DÜSSELDORF (dpa-AFX) – The latest apartment purchases and increasing rental income have given the real estate group LEG (LEG Immobilien) a boost in the third quarter of 2022. “We are very pleased that we have achieved our goals in the first nine months of 2022 despite the volatile economic situation,” said company boss Lars von Lackum on Thursday when the nine-month figures were presented. However, the Ukraine and energy crises, the rise in interest rates and the increased construction costs did not leave LEG untouched. The company is therefore adapting its business strategy and reacting with strict cost discipline. The stock fell more than 7 percent in early trading.
“We only want to spend what we earn ourselves,” explained the manager. Therefore, in 2023, nominal investments per square meter should be reduced to around the 2019 level. In addition, the company will no longer make additional purchases and will discontinue the project development business in order to further strengthen liquidity.
In the third quarter, operating profit from ongoing business (FFO 1) rose by 14.6 percent year-on-year to EUR 132.9 million, as the MDAX-listed company announced in Düsseldorf. By the end of September, rents had climbed to an average of EUR 6.32 per square meter for a comparable area, after EUR 6.12 a year earlier. Rents have been rising for years, especially in the big cities, but many medium-sized cities are now also catching up. The surplus was 127.3 million euros in the third quarter, a year earlier it had been 77.1 million euros.
Last year, LEG acquired almost 22,000 residential units, a large part of which came from the competitor Adler Group (ADLER), which got into trouble.
Already on Wednesday evening, the board of directors headed by Lars von Lackum specified the profit target for the current year. An operating result of 475 million to 485 million euros is now expected. The company previously had its sights set on up to EUR 490 million.
LEG also announced that it would focus on maximum capital efficiency in the future due to the current market situation, which is characterized by inflation and rising interest rates. Therefore, the focus will no longer be on the FFO I figure customary in the industry, but instead on the FFO 1 adjusted for investments, the AFFO. Here, LEG expects EUR 70 to 80 million for the current year and EUR 110 to 125 million for the coming year. This initially caused irritation on the market.
The focus of the business strategy on the highest possible capital efficiency will probably lead to a development of the FFO 1 below the current market expectations in 2023, it was said. LEG expects EUR 425 to 440 million here in the coming year. In the current year, 475 to 485 million euros are targeted. The forecast decline in the coming year is mainly due to the significantly lower investments. In the current year, LEG wants to invest around 42 euros per square meter in modernization, for 2023 the plan is 35 euros per square meter.
Furthermore, the dividend for 2023 will also be based on the new key figure system. The plan is to measure the distribution based on two components: depending on market developments, 100 percent of the AFFO and a portion of the net proceeds generated from real estate sales in the year under review are to be distributed.
LEG wants to sell up to 5,000 apartments. This also included around 1,300 units from the Adler portfolio purchased in 2021. So far, however, LEG has only sold around 470 apartments due to the wait-and-see attitude of the majority of investors.
The dividend proposal for 2022 will continue to be based on FFO 1, it said. However, the payout ratio of 70 percent is subject to further market developments./mne/tav/stk
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