LEG Immobilien SE: Strong nine-month figures and positive outlook for 2023 and 2024

  • AFFO rises to around €177 million (+54.4 %)
  • AFFO expected to reach upper end of guidance of €165 – 180 million in 2023
  • Persistently high demand driving resilient core business:
    • Vacancy (l-f-l) declines by 20 bps to 2.4 %
    • Rent per square metre (l-f-l) increases by 4.0 % to €6.55
    • Operating cash flow rises by 18.4 % to €306.7 million
    • Notarised sales of c.1,600 units (incl. commercial) or c. €130 million
  • Guidance for 2024 anticipates further rise in AFFO to between €180 and €200 million
  • Refinancing of all maturities until mid-2025 completed
  • RENOWATE wins new customers from the housing sector for serial renovation
  • LEG’s decarbonisation targets confirmed by SBTi (Science Based Targets Initiative)

Despite a challenging environment, LEG Immobilien SE maintained its extremely successful performance in the third quarter of 2023. Therefore, the company raises its earnings’ guidance for 2023 to the upper end of its target range despite the typically weaker fourth quarter and is confident regarding the business year 2024. Outstanding operating performance and the further rise in demand for affordable housing contribute to a reliable and resilient business model. The excellent figures for the first nine months were driven by a strong rental performance and a significant increase in net cold rent, a pronounced cost discipline and positive effects from the forward sale of green power.

Lars von Lackum, CEO of LEG Immobilien SE, said: “The shift to a cash-focussed steering approach for the company in November 2022 is paying off. With an AFFO of €177 million, we have already reached the upper end of our 2023 target range by the end of September. LEG’s excellent business development in the first three quarters of 2023 is the result of an outstanding rental performance and our strict cost discipline. Refinancing of our maturing liabilities is completed until mid-2025.

Key figures on track

The like-for-like vacancy rate declined by 20 basis points to 2.4 % compared to 9M 2022. This includes the portfolios acquired from Adler at the end of 2021, which currently still have a higher vacancy rate than the existing LEG portfolio.

Like-for-like in-place rentrose by 4.0 %. The forecast for the full year stands at 3.8 % to 4.0 % (l-f-l). This corresponds to a current average net cold rent of €6.55 per square metre, or around €425 for an average LEG apartment of approx. 65 square metres. LEG is therefore maintaining its clear focus on the “affordable housing” segment for people of low to medium incomes.

The operating cash flow increased by 18.4 % to €306.7 million in the first nine months. AFFO improved by 54.4 % to €176.9 million (9M 2022:  €114.6 million). This number reflects the free cash flow and allows in the current environment of rising interest rates and high inflation for a capital- and liquidity-focussed steering of the company. This improvement in operating cash flow and AFFO underlines the effectiveness of the changes to the business strategy made in November 2022, which is characterized by a consequent cash steering.

In line with this approach, the company is focusing on essential investment projects. This led to a
22.6 % year-on-year decline in investments to €22.32 per square metre despite inflationary effects (9M 2022: €28.82/square metre). However, LEG reaffirms its plan to invest €35 per square metre for 2023 as a whole.

NTA per share of €137.57 – gross yield of 4.6 %

EPRA NTA per share amounted to €137.57 as of 30 September 2023. At the reporting date
31 December 2022 EPRA NTA was € 153.52 per share. The main reason for the decline of the NTA is the 7.4 % depreciation of the property portfolio in the first half of 2023. The gross yield of the total property portfolio at the end of September amounted to 4.6 % (9M 2022: 4.1 %).

As usual, the next revaluation of LEG’s residential portfolio will take place in Q4 and will be reported as part of the 2023 annual financial statements. The company expects the depreciation pressure to ease slightly and the valuation to gradually stabilise. LEG expects the value of its property portfolio to decrease by between 4 % and 6 % in the second half of the year. Given high interest rates, it is currently assumed that devaluation will again be stronger in high growth markets (economically and demographically strong, high-price locations).

Despite the low transaction activity on the residential market, LEG successfully notarised sales of around 1,600 units and several commercial units for a total of around €130 million in the first nine months of 2023, which in total met book value. Overall, LEG’s sales programme comprises more than 5,000 units.

Refinancing completed until mid-2025

In the current challenging market phase, LEG is benefiting from good access to all financial market participants. All maturities for the current financial year, the €500 million bond that matures in
January 2024 and further secured financings have already been refinanced. None of LEG’s relevant loans mature until mid-2025. Overall, financing was concluded for over €900 million at average annual interest costs of 3.89 % and with an average term of 8.0 years. With almost 90 %, the focus was on secured financing. This shows that LEG can operate largely independently from the bond market in the current market environment. The company still has a solid investment grade rating of Baa2 with a stable outlook (previously: Baa1, negative outlook).

Average financing costs, including all refinancings, are currently at 1.65 % with an average maturity of 6.6 years (31 December 2022: 1.26 %, 6.5 years).

Net debt in relation to property assets (loan-to-value/LTV) amounted to 46.8 % as of 30 September 2023 (31 December 2022: 43.9 %). To adapt to changing market conditions, the company adjusted the medium-term LTV target, setting a maximum figure of 45 %.

With a €600 million commercial paper programme and revolving credit facilities of €675 million LEG has a sound liquidity reserve beyond its existing liquidity of €326 million as at the end of the reporting period.

