LEG Immobilien SE · XETR:LEG

LEG Immobilien — Investor Presentation (June 2020)

63 slides from LEG Immobilien's investor presentation, June 2020

  1. Slide 1: Company Presentation

    LEG Immobilien AG Company Presentation June 2020 1 I June 2020

  2. Slide 2: Disclaimer

    Disclaimer 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 C

  3. Slide 3: Affordable housing in Germany – made in NRW

    Affordable housing in Germany – made in NRW Aachen Bremen Düsseldorf Duisburg Hamm Minden Münster Osnabrück Ratingen Remscheid Siegburg Solingen 3 I June 2020

  4. Slide 4: Agenda

    Agenda I. AFFORDABLE HOUSING IN GERMANY – MADE IN NRW II. FINANCIAL PERFORMANCE III. PORTFOLIO OVERVIEW IV. SUSTAINABILITY V. ATTRACTIVE MARKET NRW VI. APPENDIX 4 I June 2020

  5. Slide 5: Who we are and what we stand for

    Affordable housing in Germany – Made in NRW Who we are and what we stand for No. 3 in Germany Social Responsibility  Pure Play: Residential + Germany  365,000 tenants / 136,000 apartments  Focus NRW (~98% of assets), no. 1 in NRW  Average rent per unit ~€375 per month/ €5.86/sqm  Market cap ~€7

  6. Slide 6: Key figures 2019

    Affordable housing in Germany – Made in NRW Key figures 2019 Operating results 2019 2018 +/- % Net cold rent €m 586.1 560.2 4.6 Net rental and lease income €m 435.0 418.6 3.9 EBITDA adjusted €m 426.5 405.2 5.3 FFO I €m 341.3 318.6 7.1 FFO I per share € 5.27 5.04 4.6 Dividend per share € 3.60 3.53 2.

  7. Slide 7: Affordable housing in Germany – Made in NRW

    Affordable housing in Germany – Made in NRW Affordable housing in Germany – Made in NRW Optimizing Expansion of Grow the Core business value chain platform Tapping rental Increase and extend Continuation of NRW- growth potential value-add services focussed acquisition strategy Improving customer Rea

  8. Slide 8: A lean business model, a strong balance sheet and attractive returns

    Affordable housing in Germany – Made in NRW A lean business model, a strong balance sheet and attractive returns allow to navigate through the crisis LTV 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% GAV 35% yield Peer 2 LEG 40% 45% Peer 1 Peer 5 Peer 3 50% Peer 4 55% Additional layers of complexity Germa

  9. Slide 9: A very resilient business model with a strong track record

    Affordable housing in Germany – Made in NRW A very resilient business model with a strong track record LEG not materially affected during the GFC 6,0 Avg.rent/sqm/month(€) Vacancy (%) 5,0% 5,5 GFC 4,0% 5,0 3,0% 4,5 2,0% 4,0 1,0% 3,5 3,0 0,0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 201

  10. Slide 10: Attractive yields in a low/no yield environment

    Affordable housing in Germany – Made in NRW – Stable spread over 10year BUND Attractive yields in a low/ no yield environment Gross yield LEG vs. BUND Stable spread over 10y BUND % % 6.53 10% 6% 5.64 8% 5.31 6.4 5% 6% 5.5 5.1 4% 4% 4.2 3% 2% 2% 0% 1% -2% 2013 2014 2015 2016 2017 2018 2019 May 0% 202

  11. Slide 11: Remaining focussed on NRW/Germany and affordable living

    Affordable housing in Germany – Made in NRW – Highlights 2019 – Selective growth Remaining focussed on NRW/Germany and affordable living Regional split Deal funnel 2019 Target markets Rationale Share NRW (units) Focus on NRW Market insight/ ~100,000 offered as no.1 Cost advantages first level c.45%

