LEG Immobilien AG Company Presentation - January 2020
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LEG Immobilien AG January 2020 Company Presentation
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 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. 2 I January 2020
Key Investment Highlights
c. 3.6% Dividend Yield1) from Robust Residential Cash Flows
Significant potential for stable, above average organic and external growth
Leading profitability in German residential industry driven by attractive scale effects
Leading Operating Performance Based on Strong Platform
Strong expertise in affordable housing as key success factor; process and cost efficiency
Favourable demand/supply situation, high affordability and comparatively low political risks
Consistent Extension of the Value Chain
Multimedia, Energy Services and Craftsmen Services businesses as additional earnings drivers
Digitisation and innovation
Extension of own development pipeline and acquisition of new built apartments
Creating Tangible Value from Acquisitions with High Potential for Synergies
Acquisition of c. 55,000 units since IPO with immediate value contribution and a very low execution risk
Strong Balance Sheet / Long Term Secured Financing at Very Attractive Terms
LTV of 36.3% secures defensive profile
Average cost of debt of 1.64% with average maturity of 7.3 years secures high visibility for future earnings growth
Social Responsibility: Commitment to ESG
Environmental: Energy efficient modernisation of portfolio with consideration of tenants’ affordability
Social: Commitment to human rights including health, safety and diversity
Governance: Compliance with German Corporate Governance Code, certified compliance management system,
two-tier structure of Management Board and Supervisory Board (100% independent)
1) Based on mid-point guidance 2020, share price as of 30 December 2019 (€105.55)
3 I January 2020
Highlights 9M-2019 Overall company development: Delivering on key value drivers Acquisitions: Approx. 5,700 units signed (YTD), pipeline of several smaller deals Capital growth: Another valuation uplift of around 3% expected in Q4 (~8% in FY-2019) Financing: Further reduction of avg. interest costs ahead (early redemptions + acquisitions) Sound rent momentum persists In-place rent, l-f-l €5.82/sqm (+2.9%; free financed units +3.7%) EPRA-Vacancy, l-f-l 3.6% (unchanged YOY) Maintenance/Capex €21.88/sqm (+7.7% YOY) Financials: Producing compelling total returns Net cold rent €439.8m (+5.5% YOY from €417.0m) Adjusted EBITDA €330.5m (+8.0% YOY from €305.9m) FFO I €259.1m (+7.0% YOY from €242.2m), FFO per share €4.09 (+6.7% YOY from €3.83) Pro forma NAV post conversion1 €100.52 per share (up from €93.40 in FY-2018; +7.6% YTD/ +11.4% incl. €3.53 DPS) DPS-2019 (proposal) €3.60 (rising dividend despite 9.2% higher number of shares) 1) NAV after a simulated, executed conversion of the 2014/2021 convertible which was nearly completed at end of Q3-2019 4 I January 2020
LEG at a Glance
Leading residential platform across Germany’s largest state
Overview Key Financial Metrics 9M-2019
One of the largest German residential real estate Net Cold Rent €439.8m
companies with 130,968 residential units and market
leader in the NRW market Adj. EBITDA €330.5m
NRW is one of the largest metropolitan areas in Europe FFO I €259.1m
accounting for 21% of German GDP
Regional focus bears structural competitive advantages GAV €11,277m
for operating efficiency and performance
Pro forma NAV per share1) €100.52
93% of LEG‘s portfolio is located in the catchment area of
growth cities such as Cologne, Düsseldorf or Münster LTV 36.3%
Key Data (9M-2019) Geographic Reach across NRW
Number of residential units: 131,135
Residential sqm: 8.36m
In-place rent (l-f-l): €5.82 /sqm Münster
Bielefeld
EPRA-vacancy (l-f-l): 3.6%
Rent free financed/ restricted units (l-f-l): €6.20/4.80 /sqm Dortmund
Apartment size: 64 sqm Duisburg Essen
Apartments per building: 7 units Wuppertal
Düsseldorf
Number of rooms per unit: 3 rooms
Cologne
Bonn
1) Adjusted for the effects from an executed conversion of the 2014/2021 convertible (adj. EPRA-NAV per share diluted €100.20 (excl. goodwill))
5 I January 2020
Agenda
I. LEADING OPERATING PERFORMANCE Leading operating performance and profitability on
basis of a regionally focused business model
II. ATTRACTIVE NRW MARKET Metropolitan region benefitting from sound growth
prospects; net immigration as key growth driver
III. MARKET LEADING PLATFORM WITH Proven track record for value accretive acquisitions in
EXTERNAL GROWTH POTENTIAL core markets with high synergies
