LEG closing in on further portfolio buys, improves FFO

Listed German housing company LEG Immobilien posted strongly-improved Q1 figures on the back of the country's buoyant residential market, and issued a further postive forecast for 2017 and 2018, bolstered by its own recent refinancing on better-than-previous terms.

The Düsseldorf-based LEG also said it was in concrete talks to buy several portfolios in its core heartland of North Rhine-Westphalia to add to its current holdings of 130,000 rental properties (with about 350,000 residents), which if successfully concluded, would immediately have a positive effect on earnings per share. The prospect of this has evidently been helping the recent surge in the company's share price, given that last year's target of buying 5,000 new apartments was missed – the company only managed to buy 2,000.

Among imminent acquisitions are thought to be a package of 1,400 apartments in the Hassels district of Düsseldorf and 400 apartments in nearby Neuss from hedge fund management firm Elliot Management, a company closely associated with the family office In-West Partners GmbH, which manages residential portfolios in Berlin, Leipzig-Halle and North Rhine-Westphalia

LEG's FFO I of €75.2m was up 20% on last year's corresponding period, helped by a rise of 2.9% net 'cold' rents and other cost reduction measures. The FFO I per share rose 19% to €1.19 (the current share price is about €84.00). For the full year 2017 the company is targeting €288-293m, up from 2016's €268m. Further out, the target for 2018 is €310-316m.

LEG's EPRA net asset value (not including goodwill) was €67.48 per share, with the rental yield on the portfolio at an 'attractive' level of 6.7%. The planned portfolio valuation is currently expected to increase in the mid-single-digit percentage range in the middle of the year, LEG said, with further valuation gains expected in the final quarter of 2017.

The company's recent refinancing brought its averaging financing costs down to 1.95% at the end of the quarter, from 2.04% a year ago, with an averaging remaining loan duration of ten years. Net LTV was 44.4%.