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 A FFO guidance, expecting an increase of around 10% for A FFO per share.
• LEG Immobilien SE (LEGIF) announced the acquisition of the remaining shares in BRC Capital Partners, which is expected to be neutral to A FFO per share midterm.
• The company has made significant progress in its capital recycling strategy, signing 3,400 units for a value of EUR330 million.
• LEG Immobilien SE (LEGIF) maintains a strong financial profile with a low average cash financing cost of 1.6% and a liquidity position of over EUR860 million.

Negative Points

• The company faces higher personal costs and administrative expenses due to the complex corporate structure of BRC Capital Partners.
• There is an expected increase in CapEx levels for BRC Capital Partners, which may impact A FFO contribution in the short term.
• The rental break regulation could potentially impact 18% of LEG Immobilien SE (LEGIF)'s free finance portfolio, though the overall effect is expected to be small.
• The company reported a decline in adjusted EBITDA by 3.1% due to lower contributions from green electricity production.
• LEG Immobilien SE (LEGIF) has not conducted a valuation of its real estate portfolio for the nine-month report, maintaining figures from H1 2024.

Q & A Highlights

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

Q: Could you consider a full exit of the development exposure at the right price, and what are your plans for the new locations added outside of your core exposure? A: (CEO) We do not consider ourselves the best owners for the two plots in Gisy and Grafenberg, so we are open to selling them or partnering in a joint venture. Regarding the new locations, we plan to set up a new hub in Leipzig to manage our assets in eastern Germany effectively.

Q: Do you plan to capitalize on the rising demand to ramp up the pace of disposals, or do you consider yourselves under less pressure now that asset values are slowly returning to growth? A: (CEO) We will continue to focus on reducing our LTV to our midterm target of 45% through disposals, selling assets at the lower end of our quality spectrum while sticking to our book values.

Q: What is the strategy behind increasing CapEx by one euro per square meter, and is there a focus on energy optimization? A: (COO) The increase is due to a mix of factors, including following our decarbonization path and inflation effects. We aim to optimize energy efficiency as part of our strategy.

Q: Regarding BC P, do you see other parts of its portfolio as non-core that you might want to sell in the future? A: (CEO) There are some units we do not want to keep, but there is no significant portfolio we plan to sell immediately. It will be part of our normal portfolio management.

Q: How do you plan to achieve the profitability levels of LEG for BC P, and will it be cost or revenue-driven? A: (CEO) It will be both cost and revenue-driven. We will focus on operational and administrative synergies first, followed by top-line growth through additional value-adding services.

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