IV. INNOVATION & VALUE-ADDED SERVICES Creating additional value by leveraging value of the
customer base; aspiration to become a digital leader
V. FINANCIALS: HIGH PROFITABILITY – Sound FFO and dividend growth on basis of leading
STRONG BALANCE-SHEET operating profitability and long term secured financing
VI. BUSINESS UPDATE & OUTLOOK
6 I January 2020
I. Leading Performance
Strong track record of outperforming German residential market
L-f-l in-place rent (€/sqm) Successful rent management1) (€)
6.65
5.67 6.12
5.46
5.34
5.21
5.11
2012 2018
4.96 Germany in-place rent per sqm
4.86
4.79
6.03
5.11
2011 2012 2013 2014 2015 2016 2017 2018 2012 2018
LEG in-place rent per sqm unrestricted units
LEG‘s affordable living product in urban areas well
LEG continuously outperformed the broader German
suited to market conditions
residential market
Excess demand and high affordability create
Strong outlook for further growth acceleration
headroom for sustained organic growth
Source: LEG as of FY-2018
1) Sources: LEG, Bundesbank
2) Like-for-like
7 I January 2020
I. Leading Performance
Portfolio: Attractive combination of yield and growth
High Growth Higher Yielding
As of 30.09.2019, IFRS 5 excluded Stable Markets Total Portfolio1)
Markets Markets
No. of Units 41,497 48,313 39,476 131,135
% of GAV 46% 32% 21% 100%
Gross Yield 4.3% 5.7% 6.5% 5.3%
EPRA-Vacancy l-f-l 1.9% 3.6% 6.4% 3.6%
In-Place Rent CAGR l-f-l
2.9% 2.8% 2.9% 2.9%
FY-2016 – FY-2018
Free Financed Portfolio Rent CAGR l-f-l
3.9% 3.7% 3.5% 3.8%
FY-2016 – FY-2018
High exposure to attractive economic centers and university cities (e.g. Cologne, Düsseldorf, Münster)
Higher Yielding markets – attractive cash cows with decent growth profile
Only residential units shown. Total includes an additional 1,849 residential units located outside NRW
8 I January 2020
I. Leading Performance
Positive rent development across all submarkets
Strong results on the basis of tailor-made
Minden-
Lübbecke management strategies
Steinfurt
Herford
Bielefeld
Lippe
High-Growth Markets
Borken Munster
Gütersloh
Coesfeld Warendorf
30.09.2019 (YOY)
Kleve Hamm Paderborn Hoxter
# of units 41,497 +0.3%
Wesel Recklinghausen
Gelsenkirchen
OberhausenHerne Dortmund
Unna Soest
In-place rent (sqm), l-f-l €6.51 +3.3%
Bochum
DuisburgEssen
Hagen Hochsauerlandkreis
EPRA-Vacancy, l-f-l 1.9% -50 bps
Krefeld
Viersen Mettmann
Düsseldorf Wuppertal Märkischer Kreis
Monchengladbach Remscheid
Rhein-Kreis
Solingen Stable Markets
Neuss Olpe
Heinsberg Leverkusen
(YOY)
Rheinisch-Bergischer Kreis
Cologne
Oberberg. Siegen-
Wittgenstein
30.09.2019
Rhein-Erft-Kreis Kreis
Düren Rhein-Sieg-Kreis # of units 48,313 +1.6%
Aachen
Bonn
In-place rent (sqm), l-f-l €5.47 +3.0%
Euskirchen EPRA-Vacancy, l-f-l 3.6% +20 bps
Total Portfolio1 Higher-Yielding Markets
30.09.2019 (YOY) 30.09.2019 (YOY)
# of units 131,135 +0.7% # of units 39,476 +0.2%
In-place rent (sqm), l-f-l €5.82 +2.9% In-place rent (sqm), l-f-l €5.39 +2.2%
EPRA-Vacancy, l-f-l 3.6% 0 bps EPRA-Vacancy, l-f-l 6.4% +60 bps
1) IAS 40 only, IFRS 5 excluded
9 I January 2020
I. Leading Performance
Well diversified portfolio with attractive reversionary potential
High Growth Markets Stable Markets
As of 9M-2019 LEG NRW2 NORTH RHINE-
WESTPHALIA As of 9M-2019 LEG NRW2
No. of Residential Units 41,497 4,139,973
No. of Residential Units 48,313 2,922,288
Occupancy Rate (%) 98.2% 97.3%
Minden- Occupancy Rate (%) 96.4% 96.9%
Lübbecke
In-Place Rent per sqm (€) 6.51 7.59 Steinfurt In-Place Rent per sqm (€) 5.47 5.98
Herford
Rent Potential1) 17% n/a
Rent Potential1) 9% n/a
Bielefeld
Lippe
Borken Munster
Gütersloh
Coesfeld Warendorf
Kleve Hamm Paderborn Hoxter
Wesel Recklinghausen
The LEG Gelsenkirchen
Unna Soest
Oberhausen Herne Dortmund
portfolio offers a Duisburg Essen
Bochum
11% average rent Hagen
Higher Yielding Markets
Krefeld
upside potential1 Viersen Mettmann Hochsauerlandkreis
Dusseldorf Wuppertal Märkischer Kreis
As of 9M-2019 LEG NRW2
Monchengladbach Remscheid
Solingen
Rhein-Kreis
Neuss Olpe No. of Residential Units 39,476 1,910,513
Heinsberg Leverkusen
Rheinisch-Bergischer Kreis
Oberbergischer Siegen-
Cologne Kreis Occupancy Rate (%) 93.8% 96.0%
Rhein-Erft-Kreis Wittgenstein
Düren
Aachen
Rhein-Sieg-Kreis In-Place Rent per sqm (€) 5.39 5.72
Bonn
Rent Potential1) 6% n/a
Euskirchen
Source: LEG as of 9M-2019, CBRE, Empirica, IT.NRW
1) Market rent (CBRE) compared to LEG portfolio
2) No. of residential units as of 2017, occupancy rate as of 2018
10 I January 2020I. Leading Performance
Attractive portfolio + operational excellence = strong rent growth
L-f-l residential rent (€/sqm/month) Rent growth drivers
+2.9% +3.3%
0.2% +3.0% Cost rent adjustments
