Investor Presentation • Aug 10, 2017
Investor Presentation
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LEG Immobilien AG 10 August 2017
H1-2017 Results
While the company has taken all reasonable care to ensure that the facts stated in this presentation are accurate and that the opinions contained in it are fair and reasonable, this presentation is selective in nature and is intended to provide an introduction to, and an overview of the Company's business. Any opinions expressed in this presentation are subject to change without notice and neither the Company nor any other person is under any obligation to update or keep current the information contained in this presentation. Where this presentation quotes any information or statistics from any external sources, you should not interpret that the Company has adopted or endorsed such information or statistics as being accurate.
This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realised from the proposals described herein. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, and supply and demand. The Company has based these forward-looking statements on its views and assumptions with respect to future events and financial performance. Actual financial performance could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and the Company does not undertake any duty to update the information and forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.
This presentation does not constitute an offer or invitation to purchase or sell any shares in the Company and neither this presentation or anything in it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever.
In-place rent, l-f-l €5.40/sqm (+3.0% total portfolio, +3.7% for free-financed units) EPRA-Vacancy, l-f-l 3.4% (up c.30 bps YOY, rising l-f-l occupancy in H2 expected ) Maintenance/Capex €7.2/sqm (FY-2017 target of €24/sqm)
| | Net cold rent | €263.7m (+5.7% YOY from €249.4m) |
|---|---|---|
| | Adjusted EBITDA | €193.8m (+7.4% YOY from €180.5m) |
| | FFO I (excl. minorities) | €148.8m (+8.1% YOY from €137.6m), €2.36 per share (+7.8% YOY from €2.19) |
| | AFFO | €118.6m (+9.2% YOY from €108.6m) |
| | EPRA-NAV (excl. goodwill) | €73.43 per share (+9.4% YTD, +13.5% incl. DPS of €2.76) |
| Total Portfolio | ||
|---|---|---|
| -- | ----------------- | -- |
| 30.06.2017 | (YOY) |
|
|---|---|---|
| # of units | 127,063 | -2.0% |
| In-place rent (sqm), l-f-l | €5.40 | +3.0% |
| EPRA-Vacancy, l-f-l | 3.4% | +30 bps |
| 30.06.2017 | (YOY) |
|
|---|---|---|
| # of units | 38,940 | +0.6% |
| In-place rent (sqm), l-f-l | €5.98 | +2.7% |
| EPRA-Vacancy, l-f-l | 1.7% | +40 bps |
| 30.06.2017 | (YOY) |
|
|---|---|---|
| # of units | 47,013 | -1.1% |
| In-place rent (sqm), l-f-l | €5.14 | +3.2% |
| EPRA-Vacancy, l-f-l | 3.3% | +10 bps |
| (YOY) |
|---|
| -5.5% |
| +2.9% |
| bps |
| +60 |
Minor impact from comprehensive reorganisation – Further upside in H2
temporary lower capex ratio
AFFO 43.5 45.0
H1-2016 H1-2017
H1-2016 H1-2017
| € million |
H1-2017 | H1-2016 | Higher rental income |
|---|---|---|---|
| Net rental and lease income |
202.7 | 190.4 | (+€14.3m/+5.7%) Rise in staff costs resulting |
| Net income from the disposal of investment property | -0.7 | 0.1 | from crafts business offset by decrease in externally procured services |
