continues to offer scope for financing the company's future growth.

Earnings outlook for 2019 and 2020 confirmed

In light of the overall good fundamental conditions, LEG is confirming its forecast for FFO I of between EUR 338 million and EUR 344 million in 2019 and between EUR 356 million and EUR 364 million in 2020.

About LEG

With around 131,000 rental properties and over 350,000 residents, LEG is one of Germany's leading listed housing companies. The company has eight branch offices in North Rhine-Westphalia, providing personal local contact. LEG generated rental and lease income of around EUR 767 million in the 2018 financial year.

Investor Relations contact:

Burkhard Sawazki

Tel. [phone]
E-mail: burkhard.sawazki[at]­leg.ag

Press contact:

Sabine Jeschke

Tel. [phone]
E-mail: sabine.jeschke[at]­leg-wohnen.de

The press release is available to download at: http://leg.ag/Q2-2019-en

Disclaimer

This publication constitutes neither a solicitation to buy nor an offer to sell securities. To the extent that we express forecasts or expectations or make forward-looking statements in this document, these statements can entail known and unknown risks and uncertainties. These statements reflect the intentions, opinions, or current expectations and assumptions of LEG Immobilien AG. The forward-looking statements are based on current planning, estimates and forecasts, which LEG Immobilien AG has made to the best of its knowledge, but that are not a statement on their future accuracy. Actual results and developments can therefore differ materially from the expectations and assumptions expressed.