0.6%
5.82
5.65 0.7% Re-letting
0.6%
Q3-2018 Q3-2019
0.8% Modernisation
L-f-l free financed rent (€/sqm/month)
+3.7% Mietspiegel
1.9% 1.5%
adjustments
6.20
5.98
FY-2017 FY-2018
Q3-2018 Q3-2019
Well diversified mix of growth drivers (low
Performance of free financed units demonstrates strong execution risk)
underlying fundamentals Growth not boosted by overspending (capex)
Rent restricted units: +0.5% year-on-year (like-for-like) though supported by modernization program
High exposure to structural growth markets and respective Effects from capex are now partially included in
commuter belts supports outperformance the re-letting cluster
11 I January 2020Capex & Maintenance
Lifting internal growth potential
Lifting growth potential while maintaining high capital efficiency
€194.9m • Investments increased 11.8% year-over-year
€174.4m (€21.88/sqm1)
(€20.32/sqm1) • Excess demand creates headroom for rent increases
€120.3m €136.5m • Leading capital efficiency as key value driver (rent growth relative to
capital expenditure)
€54.1m €58.4m • Target return of c. 6% on modernisation projects (IRR)
9M-2018 9M-2019
• Enhanced capex programme ongoing
Maintenance Capex
Rising capital expenditure leads to portfolio valuation upside and FFO accretion
in €/sqm: 13.8 16.1 18.2 22.4 29.4 ~30-32 ~31-33
270-280 280-290
in €m: 252.7
187.5
149.6 200 200
179
114.2 116
89.1 78
60
43
72 72 74 80 80
46 54
2014 2015 2016 2017 2018 2019 2020
1Development
maintenance capex
excluded.
12 I January 2020I. 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 the environment and responding to demographic
changes
Cologne (Höhenhaus) www.leg-wohnen.de/Gartensiedlung
• 43 buildings with c. 200 units will be replaced by 400 units
• Architectural competition concluded at end of 2019
• Approx. 30% of apartments will be subsidised or price-
demanded units, resulting in varying levels of in-place rent
• Will include a kindergarten and be responsive to aging tenants
Hilden (Greater Düsseldorf)
• Construction of 3 buildings with 38 apartments (completion by
spring/summer 2020)
Total pipeline
New construction in Hilden
• Total pipeline of c.1,000 units, yield on cost >4.5%
• Target: 500 new build units per year from 2023 1)
1) 250 new build units + acquisition of 250 new build units
13 I January 2020Agenda
I. LEADING OPERATING PERFORMANCE Leading operating performance and profitability on
basis of a regionally focused business model
II. ATTRACTIVE NRW MARKET Metropolitan region benefitting from sound growth
prospects; net immigration as key growth driver
III. MARKET LEADING PLATFORM WITH Proven track record for value accretive acquisitions in
EXTERNAL GROWTH POTENTIAL core markets with high synergies
IV. INNOVATIVE VALUE-ADDED SERVICES Creating additional value by leveraging value of the
customer base
V. FINANCIALS: LEADING CASH FLOW Sound FFO and dividend growth on basis of leading
PROFITABILITY – STRONG BALANCE- operating profitability and long term secured financing
SHEET
VI. BUSINESS UPDATE & OUTLOOK
14 I January 2020II. Attractive NRW Market
NRW: economic engine in Germany with liquid labour market
Key facts Large German corporates based in NRW
Key metropolitan area in Germany, and one of the
largest areas in Europe (17.9m inhabitants)
Largest economy: Germany in Europe, NRW in Bielefeld
Germany Gütersloh
Essen
Germany’s economic powerhouse generating approx. Mulheim/Ruhr
Düsseldorf
21% of German GDP
Leverkusen
Cologne
About one third of the largest companies in Germany Bonn
are based in NRW (10 of the DAX30 companies and 8
of Germany’s 30 largest companies by revenue in
2017/18)
Centrally located in Europe, excellent infrastructure and Decreasing unemployment in NRW
a key transport hub (with multiple airports, dense
railway system, motorway network and waterways) 12% 11.4%
11%
Robust labour market with decreasing rate of 10% 9.5%
unemployment (-40% since 2006) 8.9%
9% 8.7% 8.3%
7.8% 7.7%
8% 8.5%
Highest population density – key advantage for 8.1% 8.1% 7.0%
7% 7.4% 6.4% 6.5%
efficient property management
6%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
unemployment rate May
Source: Federal Statistical Office, Federal Employment Agency
15 I January 2020II. Attractive NRW Market
Portfolio highly exposed to structural growth markets
Geographic reach of growth cities (60 km radius) Key data
Approx. 93% of LEG‘s portfolio is located in the catchment
area of growth cities (60 km) and around 64% in the
Minden- commuter belts (60 km) of Düsseldorf and Cologne, the
Lübbecke
Steinfurt
most populous cities in NRW
Herford
Many principal university cities are located in NRW, e.g.