| Net income from the valuation of investment property | 480.1 | 1.0 | Adj. NRI-margin rose slightly from 77.6% to 78.1% YOY |
| Net income from the disposal of real estate inventory | -1.6 | -1.3 | First-time mid-year portfolio valuation (+6.0%) |
| Net income from other services | 2.7 | 1.2 | Acquisition related one-time |
| Administrative and other expenses | -19.3 | -54.6 | costs of €34.7m in H1-2016 Recurring admin. costs slightly increased to €16.2m |
| Other income | 0.2 | 0.2 | (-€0.7m YOY) mainly due to an extraordinary item |
| Operating earnings |
664.1 | 137.0 | One-time refinancing costs (€12.0m) |
| Net finance costs |
-103.6 | -86.4 | Net income from fair value measurement of derivatives (-€42.0m; thereof -€42.3m |
| Earnings before income taxes |
560.5 | 50.6 | from convertible) Slightly lower cash interests |
| Income tax expenses |
-137.2 | -27.1 | (€40.5m; -€0.8m YOY) |
| Consolidated net profit |
423.3 | 23.5 | Cash taxes (-€3.3m) |
| € million | H1 -2017 |
H1 -2016 |
|
|---|---|---|---|
| Net cold rent | 263.7 | 249.4 | +€14.3m (+5.7% YOY) |
| Profit from operating expenses | -3.5 | -1.5 | |
| Maintenance (externally -procured services) |
-20.9 | -28.8 | Disproportional growth in staff |
| Staff costs | -26.6 | -19.6 | costs mainly due to new crafts business (offset by lower |
| Allowances on rent receivables | -3.7 | -3.2 | procured services); adjusted for |
| Other | -3.5 | -3.4 | this effect increase of +4.7% |
| Non -recurring project costs (rental and lease) |
0.4 | 0.6 | |
| Recurring net rental and lease income | 205.9 | 193.5 | +€12.4m (+6.4% YOY) NRI-margin increased slightly |
| Recurring net income from other services | 3.8 | 2.3 | due to disproportionate |
| Staff costs | -10.8 | -10.7 | growth in staff costs and others |
| Non -staff operating costs |
-8.2 | -42.7 | Acquisition related one -time |
| Non -recurring project costs (admin.) |
2.8 | 37.9 | costs in H1 -2016 |
| Extraordinary and prior -period expenses |
0.0 | 0.0 | Slight increase due to release |
| Recurring administrative expenses | -16.2 | -15.5 | of a provision in 2016, |
| Other income and expenses | 0.3 | 0.2 | (number of FTE's decreased ) |
| Adjusted EBITDA | 193.8 | 180.5 | |
| Cash interest expenses and income | -40.5 | -41.3 | +€13.3m (+7.4% YOY) |
| Cash income taxes | -3.2 | -1.3 | EBITDA margin 73.5% vs. 72.4% in H1 -16 |
| FFO I (including non -controlling interests) |
150.1 | 137.9 | |
| Non -controlling interests |
-1.3 | -0.3 | Lower average interest costs |
| FFO I (excluding non -controlling interests) |
148.8 | 137.6 | (Q2-17 avg. cost 1.85% vs. 2.09% in Q2 -16) |
| FFO II (including disposal of investment property) | 148.1 | 138.2 | |
| Capex -adjusted FFO I (AFFO) |
118.6 | 108.6 |
| € million | H1-2017 | H1-2016 | |
|---|---|---|---|
| Reported interest expense |
64.5 | 61.1 | One-off refinancing effect of €4.9m in H1-2017 from |
| Interest expense related to loan amortisation |
-14.6 | -11.8 | refinancing of subsidised loans (loan amortisation) |
| Prepayment penalties / breakage costs | -6.7 | -4.5 | Release of swaps and fixed |
| Interest charges relating to valuation of assets/liabilities |
-0.7 | -1.1 | interest loans (refinancing); total refinancing costs €12.0m |
| Leasing related interest expense | -0.5 | -0.7 | |
| Interest expenses related to changes in pension provisions |