  12. Slide 12: Leveraging LEG's strong customer base with additional services

    Affordable housing in Germany – Made in NRW – Innovation & Value-Added Services Leveraging LEG‘s strong customer base with additional services Strong FFO contribution – Services €m 23 Partner Partner Partner 16 15 Cooperation Cooperation Joint venture (51%) 9 Multimedia: TV, Electricity, heating, Sm

  13. Slide 13: Digitization as a technology trend is of tremendous importance

    Affordable housing in Germany – Made in NRW – Innovation & Value-Added Services Digitization as a technology trend is of tremendous importance for the real estate industry LEG is headed towards a leading position as a driver of innovation Greatest digital achievements  Accounting Robot in Receivabl

  14. Slide 14: Strong financial profile – successfully tapped markets during the crisis

    Affordable housing in Germany – Made in NRW Strong financial profile – successfully tapped markets during the crisis Maturity profile Q1 highlights €m  €250m of secured and unsecured financings at 1.2% 2020 45 0.5% for 10 years 2021 0  €300m cash position  RCF‘s of €200m 2022 0 2023 330 1.8% Aver

  15. Slide 15: Valuation uplift FY 2019 driven by letting performance and yield compression

    Affordable housing in Germany – Made in NRW – Portfolio Valuation 2019 Valuation uplift FY 2019 driven by letting performance and yield compression Breakdown revaluation gains €m Value drivers Valuation uplift by markets Allocation capital growth 96 202 9.4% 9.1% 8.3% 422 6.1% €1,125m1 607 923 Total

  16. Slide 16: Agenda

    Agenda I. AFFORDABLE HOUSING IN GERMANY – MADE IN NRW II. FINANCIAL PERFORMANCE III. PORTFOLIO OVERVIEW IV. SUSTAINABILITY V. ATTRACTIVE MARKET NRW VI. APPENDIX 16 I June 2020

  17. Slide 17: Strong start despite a difficult environment, Guidance 2020 confirmed

    Financial Performance – Highlights Q1-2020 & Coronavirus Crisis Strong start despite a difficult environment Guidance 2020 confirmed Strong Performing ESG Financials Operations Developments  FFO I +10.7% to €94.0m  Net cold rent +4.9%  10-point paper to protect and  EBITDA-Margin 74.1%  L-f-l r

  18. Slide 18: Manageable implications of Coronavirus crisis

    Financial Performance – Highlights Q1-2020 & Coronavirus Crisis Manageable implications of Coronavirus crisis Impact on rental growth: Pre-cautionary measures  Voluntary suspension of  External hiring on-hold Mietspiegel rent increases:  Non-personnel cost savings ~20bps on l-f-l rental growth FF

  19. Slide 19: NAV and dividend development

    Financial Performance – Generating Attractive Shareholder Returns NAV and dividend development NAV per share Dividend per share €, excl. goodwill € 105.39 93.40 3.53 3.601 83.81 3.04 67.15 2.76 58.92 52.69 2.26 49.36 1.96 1.73 +13.5% +13.0% 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017

  20. Slide 20: Margin expansion story is set to continue

    Financial Performance −Highlights Q1-2020 Margin expansion story is set to continue Net Cold Rent Adj. Net Rental and Lease Income Margin €m €m +4.9% Adj. Net Rental and Lease Income +6.5% % 76.8 78.0 Driver 146.3 153.5 112.4 119.7 Ongoing efficiency gains Q1-2019 Q1-2020 Q1-2019 Q1-2020 Q1-2019 Q1-

  21. Slide 21: Sound underlying rent dynamics

    Financial Performance – Rent Development Sound underlying rent dynamics L-f-l residential rent Rent growth drivers FY 2019 (€/sqm/month) % +2.8% +2.9% 5.72 5.88 0.9 Re-letting Q1-2019 Q1-2020 Modernisation 0.8 L-f-l free financed rent (€/sqm/month) Mietspiegel adjustments +3.1% 6.06 6.25 1.2 Q1-2019

