- FFO I climbs 10.4 % year-on-year to around EUR 423 million
- NTA increases 19.3 % to EUR 146.10 per share
- Strong operating performance:
- Vacancy rate falls to 2.3 % (down 40 bps like-for-like)
- Average rent EUR 6.13 (up 3.2 % like-for-like)
- Portfolio grows to 166,200 units (up 15 %), a fifth of which outside NRW
- Dividend proposal of EUR 4.07 (up 7.7 %)
- 2022 outlook confirmed (FFO I of between EUR 475 and EUR 490 million)
- Support for refugees: A new home for more than 70 Ukrainian families to date
LEG Immobilien SE’s positive business performance continued in 2021. A key driver of its earnings growth was the increase in net cold rent driven by acquisitions, rental growth, and the best rental performance in LEG’s history, with an occupancy rate of almost 98 %. The number of LEG apartments increased by around 22,000 units – the biggest annual increase ever; the new units will only fully contribute to LEG’s earnings from 2022 onwards. LEG also reports the strongest valuation uplift of its portfolio since going public in 2013.
“In 2021 we began an important new chapter in the company’s history as the second-biggest landlord in Germany. With 22,000 apartments added in the past year, we now offer good homes at fair prices at around 270 locations across many parts of Germany,” says CEO Lars von Lackum. He continues: “The whole country needs more affordable housing – that is our core business, and what we know best, as demonstrated by our outstanding key performance indicators: We are effectively at full occupancy, even in many higher-yielding markets with a weaker demand. When modernising flats to enhance energy efficiency and when building new ones, we pay attention to what our clients are able to afford and we campaign on their behalf politically as well.”
FFO I rises significantly – 2020 moderate rent waiver compensated
Funds from operations (FFO I), the key performance indicator for the company, rose significantly by 10.4 % to EUR 423.1 million in the 2021 financial year as a result of the factors described above (2020 financial year: EUR 383.2 million).
The EBITDA margin expanded considerably to 74.9 % (previous year: 74.4 %). Therefore, LEG remains one of the most profitable German residential companies.
In-place like-for-like rent rose by 3.2 % compared to the previous year. The company was therefore able to offset the moderate rent growth of the previous year, which was partially driven by the voluntary temporary waiver of rent increases due to the coronavirus pandemic. The average rent per square metre charged for an LEG apartment is EUR 6.13 (like-for-like). This is testimony to LEG’s clear focus on the “affordable housing” segment for tenants in the low to medium income brackets.
The vacancy rate significantly fell year-on-year, by 40 basis points to 2.3 % (like-for-like) and has reached the level of structurally related vacancies resulting from a change in tenant. The company is especially pleased with its performance in higher-yielding markets with traditionally higher vacancy rates, where it reduced the vacancy rate by an average of 50 basis points year-on-year to 3.5 % (like-for-like).
Dividend proposal of EUR 4.07
The Management Board and the Supervisory Board intend to propose a dividend of EUR 4.07 per share for the financial year 2021 at the Annual General Meeting on 19 May 2022. On a per share basis the dividend increases by 7.7 % compared to the previous year. The dividend yield amounts to 3.3 % based on the year-end closing price for 2021.
Further significant value growth in portfolio
The company reports the net asset value of its properties in terms of net tangible asset value (NTA). NTA increased by 19.3 % to EUR 146.10 per share as at the end of the reporting period.
The average value of the property portfolio (including acquisitions) was EUR 1,706/m² as of 31 December 2021 (31 December 2020: EUR 1,503/m²). This equates to a gross rental yield of the portfolio of 4.2 %.
NTA is expected to rise again in 2022 thanks to the positive operating performance and consistently high demand for German residential property.