-1.2 | -1.6 | |
| Cash effective interest expense (gross) | 40.8 | 41.4 | |
| Cash effective interest income |
0.3 | 0.1 | Interest coverage improved |
| Cash effective interest expense (net) | 40.5 | 41.3 | further (4.8x up from 4.4x YOY) |
| € million | 30.06.2017 | 31.12.2016 | |
|---|---|---|---|
| Equity (excl. minority interests) |
3,665.5 | 3,414.5 | €423.3m net profit |
| Effect of exercising options, convertibles and other rights |
495.5 | 435.6 | -€174.4m dividend €14.0m other comprehensive |
| NAV | 4,161.0 | 3,850.1 | income (derivatives) |
| Fair value measurement of derivative financial instruments | 168.8 | 146.7 | |
| Deferred taxes1) | 763.5 | 644.2 | |
| EPRA-NAV | 5,093.3 | 4,641.0 | |
| (m)2) Number of shares fully-diluted incl. convertible |
68.644 | 68.466 | |
| EPRA-NAV per share in € | 74.20 | 67.79 | |
| Goodwill resulting from synergies | 52.7 | 43.8 | |
| Adjusted EPRA-NAV (excl. goodwill) |
5,040.6 | 4,597.2 | |
| Adjusted EPRA-NAV per share in € | 73.43 | 67.15 |
2) Actual number of shares outstanding 63.19m 1) And goodwill resulting from deferred taxes on EPRA-adjustments 3) Assumption: expected 2018 FFO, growth rate of 0%
| Valuation uplift | Gross yield | |
|---|---|---|
| High-growth markets |
+6.8 % | 5.2 % |
| Stable markets |
+5.7 % | 7.0 % |
| Higher-yielding markets |
+4.9 % | 7.5 % |
| Total portfolio | +6.0 % | 6.3 % |
| Market | Residential Units |
GAV Residential Assets (€m) |
% of Total Residential GAV |
GAV/ sqm (€) |
In-Place Rent Multiple |
Multiples, Estimated Rental Values (30.06.2017) |
GAV Commercial/ Other Assets (€m) |
Total GAV |
|---|---|---|---|---|---|---|---|---|
| High Growth Markets |
38,940 | 3,547 | 44% | 1,381 | 19.4x | 16.9x | 194 | 3,741 |
| Stable Markets |
47,013 | 2,600 | 32% | 860 | 14.2x | 13.3x | 104 | 2,704 |
| Higher Yielding Markets |
39,215 | 1,824 | 22% | 759 | 13.3x | 12.6x | 60 | 1,884 |
| Subtotal NRW | 125,168 | 7,971 | 98% | 997 | 15.8x | 14.4x | 358 | 8,329 |
| Portfolio outside NRW |
1,895 | 144 | 2% | 1,126 | 16.7x | 15.5x | 2 | 145 |
| Total Portfolio | 127,063 | 8,115 | 100% | 999 | 15.9x | 14.5x | 360 | 8,475 |
| Other Assets | 303 | |||||||
| Total | 8,778 |
| € million | 30.06.2017 | 31.12.2016 | |
|---|---|---|---|
| Investment property | 8,463.8 | 7,954.9 | Revaluation gains €480.1m |
| Prepayment for investment property |
258.4 | 27.3 | Capex €30.2m Additions €28.9m |
| Other non-current assets | 173.9 | 182.3 | Reclassification -€30.9m |
| Non-current assets | 8,896.1 | 8,164.5 | |
| Receivables and other assets | 102.1 | 47.7 | |
| Cash and cash equivalents | 161.5 | 166.7 | Cash flow from operating activities €107.9m |
| Current assets | 263.6 | 214.4 | Acquisitions and capex |
| Assets held for sale | 30.3 | 57.0 | -€280.8m Dividend -€174.4m |
| Total Assets | 9,190.0 | 8,435.9 | |
| Equity | 3,688.9 | 3,436.7 | |
| Non-current financial liabilities | 3,550.0 | 3,222.3 | |
| Other non-current liabilities |
989.5 | 870.3 | |
| Non-current liabilities | 4,539.5 | 4,092.6 | Bond issue +€495m |
| Current financial liabilities | 574.1 | 552.0 | Repayment of subsidised |
| Other current liabilities | 387.5 | 354.6 | loans -€182.2m and other bank loans -€165.7m |
| Current liabilities | 961.6 | 906.6 | Commercial paper +€200m |
| Total Equity and Liabilities |