Münster
Bielefeld
Lippe Cologne, one of Germany’s “Universities of Excellence” or
Borken
Coesfeld Gütersloh Bonn, Aachen and Münster
Warendorf
Paderborn Höxter
Kleve Hamm
Wesel Recklinghausen
Unna
Gelsenkirchen
Oberhausen Herne Dortmund
Soest Structural growth cities
Bochum
Duisburg Essen
Krefeld Hagen Number of 1-2 person households constantly growing in
Viersen Mettmann
Hochsauerlandkreis
Düsseldorf Wuppertal Märkischer Kreis swarm cities and outperforming Germany (2017: 75.3% in
Mönchengladbach Solingen
Rhein-Kreis
Olpe
Germany)
Neuss Leverkusen
Heinsberg
Cologne Oberbergischer Siegen- Growth cities tend to younger age structure compared
Kreis Wittgenstein
Rhein-Erft-Kreis
to Germany: stronger increase in share of people under the
Düren
Rhein-Sieg-Kreis
Aachen age of 40 (2017: 43.0 % in Germany) and percentage of
Bonn
people above the age of 60 steadily shrinking (2017: 27.9%
Euskirchen in Germany; rising trend)
Source: Federal Statistical Office
16 I January 2020II. Attractive NRW Market
NRW: leading position in future industries
Highlights Key markets showing sound household growth1)
• Direct investments: #1 in Germany for foreign investors
• 29.2% of direct investments in Germany Germany
Inhabitants +2.6%
Inhabitants +3.1%
Households +3.7%
• Chemicals: #1 in Germany, #5 in Europe (sales) Households +7.1%
• NRW generates 30.8% of German sales
Inhabitants +2.5%
Households +0.7%
• Biotechnology: #1 in Europe, #9 worldwide (patents)
• Highest number of biotech patent applications in Europe
• NRW generates 44.4% of German sales
Inhabitants +4.0%
Households +3.7%
• Microsystems Technology: top position
Gütersloh
• 28% of all German players are located in NRW with focuses in 1,448 units
Aachen, Cologne/Bonn, Münster, and Dortmund as a hotspot
• Nanotechnology: top position in Germany and Europe Dortmund
• More than 200 companies, thereof 50 large companies 13,596 units
• 220 institutes (of which 9 Fraunhofer, 3 Max Planck and
universities) Düsseldorf
5,307 units
Mönchengladbach
6,444 units
• Mobile communication: #1 in Germany
• NRW companies account for 83% of the German mobile Cologne
3,898 units
communication market
Inhabitants +6.1%
Bonn Households +5.3%
• Education: 6 of 10 largest universities located in NRW 2) Inhabitants +2.4% 2,283 units
Households +1.6%
• e.g. RWTH Aachen, one of the largest technical universities in
Inhabitants +4.7%
Europe, renowned for engineering, IT and natural sciences Households +1.9%
1) Federal Statistical Office, 2016 vs. 2011
2) Cologne, Aachen, Münster, Bochum, Duisburg/Essen, Bonn. Measured by number of registered students. Source: Federal Statistical Office, winter term 2018/19
17 I January 2020II. Attractive NRW Market
NRW: high quality of life in the Rhine area
NRW’s capital Düsseldorf, international trade and business hub Münster
Belefeld
• Ranked #6 worldwide in Mercer Quality of Living Ranking 2018 especially for its Duisburg Essen
Dortmund
good infrastructure and its vast offering for cultural and leisure activities. Its excellent Düsseldorf Wuppertal
medical care, vibrant art scene and fashion industry represent other benefits. Cologne
Bonn
• Ranked #18 worldwide in Monocle Quality of Life Survey 2018 especially for its
excellent infrastructure (road, rail, air) and vast opportunities for leisure activities and Düsseldorf 2014-2040
shopping. According to Monocle, Düsseldorf is a rare combination of a local community Population +10.6 %
and an enthusiastic cosmopolitan city.
Households +15.5%
• Düsseldorf offers an international airport, a well-known trade fair and is home to Düsseldorf 2016
companies such as Henkel, Metro, Ceconomy, Uniper or Gerresheimer.
Population 613,230
• The city is a hub for international businesses with 5,000 German or European Vacancy1) 1.5%
headquarters, especially from Japan and multiple telecommunication firms such as Asking rent1) 10.00 €/sqm
Vodafone or Ericsson.