At 40.4 %, the company enjoys a very high equity ratio compared to many other industries. LEG’s statement of financial position is resilient, as investment property accounts for 95 % of the total volume of the balance sheet and LEG does not recognise any goodwill in its financial statements.

Cost reduction and business opportunities thanks to smart climate protection

LEG also does its utmost to ensure that every euro invested in climate protection and digitalisation is used as efficiently as possible in the interest of its tenants and its own business success and in its role as a solutions’ provider for the entire housing sector. The company is thus continuing its three-stage approach to achieve German and European climate targets. The following progress has been made:

  • Hydraulic balancing and long-term optimisation ofexisting heating systems with AI-controlled thermostats from termios (previously seero): with low capital expenditure of just a few hundred euros per home, this can reduce energy consumption by up to 30 % with no need for maintenance for five years and also no need to change batteries, which is often the case for comparable products already available in the market. The joint venture plans to install the thermostats in the first LEG pilot apartments in January 2024 – about a year after it was founded.
  • Low-cost replacement of heating systems, primarily replacing gas heating with air-to-air heat pumps: in March this year, the company launched a partnership with Mitsubishi Electric as a major supplier. In September, LEG and the Dusseldorf-based family-run company Soeffing founded the joint venture dekarbo, which offers a one-stop installation and maintains the pumps digitally over the entire life cycle. The comprehensive package is used in LEG’s own properties as well as offered to third parties.
  • Digital serial comprehensive renovation work with RENOWATE

The “oldest” green joint venture with almost two years of age is currently working for LEG on
12 buildings comprising a total of 180 residential units in Moenchengladbach and Soest, all of which are at different stages of development. Facade renovation work on around 140 apartments will be completed by the end of the year. RENOWATE also won three other external customers from the housing sector with its renovation planning solution. The company was awarded its first external contract at the end of 2022.

With termios, its air-to-air heat pumps campaign, RENOWATE and the real estate services platform Youtilly, which was developed in-house, all of LEG’s innovations are featured in the ZIA Innovation Radar 2023, the leading source of innovations from throughout the entire German property sector.

Strong earnings forecast for 2023 – first outlook for 2024

Given the good business performance in the first three quarters of 2023, LEG expects AFFO to reach the upper end of the forecast range of between €165 million and 180 million for the full year. It also confirmed an EBITDA margin of around 80 % (originally: 78 %).

In addition, the company is presenting its first outlook for 2024. Considering the sustained high level of demand for affordable housing and the company’s successful, cash-focused business strategy, LEG is forecasting an AFFO of between €180 and €200 million in 2024. These figures do not reflect the effects of further possible portfolio acquisitions or disposals.

The company also reaffirmed its dividend policy for the financial year 2023, which was published as part of its strategy changes in November 2022. LEG intends to distribute 100 % of AFFO and a portion of the net proceeds from property sales to shareholders. The dividend proposal will be decided in March 2024 and published along with the 2023 annual financial statements.

The company expects a rental growth in 2024 of between 3.2 % and 3.4 %, which is higher than the expected rental growth for the current year excluding extraordinary effects. The rent increases of 0.8 percentage points in the subsidised property portfolio that took effect this year are not due again until 2026. LEG is planning investments of €32 per square metre in 2024. This is again lower than in 2023 and the high-spending years at the start of the decade but is about on par with 2017 levels after adjustment for inflation, meaning that it satisfies the need for capital discipline while still covering the necessary structural improvements. LEG plans to make use of the expanded subsidisation options for energy optimisation.

Specific new sustainability targets for 2024 to 2027 have also been agreed between the Management Board and the Supervisory Board. It should also be noted that the Science Based Target Initiative, which sets high standards, confirmed several days ago that LEG’s carbon reduction roadmap is in line with the Paris Agreement and the 1.5-degree target.

Lars von Lackum: “In these challenging times, LEG’s rock-solid business model encompasses strict cost discipline, a strong sense of responsibility and long-term reliability. We intend to further improve our operating earnings in 2024, too. We will keep administrative expenses and investments under strict control, while acting responsibly in making the most of the available income opportunities for all stakeholders. This is what characterises our successful, capital-oriented business strategy, which is conservative in the best sense of the word.


About LEG

With around 167,000 rental apartments accommodating some 500,000 residents, LEG SE is a leading listed housing company in Germany. The company maintains eight branches and is also represented at select locations with personal local contacts. From its core business of renting and leasing, LEG SE generated revenue of around €1.15 billion in fiscal year 2022, with an average rent of 6.32€/sqm. With a share of around one-fifth social housing and its ongoing commitment towards efficient climate protection – including serial refurbishment with the RENOWATE subsidiary founded at the beginning of 2022 – LEG underscores its dedication to sustainability in various areas.


Contact Investor Relations:

Frank Kopfinger

Phone +49 211 45 68-550

E-mail: frank.kopfinger@leg-se.com


Contact Press:

Sabine Jeschke

Tel. +49 211 45 68-325

E-mail: sabine.jeschke@leg-wohnen.de



This publication constitutes neither an invitation to buy nor an offer to sell securities. Insofar as we express forecasts or expectations or make statements relating to the future in this document, these statements may involve known and unknown risks and uncertainties. These statements express the intentions, beliefs, or current expectations and assumptions of LEG Immobilien SE. Forward-looking statements are based on current plans, estimates and projections made by LEG Immobilien SE to the best of its knowledge but are not guarantees of future performance. Actual results and developments may therefore differ materially from the expressed expectations and assumptions.

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