Biggest acquisition in company’s history strengthens position as nationwide provider
In the reporting year, in a highly competitive market environment, LEG acquired 21,742 residential units – more than in any year before. This translates into portfolio growth of 15 %. The biggest single acquisition was the Adler Group portfolio of around 15,400 apartments with a strong regional focus in the north of Germany. In connection with the acquisition, LEG has opened its first branch office outside North Rhine-Westphalia – in Bremen. The new properties have been owned by LEG for only ten weeks now and have been quickly integrated into its portfolio: IT equipment and processes were rolled out in the first few days and around 200 local employees were familiarised with the systems, processes, and new roles. The company is creating action plans for properties in higher-yielding markets to successfully reduce vacancy rates here as well, just as in higher-yielding markets in NRW in previous years. LEG currently renovates more than 400 vacant apartments so that they can be successfully marketed. In close cooperation with the cities and local councils, LEG continues the neighbourhood development measures initiated by Adler. LEG’s “Your Home Helps” Foundation has already begun its social work on site, especially at LEG’s biggest new location in Wilhelmshaven. The capital of the foundation was increased from EUR 16 to EUR 21 million to finance social managers for LEG’s new locations and to establish and expand the social networks necessary at the new neighbourhoods.
Around a fifth of LEG’s apartments are now outside its home market of North Rhine-Westphalia. Thus, in 2021, the company finally took the step from being the regional market leader in NRW to becoming one of Germany’s biggest housing companies.
Concurrently with the purchase of the Adler portfolio, LEG acquired shares in the Dutch housing company BCP of which it currently holds 34.4 %. LEG has secured a further growth opportunity for 2022 with a purchase option for another 63 % of BCP valid until the end of September 2022. BCP has an attractive portfolio of 12,100 apartments in markets with LEG properties and LEG target regions.
However, portfolio optimisation at LEG also means disposing of properties which do not or no longer fit into the company’s portfolio, for example around 1,300 units from the Adler portfolio, which are spread across different regions in Thuringia and Saxony: there are already several interested potential buyers. In total, LEG intends to sell up to 5,000 units in 2022 to further optimise its portfolio.
Financial stability as a defining feature
Average financing costs were 1.06 % on 31 December 2021 with an average maturity of 6.47 years. This includes the very short-term bridge financing for the acquisition of the Adler Group portfolio described above. Following the replacement of the bridge financing with bonds with a volume of EUR 1.5 billion issued at the beginning of the year, the average interest rate on liabilities is now 1.21 % with an average maturity of 7.5 years. Despite higher interest levels in general, the company’s financing costs are still at their lowest level since LEG went public with no major borrowing due until 2024.
Net gearing in relation to property assets (LTV) was 42.8 % as at the end of the reporting period and below our target of 43 %.
Firm focus on sustainability – balanced solutions with politicians
LEG has long been committed to high standards for ESG criteria – for environmental, social and governance aspects. When it adopted its sustainability and decarbonisation strategy in the spring of 2021, the company defined positions, targets, concrete milestones, and projects to achieve its targets in all three dimensions of sustainability.
Climate protection is the top environmental priority. LEG’s carbon reduction roadmap is in line with the German government’s goal of achieving climate neutrality by 2045. This roadmap is underpinned by short-term and long-term targets. The plan for 2021 was to energetically modernise at least 3 % of apartments, the final percentage was 3.5 %. This is more than twice the German national average. In 2021, the company also progressed its pilot project for serial energetic refurbishment according to the Energiesprong approach of one LEG neighbourhood built in the 1950s with four partners from the construction industry. Further research projects regarding, for example, the use of green hydrogen or the development of a green local heating network at selected LEG neighbourhoods, are ready to launch. Besides energetic refurbishment, it will take a correspondingly large range of green energy provision - for instance through the increased use of heat pumps - to make Germany’s building stock climate-neutral. LEG is campaigning for this in the political arena. More solar panels on roofs are far from enough to achieve this goal – it needs an open mind for new technology to ensure capital is invested in measures with the greatest carbon reduction potential.