• Many consultancies have their German headquarters Düsseldorf Medienhafen:
(e.g. McKinsey, A.T. Kearney, Booz Allen Hamilton) or Architecture by Frank Gehry,
large offices in Düsseldorf first-class restaurants and
various offices occupied by
media and consulting turned
this former harbor area into a
city hotspot.
1) Market vacancy and market asking rent 2) According to Wirtschaftswoche and ImmobilienScout24 Photo credits: Michael Gaida Source: LEG Housing market report
18 I January 2020II. Attractive NRW Market
NRW: successful structural change of the Ruhr area
Example 1: Dortmund Münster
Belefeld
The former center of the mining and steel industry has developed into an innovative and
Dortmund
future oriented science and technology city: Duisburg
Essen
Düsseldorf Wuppertal
• It has become a top location for future oriented sectors e.g., Cologne
Bonn
biotechnology/biomedicine, energy efficiency technology, production technology, IT. Its
microsystems technology cluster is the largest in Germany and one of the largest in
Dortmund 2014-2040
Europe. 900 logistics companies with 27,000 employees benefit from the good
infrastructure. Population +5.1%
Households +6.5%
• Excels in scientific research (e.g., Max Planck Institute of Molecular Physiology
(MPI) as one of the world’s leading institutions or Dortmund’s Fraunhofer Institut for Dortmund 2016
Material Flow and Logistics as Europe’s top institute for logistics solutions). The Population 585,813
science and technology campus in Dortmund includes 16 faculties and >33,000
students as well as the technology center with c.350 companies and c.10,000 Vacancy1) 2.5%
employees in the areas of IT, logistics, microsystems, nanotechnology, production Asking rent1) 6.15 €/sqm
technology.
The Phoenix lake is one of Germany’s largest urban development
projects on a former blast furnace and steel production site offering
a vast recreational area for water sports and leisure, premium
residential units, commercial units, offices and a marina with
restaurants.
1) Market vacancy and market asking rent Source: LEG Housing market report Photo credits: evgenIT
19 I January 2020II. Attractive NRW Market
NRW: successful structural change of the Ruhr area
Example 2: Essen Münster
Belefeld
The former coal mining and steel city (Krupp) has developed into an important business, Dortmund
service and trade center: Duisburg
Essen
Düsseldorf Wuppertal
• 8 of the 100 largest German companies (by sales) are headquartered in Essen Cologne
Bonn
(e.g. E.ON, RWE, Thyssenkrupp, Aldi Nord, Schenker, Evonik, Brenntag, Hochtief);
also c.13,000 small and medium sized companies.
Essen 2015-2040
• The industrial focus is on future-oriented industries. Essen is one of Germany’s top Population +3.4%
locations for energy (RWE, E.ON and many small/medium-sized companies), for Households +4.4%
healthcare, medical research and health management as well as for environment
and water management and an important center for creative businesses. Essen 2016
Population 583,084
• Research from the University of Duisburg-Essen is highly regarded (in particular
biomedicine, nanotechnology, urban development). As a specialist centre for medical Vacancy1) 3.4%
provision it employs top-class doctors in nearly every specialty 40,000 jobs in the Asking rent1) 6.07 €/sqm
health services industry and.
• The European Commission has
awarded Essen “The European Zollverein UNESCO World Heritage Site:
Green Capital 2017” thanks to its More than 25 years after its closure, the
successful transformation from a once largest colliery in Europe combines
coal and steel city to the greenest culture and dining, design and architecture,
city in NRW. handicraft and the creative industry – as the
only World Heritage Site of the Ruhr Area.
1) Market vacancy and market asking rent Source: LEG Housing market report
20 I January 2020II. Attractive NRW Market
Positive demographics with stabilising net immigration
Cities entering upswing mode Key facts
Index = 1975 Federal Agency of Migration and Refugees collected data
End of declining population
110 that net immigration of foreigners to Germany amounted
Bielefeld
0.4%
105 to about 0.4 million in 2018, thereof 0.26 million
Mönchen-
0.5% gladbach non-EU nationals 6)
100
0.4% Krefeld End of 2017, 1.4 million people seeking protection (incl.