9,190.0 | 8,435.9 |
| € million | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Financial liabilities |
4,124.1 | 3,774.3 |
| Cash & cash equivalents | 161.5 | 166.7 |
| Net Debt |
3,962.6 | 3,607.6 |
| Investment properties | 8,463.8 | 7,954.9 |
| Properties held for sale | 30.3 | 57.0 |
| Prepayments for investment properties |
258.4 | 27.3 |
| Property values |
8.752,5 | 8,039.2 |
| Loan to Value (LTV) in % | 45.3 | 44.9 |
| Pro-forma LTV post conversion in % | 42.2 | 41.5 |
Significant positive impact on LTV from future conversion of convertible expected (currently -310bps)
1) Commercial paper
2) Maturity 2021 with investor put option 2019 (€300 m convertible bond)
3) Payback of corporate bond (€500 m)
| Key Facts | Maturities | ||
|---|---|---|---|
| Average debt maturity |
9.4 years (9.0 years*) | 1-2 years | 0.0% (4.7%*) |
| Interest costs | Ø 1.95% (1.85%*) | 3-5 years | 16.3% (15.4%*) |
| Hedging ratio | 93.8% (89.4%*) | 6-8 years | 37.9% (36.2%*) |
| Rating | Baa1 (Moody's) | ≥ 9 years | 45.8% (43.6%*) |
| 2017 | Guidance |
|---|---|
| FFO I | €290m - €295m / €4.59 - €4.67 per share (up from €288m - €293m / €4.56 - €4.64 per share) |
| EBITDA margin |
~72% |
| L-F-L rent growth | 3.0 - 3.3% |
| L-F-L vacancy | ~ -20 bps |
| Investments | ~€24/sqm |
| Dividend | 65% of FFO I |
| 2018 | |
| FFO I | €315m - €323m / €4.99 - €5.11 per share (up from €310m - €316m / €4.91 - €5.00 per share) |
| EBITDA margin |
~73% |
| L-F-L rent growth | ~3.0% |
| Investments | ~€29/sqm |
| Mid-term |
L-F-L rent growth 3.0 - 3.5%
FFO I per share (€)
Sources:
1) Interview with director of Federal Agency of Migration and Refugees (Aug 2016)
2) Deutsche Bundesbank
3) Regional government of North Rhine-Westpahlia
| € million | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Investment properties | 8,456.1 | 7,950.9 |
| Assets held for sale | 30.3 | 57.0 |
| Market value of residential property portfolio (net) |
8,486.4 | 8,007.9 |
| Estimated incidental costs |
836.3 | 789.2 |
| Market value of residential property portfolio (gross) |
9,322.7 | 8,797.0 |
| Annualised cash flow from rental income (gross) |
500.2 | 500.3 |
| Non recoverable operating costs | -69.9 | -79.1 |
| Annualised cash flow from rental income (net) |
430.3 | 421.2 |
| EPRA Net Initial Yield in % |
4.6 | 4.8 |
| Adj. EBITDA margin | FY-2016 | FY-2015 | ||
|---|---|---|---|---|
| €m | margin % |
€m | margin % | |
| As reported |
355.7 | 69.5 | 293.7 | 67.3 |
| Gap restricted vs. unrestricted rents1) | 26.3 | 71.0 | 22.5 | 68.9 |
1) €/sqm: €4.67 vs. €5.56 in 2016, €4.67 vs. €5.48 in 2015
Additional upside for value enhancing capex measures due to steadily improving market fundamentals
* 2,095 units in Q1-2017
| ≤ 5 years2) | 10 years2) 6 – |
≥ 10 years2) | |
|---|---|---|---|
| In-place rent | €4.56 | €4.67 | €4.85 |
| Market rent1) | €6.79 | €5.54 | €6.01 |
| Upside potential3) | 49% | 19% | 24% |
| Upside potential p.a.3) | €6.8m | €3.6m | €24.7m |
Source: LEG as of Q2-2017
1) Employed by CBRE as indicator of an average rent value that could theoretically be achieved, not implying that an adjustment of the in-place rent to the market rent is feasible, as stringent legal and contractual restrictions regarding rent increases exist.
2) ≤5 years = 2017-2021; 6-10 years = 2022-2026; ≥10 years = 2027ff.