  22. Slide 22: Acquisitions: Leading Management Skills Paying Off

    Financial Performance – Scalability of platform + cost discipline support value accretive growth Acquisitions: Leading Management Skills Paying Off Strong volume growth at decreasing overhead cost… # of units 36.7 33.1 32.1 33.3 34.0 33.2 Recurr. Admin costs (€m) 133,969 134,031 128,488 130,085 106,

  23. Slide 23: Ongoing focus on energy efficiency

    Financial Performance – Capex & Maintenance Ongoing focus on energy efficiency Lifting potential for growth and energy efficiency while maintaining high capital efficiency €m +45.7% €73.3m (€8.25/sqm) €50.3m (€5.74/sqm)  Investments increased c.45% year-over-year due to 54.7 strong increase in line

  24. Slide 24: Guidance 2020 confirmed on the basis of strong operating numbers

    Outlook Guidance 2020 confirmed on the basis of strong operating numbers, a resilient business model and a strong balance sheet Strong Performing ESG Financials Operations Topics  FFO I €370m – 380m  L-f-l rental growth <2.8%1  Energy efficient modernization  EBITDA-Margin ~74%  L-f-l vacancy s

  25. Slide 25: Agenda

    Agenda I. AFFORDABLE HOUSING IN GERMANY – MADE IN NRW II. FINANCIAL PERFORMANCE III. PORTFOLIO OVERVIEW IV. SUSTAINABILITY V. ATTRACTIVE MARKET NRW VI. APPENDIX 25 I June 2020

  26. Slide 26: Positive rent development across all submarkets

    Portfolio and Operating Performance – Overview Positive rent development across all submarkets Strong results on the basis of tailor-made management strategies Bielefeld North Rhine-Westphalia Lippe Munster Gütersloh (~131,600 units / ~97%) Recklinghausen Hamm Paderborn GelsenkirchenDortmund Soest O

  27. Slide 27: Portfolio valuation: With €1,356/sqm @5.1% gross yield

    Portfolio Overview (as of 31 March 2020) Portfolio valuation: With €1,356/sqm @5.1% gross yield still at attractive levels in absolute and relative terms GAV In-Place GAV Residential Residential GAV/ Gross Rent Market Commercial/ Total GAV Market segment Units Assets (€m) sqm (€) yield Multiple Mult

  28. Slide 28: Well-balanced portfolio with significant growth potential

    Portfolio Overview Well-balanced portfolio with significant growth potential 31.03.2020 Units Gross Asset Value Rental Income By Market 21% 30% 26% 31% 45% 37% 34% 37% 39% High Growth Markets Stable Markets Higher Yielding Markets Restricted Subsidised Subsidised Subsidised 25% 26% 23% vs. Unrestric

  29. Slide 29: Refinancing of subsidised loans lifting value

    Portfolio Overview – Rent revisionary potential Refinancing of subsidised loans lifting value Rent Potential Subsidised Units Number of Units Coming Off Restriction and Rent Upside # Units c.17,000  Until 2028, c. 24,000 units will come c.10,000 2.272 off rent restriction 1.664 1.620  Units show s

  30. Slide 30: Well diversified portfolio with attractive reversionary potential

    Portfolio Overview – Leading Performance Well diversified portfolio with attractive reversionary potential High Growth Markets Stable Markets Higher Yielding Markets As of 31.12.2019 LEG NRW LEG NRW LEG NRW No. of Residential Units 40,843 3,401,632 52,034 3,923,192 41,154 1,689,539 Occupancy Rate (%

  31. Slide 31: Above inflationary rent growth and high occupancy

    Portfolio Overview Above inflationary rent growth and high occupancy Significant rent upside1) potential with current in-place rents of € 5.82/sqm/month (as of FY-2019), approx. 13% below market rent levels Residential % of total Rent Market rent2 % to EPRA- Rent CAGR last Occup. CAGR Market (FY-201