95
asylum seekers) were registered in Germany, the majority
90 0.5% Dortmund
living in NRW (30%) 4)
85 0.6% Essen
Stabilising net immigration is currently continuing with
80
decreasing share of refugees (c. -17% asylum seekers
1975 1980 1985 1990 1995 2000 2005 2010 2015
CAGR 2011 - 2016 2018 YOY; c. 0.18 million new asylum seekers in 2018)5)
Immigration is driving overall population growth,
Net immigration to Germany
triggering additional growth in net new households
~1.0 m 1)
(c. +80% yoy)
Additional pressure on affordable housing segment due
to immigrants leaving temporary housing
NRW ~25% 0.8 m 3)
Outperformance of German economy attracts qualified
0.5 m 2) ~0.42 m 6) 0.4 m 6) new immigration
Liquid labour market and affordable living as pull-factors
2015 2016 2017 2018 2019-2020
for NRW
Sources:
1) Interview with director of Federal Agency of Migration and Refugees (Aug 2016)
2) Federal Statistical Office, press release 13 Mar 2018
3) Deutsche Bundesbank, Monthly Report June 2018
4) https://www.welt.de/politik/deutschland/article178141460/Migration-nach-Europa-In-NRW-leben-mehr-Asylzuwanderer-als-in-ganz-Italien.html, June 2018
5) Bundesamt für Migration und Flüchtlinge, August 2019
6) Federal Statistical Office, press release 16 July 2019
21 I January 2020II. Attractive NRW Market
NRW cities still showing decent upside potential
Purchasing power1) / household
Gross rent / household
34.6% 29.3% % Gross rent ratio
24.9%
23.6% 23.3%
EUR 4,644
21.7%
4,138
3,910
3,602
3,371
3,262
1,605
956 1,031
910
796 781
Munich Berlin Dusseldorf Dortmund Essen NRW
Source: Own calculations based on Empirica (2018), IT:NRW (2017), MB Research (2018) 1) Net income pre tax and social insurance contributions and including received transfer payments
22 I January 2020Agenda
I. LEADING OPERATING PERFORMANCE Leading operating performance and profitability on
basis of a regionally focused business model
II. ATTRACTIVE NRW MARKET Metropolitan region benefitting from sound growth
prospects; net immigration as key growth driver
III. MARKET LEADING PLATFORM WITH Proven track record for value accretive acquisitions in
EXTERNAL GROWTH POTENTIAL core markets with high synergies
IV. INNOVATION & VALUE-ADDED SERVICES Creating additional value by leveraging value of the
customer base; aspiration to become a digital leader
V. FINANCIALS: HIGH PROFITABILITY – Sound FFO and dividend growth on basis of leading
STRONG BALANCE-SHEET operating profitability and long term secured financing
VI. BUSINESS UPDATE & OUTLOOK
23 I January 2020III. Market Leading Platform with External Growth Potential
Strong acquisition track record since IPO – Creating tangible value
Portfolio growth set to continue in 2019
Approx. 5,700 units signed in 2019 in a challenging market environment,
thereof 1,400 in Lower Saxony and 1,160 in Bremen
Average initial FFO yield of 4.6%1)
Pipeline of several predominantly smaller deals
Portfolio development since IPO (in units) Attractive initial yields + operational improvements +
low risk
~46,000 ~ 137,000 = Creation of tangible value
90,926 • Portfolio2): average in-place rents c. +13% (average 48
months, CAGR of 3.2%), vacancy down by 60 bp
Lifting attractive value potential also in Stable and
Higher Yielding markets
2012 Acquisitions 11/2019
(net of disposals)
1) Excl. development projects 2) Acquisitions since year end 2012; excl. acquisitions in 2019
24 I January 2020III. Market Leading Platform with External Growth Potential
Scalability of platform + cost discipline support value accretive growth
Strong volume growth at overhead cost below FY-2013 level…
Recurr.
admin costs # of units
33.1 36.7 32.1
35.2 33.3 34.0
€35m 150,000
100,000
128,488 130,085 133,969
50,000
106,961 108,916
94,311
2013 2014 2015 2016 2017 2018
…leads to a significant drop of the administrative costs ratio
Recurr.
admin costs/
net cold rent Net cold rent
12 % 9.8% €500m
8.5% 8.4% 560.2
9% 534.7
511.7
6% 436.1
6.3% 6.2% 6.1%
360.5 390.1
€350m
2013 2014 2015 2016 2017 2018
25 I January 2020Agenda
I. LEADING OPERATING PERFORMANCE Leading operating performance and profitability on
basis of a regionally focused business model
II. ATTRACTIVE NRW MARKET Metropolitan region benefitting from sound growth
prospects; net immigration as key growth driver
III. MARKET LEADING PLATFORM WITH Proven track record for value accretive acquisitions in
EXTERNAL GROWTH POTENTIAL core markets with high synergies
IV. INNOVATION & VALUE-ADDED SERVICES Creating additional value by leveraging value of the
customer base; aspiration to become a digital leader
V. FINANCIALS: HIGH PROFITABILITY – Sound FFO and dividend growth on basis of leading
STRONG BALANCE-SHEET operating profitability and long term secured financing
VI. BUSINESS UPDATE & OUTLOOK
26 I January 2020IV. Innovation & Value-Added Services
Leveraging LEG‘s strong customer base with additional services
Partner Partner Partner Partner
Cooperation Joint venture (51%) Joint venture (51%) • Elderly care services
• Multimedia: TV, • Electricity, heating, • Small repair work, • Emergency call
internet and telephone metering craftsmen services system
Launch January 2014 Launch March 2015 Launch January 2017 Pilot launch in 09-2018
FFO contribution – Services Growth drivers
Increasing penetration rate & portfolio growth
€19m
€16m
New services & third party business
€15m
Price adjustments
€9m Principles
€6.8m Additional cash flow streams at low risk
€4.6m Stay focused: • selective extension of value chain
• complementary to letting business
€0.0m
Value add for tenants and shareholders
2013 2014 2015 2016 2017 2018 2019E
27 I January 2020IV. Innovation & Value-Added Services
Digitization
Digitization as a technology trend is of tremendous importance for the real estate industry and LEG is headed
towards a leading position as a driver of innovation.
