• Like-for-Like Rental Growth: 3.2% for the full portfolio; 3.8% for the free-financed portfolio.
• AFFO Guidance 2024: EUR190 million to EUR210 million, representing a 10% increase in AFFO per share.
• AFFO Guidance 2025: Expected to grow to EUR205 million to EUR225 million, a 7.5% increase.
• Net Cold Rent: Increased by 3.3% to EUR643.8 million for the first three quarters.
• Recurring Net Operating Income: Rose by 2.6% to EUR530.3 million.
• Adjusted EBITDA: Declined by 3.1% due to lower green electricity production contribution.
• AFFO: Decreased by 14.1% year over year to EUR152 million.
• Gross Yield: Portfolio gross yield of around 5%.
• Units Sold: 3,400 units sold for EUR330 million.
• Investment Spending: EUR24.63 per square meter in the first nine months, with a full-year guidance of EUR34 per square meter.
• Average Interest Cost: Maintained at a low level of 1.6%.
• Liquidity Position: More than EUR860 million.
• LTV (Loan-to-Value): 48.5% as of September, expected to be below 48% by year-end.

• Warning! GuruFocus has detected 13 Warning Signs with LEGIF.

Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• LEG Immobilien SE (LEGIF) reported a strong 3.2% like-for-like rental growth for its full portfolio, aligning with its guidance range.
• The company confirmed its 2024 AFFO guidance, expecting an increase of around 10% for the AFFO per share.
• LEG Immobilien SE (LEGIF) announced the acquisition of the remaining shares in Brack Capital Partners, which is expected to be earnings accretive in the mid-term.
• The company has made significant progress in its capital recycling strategy, selling 3,400 units for EUR330 million, all above book value.
• LEG Immobilien SE (LEGIF) maintains a strong financial position with a low average cash financing cost of 1.6% and a liquidity position of over EUR860 million.

Negative Points

• The AFFO decreased by 14.1% year over year to EUR152 million, primarily due to higher investments and lower contributions from green electricity production.
• The company faces higher refinancing rates, which remain above its current average financing costs.
• There is uncertainty regarding the impact of potential rent regulation changes, although the effect on the portfolio is expected to be small.
• The acquisition of BCP will initially be AFFO neutral due to increased CapEx requirements.
• The company has not yet achieved its mid-term LTV target of 45%, indicating ongoing pressure to manage leverage.

Q & A Highlights

Q: Could you consider a full exit of the development exposure at the right price, and what are your plans for new locations added outside your core exposure? A: We do not consider ourselves the best owners for the two plots in Gerresheim and Grafenberg after shutting down our development operations. We are open to selling them or partnering in a joint venture. Regarding new locations, we plan to set up a hub in Leipzig to manage our assets in Eastern Germany, leveraging our substantial footprint there.

Q: Do you plan to capitalize on rising demand to ramp up disposals, or are you under less pressure now that asset values are returning to growth? A: We aim to control our Loan-to-Value (LTV) ratio, targeting a mid-term goal of 45%. We will continue disposals, focusing on lower-quality assets and new builds, ensuring sales align with book values to manage LTV effectively.

Q: What is the strategy behind increasing CapEx by EUR1 per square meter, and will you focus more on energy optimization? A: The increase is due to inflation and our decarbonization efforts. We focus on cash spending rather than accounting measures, and the capitalization rate should not change dramatically.

Q: Regarding BCP's portfolio, do you consider any parts non-core for future sales? A: There are no immediate plans to sell off large parts of BCP's portfolio. Any sales will be part of our regular portfolio management, focusing on smaller, non-core assets.

Q: How do you plan to achieve AFFO growth, and will it mainly come from rental growth? A: AFFO growth will be driven by rental growth and optimizing our assets. We aim to enhance energy services and non-rental business margins, adding value to the company.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.