  32. Slide 32: Portfolio Structure

    Portfolio Overview – 31 March 2020 Portfolio Structure Construction Years Free Financed / Rent Restricted Units After 1989 6% 12% Until 1949 Rent Free restricted 25% 75% financed units units 1970-1989 24% 58% 1950-1969 Building Types1 Apartment Size2 High 2% > 90 sqm <40 sqm Rise 4% 5% 66% 71-90 sqm

  33. Slide 33: Unlocking value potential through construction on own land

    Portfolio Overview – Leading Performance Unlocking value potential through construction on own land Münster  Four buildings with 51 units in Münster: seizing value potential through densification on vacant plots of own land  Construction cost €7.7m or c.€2,200/sqm; IPR c.€12-13/sqm  Respecting th

  34. Slide 34: Asset values significantly below replacement cost

    Portfolio Overview – Supply & Value Potential Asset values significantly below replacement cost Residential replacement costs of the LEG portfolio  Minimum replacement cost for new-built product at c. €2,700 per sqm2  The portfolio of affordable living product is de facto irreplaceable at comparab

  35. Slide 35: Agenda

    Agenda I. AFFORDABLE HOUSING IN GERMANY – MADE IN NRW II. FINANCIAL PERFORMANCE III. PORTFOLIO OVERVIEW IV. SUSTAINABILITY V. ATTRACTIVE MARKET NRW VI. APPENDIX 35 I June 2020

  36. Slide 36: Social responsibility – What we have done so far

    Sustainability Social responsibility - What we have done so far Creation of an organisational and reporting structure Sustainability Manager  Management Board bears overall responsibility Management Board  Top decision-maker Management Board: Lars von Lackum, CEO  Responsible Supervisory Board me

  37. Slide 37: Environmental commitment

    Sustainability Environmental commitment LEG set itself measurable and publicly communicated targets for the energetic improvement of the portfolio and reports on their achievement in its sustainability reports Environmental targets  Energy efficient modernisation of more than 15% of our portfolio i

  38. Slide 38: Social commitment

    Sustainability Social commitment Tenants Employees  Offering attractive housing at affordable rents  Vocational training and professional development  Cooperation with professional partners for housing-  Charta of Diversity signed (www.charta-der-vielfalt.de) related services or offers (multimed

  39. Slide 39: Social commitment during the crisis

    Sustainability Social commitment during the crisis Coronavirus crisis: LEG’s voluntary 10-point paper (21 March 2020) and additional measures Support and protection for tenants Protection of employees  Suspension of rent increases in line with  Work from home to provide safety and flexibility for

  40. Slide 40: Corporate Governance

    Sustainability Corporate Governance Corporate Governance Code Compliance Management System  Compliance with the German Corporate Governance  Certified Compliance Management System Code  Focus on fair and responsible business, competition  Member of the Corporate Governance Institute of the regul

  41. Slide 41: Agenda

    Agenda I. AFFORDABLE HOUSING IN GERMANY – MADE IN NRW II. FINANCIAL PERFORMANCE III. PORTFOLIO OVERVIEW IV. SUSTAINABILITY V. ATTRACTIVE MARKET NRW VI. APPENDIX 41 I June 2020

  42. Slide 42: Portfolio highly exposed to structural growth markets

    Attractive Market NRW Portfolio highly exposed to structural growth markets Geographic reach of growth cities Key data (60 km radius)  Approx. 93% of LEG‘s portfolio is located in the catchment area of growth cities (60 km) and around Minden- Lübbecke 64% in the commuter belts (60 km) of Düsseldorf

  43. Slide 43: North-Rhine Westphalia (NRW)

    Attractive Market NRW North-Rhine Westphalia (NRW) Favourable demograhics NRW household growth 2014-20401  Key metropolitan area in Germany, and one of the m 8.6 +5.3% 9.0 largest areas in Europe (17.9m inhabitants) >2 People 2.2 2.0 Households  Highest population density – key advantage for effic