In total, the company has invested more than EUR 42 per square metre in its properties in 2021. In addition to energetic refurbishment, this includes turn costs, maintenance costs and investments in increasing residential quality contributing to customer satisfaction – a key social KPI.
The company also sees new construction as part of its social commitment – contributing to the creation of additional affordable housing, including social housing. LEG has therefore decided to expand its new-build programme: Instead of its previously planned 500 new completed apartments p.a., the company intends to raise its target to 1,000 units p.a. from 2026 onwards. To do so, LEG plans to develop purchased land with or without building rights. The company will cooperate with proven experts in serial construction to ensure that new apartments remain affordable.
Our employees benefit from our stable business model and our financial success through safe jobs, fair pay, flexible working time models and several additional benefits provided by the company. In 2021, LEG hired
171 new colleagues and trained more young people than ever.
One area that LEG’s foundation “Your Home Helps” is currently focusing on is assisting people fleeing the horrific Russian aggression in Ukraine. Through a special fund of EUR 500,000, it is financing the initial setup of apartments that LEG will provide in cooperation with local councils. More than 70 LEG apartments are currently reserved for people fleeing Ukraine or have already been occupied by Ukrainian families. They are located in Düsseldorf, Duisburg, Köln, Remscheid, Dortmund, Bergkamen, Herne and Wilhelmshaven.
LEG plans several optimisations in the area of good governance. If supervisory board candidates are elected as nominated, the share of women on the Supervisory Board will increase to a third after this year’s Annual General Meeting. Besides the standards for the Management Board’s variable remuneration have been improved again: The transaction bonus that management already waived in conjunction with the Adler acquisition will be removed entirely. FFO I per share will replace FFO I as financial performance criteria. In addition, members of the Management Board will be required to reinvest 25% of their long-term bonus in LEG shares.
It is particularly important to the company to balance climate protection, social aspects and economic efficiency. In this context, sharply rising energy and commodity prices are a particular concern – regarding its own construction projects and property management, but more importantly regarding the affordability of heating and electricity for customers. In close dialogue with politicians, LEG is looking to find a joint solution to share the burden fairly and ecologically. Accordingly, LEG welcomes the so-called German “Energiegeld” (a subsidy towards energy costs for households with lower income), that has been resolved by the Federal government but is critical of its one-off nature.
Outlook for 2022 confirmed
Depending on how the residential, financial and geopolitical situation unfolds, the company is forecasting FFO I between EUR 475 and EUR 490 million for 2022. Based on the lower end of this range, this corresponds to an increase of at least 12% as against the FFO I achieved in 2021.The previous year’s portfolio acquisitions will contribute approximately EUR 50 million to FFO I.
These figures do not yet take into account the effects of further possible portfolio acquisitions or disposals. LEG intends to purchase around 7,000 apartments again in 2022 – exercising its BCP option would more than fulfil this ambition.
Regarding the outlook for the new financial year, CEO Lars von Lackum says, “LEG has a robust business model, a stable balance sheet and its operating performance is outstanding. We therefore anticipate further earnings growth in 2022 and are planning significant progress again in terms of climate protection, modernisation and new construction, even though the risks – to our business as well – have increased in recent days.”
With more than 166,000 rental properties and around 500,000 residents, LEG is one of Germany’s leading listed housing companies. The company has eight branch offices and is represented by local personal contacts at selected locations in other western German states. LEG generated income of around EUR 960 million from its core rental and lease business in the 2021 financial year. As part of its new construction campaign, LEG wishes to make a social contribution towards creating both privately financed and publicly subsidised housing, and to build or acquire at least 500 new apartments per year from 2023 onwards; the number of new apartments is to rise to 1,000 in total from 2026.
Investor Relations contact:
Tel. +49 211 45 68-550
Tel. +49 211 45 68-325
This publication is 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 SE. The forward-looking statements are based on current planning, estimates and forecasts, which LEG Immobilien SE 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.