Greatest digital achievements
• Accounting Robot in Receivables Management increases
customer satisfaction as employees focus on customer need
instead of repetitive bookkeeping-tasks
• Success with tenant app, additional 50% active users
convinced by extended self-services
• Streamlining internal processes in maintenance and
repair to reduce costs
Current development
• Substituting written form by phone service to increase
customer satisfaction
• No more phone queues as we call our customers back on
demand LEG’s Innovation management approach
• Monitoring water quality in our apartment houses con-
tinuously and automatically through IoT increasing tenant Internal scope External scope
safety and reducing costs
Digitization in the long run • Corporate culture • Innovative services and
supporting constant business models
• Further automation of processes development / innovation • Extensive network
• Development of ecosystems with strategic partners to
increase customer satisfaction and retention • State-of-the-art processes • Alliances and strategic
• Development of value-add services (disruptive topics) • Collaboration and partnerships
communication • Transferable innovations and
best practices
28 I January 2020Agenda
I. LEADING OPERATING PERFORMANCE Leading operating performance and profitability on
basis of a regionally focused business model
II. ATTRACTIVE NRW MARKET Metropolitan region benefitting from sound growth
prospects; net immigration as key growth driver
III. MARKET LEADING PLATFORM WITH Proven track record for value accretive acquisitions in
EXTERNAL GROWTH POTENTIAL core markets with high synergies
IV. INNOVATION & VALUE-ADDED SERVICES Creating additional value by leveraging value of the
customer base; aspiration to become a digital leader
V. FINANCIALS: HIGH PROFITABILITY – Sound FFO and dividend growth on basis of leading
STRONG BALANCE-SHEET operating profitability and long term secured financing
VI. BUSINESS UPDATE & OUTLOOK
29 I January 2020V. Financials: High Profitability
Financial Highlights 9M-2019
Net Cold Rent (€m) Adj. Net Rental and Lease Income (€m) Adj. EBITDA (€m)
+5.5%
+7.9%
+8.0%
417.0 439.8 350.1
324.4 305.9 330.5
9M-2018 9M-2019 9M-2018 9M-2019 9M-2018 9M-2019
FFO I (€m) Capex-Adj. FFO I / AFFO (€m) Margin (%)
9M-2018 9M-2019 Comment
+7.0% Ongoing efficiency
Adj. NRI 77.8 79.6 gains offsetting
higher maintenance
0.6% See above +
Adj.
73.4 75.1 decreasing admin.
EBITDA costs
259.1
242.2 See above + lower
FFO I 58.1 58.9
interest ratio
121.9 122.6
See above + higher
AFFO 29.2 27.9
growth investments
9M-2018 9M-2019 9M-2018 9M-2019
30 I January 2020V. Financials: High Profitability
Income statement 9M-2019
€ million 9M-2019 9M-2018
Net rental and lease income 340.2 315.2 Higher net cold rents (+€22.8m
YOY/+5.5%)
Net income from the disposal of investment property -0.8 -0.7
Net income from the valuation of investment property 551.6 383.5
Revaluation gains of 5.1%
Net income from the disposal of real estate inventory -2.0 -1.5
Net income from other services 1.5 3.8
Admin. costs contain one-off
effects e.g. severance
Administrative and other expenses -38.0 -31.7 payments, higher
depreciation due to the
adoption of IFRS 16
Other income 0.4 0.6
Operating earnings 852.9 669.2 Net income from fair value
measurement of derivatives
-€92.6m; thereof -€91.3m from
Net finance costs -182.0 -117.9
convertibles
(9M-2018: -€49.6m)
Earnings before income taxes 670.9 551.3 Stable cash interests (€58.4m;
-€0.4m YOY) despite rising
debt volume
Income tax expenses -182.0 -143.6
Cash taxes (-€12.9m); lower
Consolidated net profit 488.9 407.7 expenses for FY 2019
expected
31 I January 2020V. Financials: High Profitability
FFO calculation 9M-2019
€ million 9M-2019 9M-2018
Net cold rent 439.8 417.0 +€22.8m/+5.5%
Profit from operating expenses -0.9 -3.3
Maintenance (externally-procured services) -36.9 -37.6
Staff costs -48.8 -45.2 Growth in staff costs mainly due
to additional FTE’s for crafts
Allowances on rent receivables -5.8 -4.1 services and enhanced capex
Other -0.3 -7.0 programme
Non-recurring project costs (rental and lease) 2.9 4.7 Adj. NRI increased by +€25.5m
Recurring net rental and lease income 350.0 324.5 YOY (+7.9%); rising
maintenance costs/inflation
Recurring net income from other services 3.4 5.6 more than offset by efficiency
Staff costs -24.4 -19.6 gains
Non-staff operating costs -10.9 -10.9
Rising staff costs only due to
Non-recurring project costs (admin.) 12.0 5.8 one-time effects (severance
payments c. €8m)
Recurring administrative expenses -23.3 -24.7
Other income and expenses 0.4 0.5
EBITDA increased by +€24.6m
Adjusted EBITDA 330.5 305.9 YOY (+8.0%); recurring admin.