  44. Slide 44: North-Rhine Westphalia (NRW)

    Attractive Market NRW North-Rhine Westphalia (NRW) Favourable economic climate Leading positions in important industries  Germany’s economic powerhouse generating approx. Direct investments: #1 in Germany for foreign investors 21% of German GDP  29.2% of direct investments in Germany  About one t

  45. Slide 45: Appendix – Financials

    Agenda I. AFFORDABLE HOUSING IN GERMANY – MADE IN NRW II. FINANCIAL PERFORMANCE III. PORTFOLIO OVERVIEW IV. SUSTAINABILITY V. ATTRACTIVE MARKET NRW VI. APPENDIX FINANCIALS 45 I June 2020

  46. Slide 46: FFO Calculation

    Appendix – Q1-2020 FFO Calculation €m Q1-2020 Q1-2019 Net cold rent 153.5 146.3  +€7.2m YOY/+4.9% Profit from operating expenses -0.8 -1.7 Maintenance (externally-procured services) -12.9 -13.8  Growth in staff costs mainly Staff costs -17.7 -16.1 due to additional FTE’s Allowances on rent receiva

  47. Slide 47: Income Statement

    Appendix – Q1-2020 Income Statement €m Q1-2020 Q1-2019  Higher rental income +€7.2m Net rental and lease income 116.5 109.7 YOY/+4.9%  Higher personnel expenses (€1.6m) Net income from the disposal of investment property -0.3 -0.3 Net income from the valuation of investment property -0.7 -0.2 Net

  48. Slide 48: Strong balance sheet

    Appendix – Q1-2020 Strong balance sheet €m 31.3.2020 31.12.2019 Investment property 12,269.0 12,031.1  Acquisitions €184.9m  Capex €54.7m Other non-current assets 269.5 322.7 Non-current assets 12,538.5 12,353.8 Receivables and other assets 106.3 89.6  Cash flow from operating activities €80.2m C

  49. Slide 49: Strong credit profile in more volatile financing environment

    Appendix – Q1-2020 Strong credit profile in more volatile financing environment €m 31.3.2020 31.12.2019 Financial liabilities 5,004.7 5,053.9  Strong balance sheet with LTV of 38.0% significantly below maximum target (43%) Excluding lease liabilities (IFRS 16) 29.9 31.8 leaves headroom for growth i

  50. Slide 50: EPRA-Net Asset Value

    Appendix – Q1-2020 EPRA-Net Asset Value €m 31.3.2020 31.12.2019  €63.6m net profit Equity (excl. minority interests) 5,986.0 5,909.9  €12.5m pensions Effect of exercising options, convertibles and other rights 26.1 26.1 NAV 6,012.1 5,936.0 Fair value measurement of derivative financial instruments

  51. Slide 51: Broadbased valuation uplifts continue across market segments

    Appendix – Portfolio Valuation 2019 Broadbased valuation uplifts continue across market segments Valuation uplift by markets (l-f-l), including commercial and other assets Valuation uplift FY-19 Valuation uplift H2-19 Gross yield FY-19 High-Growth Markets 9.4% (7.5% in FY-18, l-f-l) 3.5% 4.1% (4.5%

  52. Slide 52: Market clustering based on LEG's methodology

    Appendix – Portfolio Valuation Market clustering based on LEG’s methodology Key indicator Scoring based on local districts5 LEG Scoring Relative comparison of rental 1. Rental level1 levels High-growth markets Relative comparison of vacancy 2. Vacancy level2 levels Stable markets ~30 indicators like

  53. Slide 53: Appendix – Regulation

    Agenda I. AFFORDABLE HOUSING IN GERMANY – MADE IN NRW II. FINANCIAL PERFORMANCE III. PORTFOLIO OVERVIEW IV. SUSTAINABILITY V. ATTRACTIVE MARKET NRW VI. APPENDIX REGULATION 53 I June 2020