3) Rent upside is defined as the difference between LEG in-place rent as of Q2-2017 and market rent (defined in footnote 1) as of Q2-2017.
| Release date (expected) |
High-Growth Markets |
Stable Markets |
Higher-Yielding Markets |
Total Portfolio |
|---|---|---|---|---|
| 2017 (Q1) | 4,108 units (mainly Cologne) |
16,379 units (mainly Dortmund, Wuppertal) |
13,794 units (mainly Herne, Recklinghausen) |
34,281 units |
| 2017 (Q2) | 6,104 units (mainly Münster) |
- | 7,617 units (mainly Gelsenkirchen) |
13,721 units |
| 2017 (Q3) | 4,108 units (mainly Bocholt, Aachen) |
5,438 units (mainly Solingen, Hattingen) |
13,495 units (mainly Duisburg, Dorsten, Herten) |
23,041 units |
| 2017 (Q4) | 607 units | 72 units | - | 679 units |
| Total 1 | 14,927 units | 21,889 units | 34,906 units | 71,722 units |
| Thereof: - Bocholt - Castrop-Rauxel - Cologne - Dortmund - Duisburg |
1,896 units 3,902 units |
13,165 units | 2,462 units 8,571 units |
|
| - Gelsenkirchen - Herne - Munster - Recklinghausen - Wuppertal |
6,075 units | 1,983 units | 6,735 units 3,150 units 2,692 units |
Sub-portfolios also include restricted units |
| Corporate Bond | ||
|---|---|---|
| Issue Size | EUR 500m | |
| Term / | 7 years / | |
| Maturity Date | 23 January 2024 | |
| Coupon | 1.250 % p.a. | |
| Issue | 99.409 % | |
| Price | ||
| Initial Re-offer | 1.339 % | |
| Yield | ||
| Financial | Incurrence-based: | |
| Covenants | • Net financial debt / total assets ≤ 60% |
|
| • Secured financial debt / total assets ≤ 45%1) • Unencumbered assets / unsecured financial |
||
| debt ≥ 125%1) | ||
| Maintenance-based: | ||
| • Adj. EBITDA / net cash interest ≥ 1.8x |
||
| ISIN | XS1554456613 | |
| WKN | A2E4W8 |
| Convertible Bond | |
|---|---|
| Issue Size | EUR 300m |
| Term / Maturity Date |
7.2 years / 1 July 2021 |
| Coupon | 0.500 % p.a. |
| Initial Conversion Price |
EUR 62.39 |
| Adjusted Conversion Price |
EUR 56.8403 (as of 20 May 2016) |
| Investor Put | 1 July 2019 |
| Issuer Call | From 22 July 2019, if the LEG share price exceeds 130 % of the then applicable conversion price |
| ISIN | DE000LEG1CB5 |
| WKN | LEG1CB |
1) After 31 July 2017
| Date | Report/Event |
|---|---|
| 10.08.2017 | Quarterly Report Q2 as of 30 June 2017 |
| 05./06.09.2017 | Roadshow London, Bank of America Merrill Lynch |
| 07.09.2017 | Roadshow Frankfurt, Jefferies |
| 12.09.2017 | Global Real Estate Conference Bank of America Merrill Lynch, New York |
| 18.09.2017 | Berenberg & Goldman Sachs German Corporate Conference, Munich |
| 19.09.2017 | Baader Investment Conference, Munich |
| 25./26.09.2017 | Capital Markets Day 2017, Düsseldorf |
| 29.09.2017 | Société Générale Pan European Real Estate Conference, London |
| 10.11.2017 | Quarterly Report Q3 as of 30 September 2017 |
Burkhard Sawazki Head of Investor Relations Tel: +49 (0) 211 4568-204 [email protected]
Karin Widenmann Manager Investor Relations Tel: +49 (0) 211 4568-458 [email protected]
40476 Düsseldorf, Germany E-Mail: [email protected]
LEG Immobilien AG Phone: +49 (0) 211 4568-400 Hans-Boeckler-Str. 38 Fax: +49 (0) 211 4568-22 204
Thank you for your interest.
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