'Organic rent growth' the driver for LEG H1 performance

The Düsseldorf-based listed German housing landlord LEG Immobilien has increased its earnings outlook for 2015 and 2016 following a ‘continued strong operating performance’ in the second quarter. It highlighted organic rent growth in German housing of 2.6% as the main driver of its strong performance.

LEG has raised its funds from operations (FFO) outlook to a range of €200m to €204m for 2015 (previously €195m to €200m) and to a range of €233m to €238m for 2016 (previously €223m to €227m). FFO rose by 24.3% to €101.4m in the first half compared with the year-earlier period.

The company has acquired around 6,300 housing units so far this year, and said the revised prognosis does not yet factor in any positive effects anticipated from future acquisitions. The company now has 110,000 rental properties and 300,000 tenants located throughout its heartland of North Rhine-Westphalia. Its portfolio was valued at €6.1bn at end-June.

Rental income increased by 13.7% year-on-year to €214.8m in the first half, reflecting positive effects from its acquisitions and organic rent growth. Rents per square metre rose 2.6% on a like-for-like basis, with the free-financed property portfolio recording growth of 3.5%.

According to Thomas Hegel, group CEO, "Our strategy of value-oriented growth is again proving successful, with our operating performance continuing to outperform the market. Following the purchase of around 6,300 residential units this year, we are working on further acquisitions. In addition, the financing we have secured for the long term has also strengthened our basis for generating further attractive earnings and dividend growth."

In July 2015, LEG refinanced around €900m of loans, fixing an average loan maturity of around 10 years and average financing costs of less than 2.1%. "Very attractive margins for the long loan maturity of less than 100 basis points on average were negotiated with the banks, demonstrating LEG’s good positioning on the financing market," said Hegel.

The firm's borrowing structure gives it a loan-to-value of 49.4% and net asset value per share of €52.12 (the share price is currently hovering around €65.00, after recent weakness). “With regard to the upcoming revaluation of the property portfolio as at the end of the year, a yield compression is assumed,” the company said.