  54. Slide 54: Ongoing political discussion but small impacts on LEG

    Appendix – Rent Regulation Ongoing political discussion but small impacts on LEG Topic Description Impact on LEG Mietspiegel  Agreement on change of reference period from 4 to 6 years Marginal impact on rent growth. (reference rent) Modernization  Reduction of modernization charge from 11% to 8% L

  55. Slide 55: Rent Regulation Basics

    Appendix – Rent Regulation Basics Free financed units Existing contracts  Rent increase by max. 20% (15% cap in tense markets²) within 3 years; limit: local reference rent1  After modernization: annual rent can be increased by 8% of modernization costs; New NRW Tenant limit: €3 per sqm (rent/sqm/m

  56. Slide 56: Appendix – Management

    Agenda I. AFFORDABLE HOUSING IN GERMANY – MADE IN NRW II. FINANCIAL PERFORMANCE III. PORTFOLIO OVERVIEW IV. SUSTAINABILITY V. ATTRACTIVE MARKET NRW VI. APPENDIX MANAGEMENT 56 I June 2020

  57. Slide 57: LEG Management Board

    Appendix – Management LEG Management Board Lars von Lackum Dr. Volker Wiegel CEO COO Responsibilities  Strategy, M&A, Organisation and Digitisation  Finance and Controlling  Asset and Property-Management; incl.  Legal and Human Resources  Investor Relations  Commercial Management  Management

  58. Slide 58: Investor & Creditor Relations

    Agenda I. AFFORDABLE HOUSING IN GERMANY – MADE IN NRW II. FINANCIAL PERFORMANCE III. PORTFOLIO OVERVIEW IV. SUSTAINABILITY V. ATTRACTIVE MARKET NRW VI. APPENDIX INVESTOR & CREDITOR RELATIONS 58 I June 2020

  59. Slide 59: LEG Share Information

    Appendix LEG Share Information Basic data Well-balanced shareholder structure1  Prime Standard, Frankfurt Stock Exchange Other free float MFS  Total no. of shares: 69,009,836 75.8% 10.5%  Ticker symbol: LEG BlackRock  ISIN: DE000LEG1110 8.1%  Indices: MDAX, FTSE EPRA/NAREIT, GPR 250, DAX ESG, B

  60. Slide 60: LEG Additional Creditor Information

    Appendix LEG Additional Creditor Information Unsecured financing covenants Financing mix Covenant Threshold 31.03.2020 Variable interest Fixed interest Consolidated Adjusted EBITDA / 8.6% 79.8% Net Cash Interest >1.8x 5.5x Unencumbered Assets / Swaps Unsecured Financial Indebtedness >125% 196% 11.6%

  61. Slide 61: Capital Market Financing

    Appendix Capital Market Financing Corporate Bonds Convertible Bond 2017/2024 2019/2027 2019/2034 2017/2025 Issue Size €500m €500m €300m Issue Size €400m Term / 7 years / 8 years / 15 years / Term/ 8 years / Maturity Date 23 January 2024 28 November 2027 28 November 2034 Maturity Date 1 September 202

  62. Slide 62: Financial Calendar 2020

    Appendix Financial Calendar 2020 March 2020 Report/Event 9th Annual Report 2019 May 2020 11th Quarterly Statement Q1 as of 31 March 2020 August 2020 7th Quarterly Report Q2 as of 30 June 2020 August 2020 19th Virtual Annual General Meeting November 2020 12th Quarterly Statement Q3 as of 30 September

  63. Slide 63: Investor Relations

    Contact Investor Relations Frank Kopfinger, CFA Karin Widenmann Head of Investor Relations & Strategy Senior Manager Investor Relations Tel: +49 (0) 211 4568-550 Tel: +49 (0) 211 4568-458 E-Mail: frank.kopfinger@leg.ag E-Mail: karin.widenmann@leg.ag LEG Immobilien AG ǀ Hans-Boeckler-Str. 38 ǀ 40476

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