Cash interest expenses and income -58.4 -58.8 costs slightly decreased
Cash income taxes from rental and lease -10.0 -4.1
Stable interest expenses (avg.
FFO I (including non-controlling interests) 262.1 243.0
1.63% vs. 1.71% in 9M-2018)
Non-controlling interests -3.0 -0.8 despite rising debt volume
FFO I (excluding non-controlling interests) 259.1 242.2
FFO II (including disposal of investment property) 255.9 240.6
Capex-adjusted FFO I (AFFO) 122.6 121.9
32 I January 2020V. Financials: Strong Balance Sheet
Balance sheet 30 September 2019
€ million 30.09.2019 31.12.2018 Revaluation €551.6m
(60% yield compression,
Investment properties 11,276.6 10,709.0 40% rent development)
Capex €132.4m
Other non-current assets 222.6 175.9
Reclassifications (disposal)
Non-current assets 11,499.2 10,884.9 -€178.9m
Receivables and other assets 96.2 55.4 Acquisitions €25.9m
IFRS 16 and Others 36.6m
Cash and cash equivalents 382.3 233.6
Current assets 478.5 289.0 Cash flow from operating
activities €224.8m
Assets held for sale 172.5 20.3
Investing activities
Total Assets 12,150.2 11,194.2 - €4.7m
Financing activities
Equity 5,549.5 4,783.9
-€71.4m
Non-current financing liabilities 4,319.4 4,113.3
Financing liabilities
Other non-current liabilities 1,618.1 1,382.3 Loan proceeds €436.5m
Non-current liabilities 5,937.5 5,495.6 Repayment of loans
-€270.2m
Current financing liabilities 257.8 484.8
Other current liabilities 405.4 429.9
Current liabilities 663.2 914.7
Total Equity and Liabilities 12,150.2 11,194.2
33 I January 2020V. Financials: Strong Balance Sheet
LTV 30 September 2019
€ million 30.09.2019 31.12.2018
Financial liabilities 4,577.2 4,598.1 Strong balance sheet (LTV
target: 40-43%) after equity
Leasing liabilities (IFRS 16) 32.1 0.0 conversion of the 2014/2021
convertible leaves headroom
Cash & cash equivalents 382.3 233.6 for further growth investments
Potential for further de-
Net Debt 4,162.8 4,364.5 gearing via capital growth
Investment properties 11,276.6 10,709.0
Properties held for sale 172.5 20.3
Prepayments for investment properties 4.3 -
Property values 11,453.4 10,729.3
Loan to Value (LTV) in % 36.3 40.7
34 I January 2020V. Financials: Strong Balance Sheet
LT financing secures future earnings growth
Weighted avg. interest (excl. subsidised loans)
%
as of 30.09.2019 1.3%
1.6%
€962m
€908m
Variable
interest
9.9%
1.6%
1.6%
€536m 1.7%
2.2% Swaps
€458m
€420m 12.7%
€360m
1.0% €290m Fixed
4.2% 30.09.2019
€172m 2.8% 1.4% 1.8% interest
0.5% €133m €120m 77.3%
€106m €102m
€23m
1) 3)
2019 2020 2) 2021 2022 2023 2024 2025 4) 2026 2027 2028 2029 2030 2031 ff
1) remaining volume convertible bond 2014/21 (€23m)
2) commercial paper (€100m)
3) corporate bond (€500m)
4) convertible bond (€400m)
Key Facts Maturities
Average debt maturity 7.3 years (7.4 years)5 0-2 years 4.2% (2.1%)5
Interest costs Ø 1.64% (1.68%)5 3-5 years 13.1% (13.3%)5
Hedging ratio 90.1% (89.9%)5 6-8 years 52.5% (53.6%)5
Rating Baa1 (Moody‘s) ≥ 9 years 30.3% (31.0%)5
5) excluding commercial paper
35 I January 2020EPRA-Net Asset Value
EPRA-Net Asset Value 30 September 2019
€ million 30.09.2019 31.12.2018 €486.2m net profit
Equity (excl. minority interests) 5,527.4 4,757.6 €551.5m equity conversion
-€41.5m change in OCI
Effect of exercising options, convertibles and other rights 86.7 553.9 -€223.1m dividend
-€3.3m IFRS 16 and Others
NAV 5,614.1 5,311.5
Fair value measurement of derivative financial instruments 71.5 222.2
Deferred taxes1) 1,281.7 1,132.7
EPRA-NAV 6,967.3 6,666.4
Number of shares fully-diluted incl. convertible (m)2) 69.010 68.824 Comment on pro forma NAV
post conversion
EPRA-NAV per share in € 100.96 96.86 This figure incorporates an
equity conversion of the
Goodwill resulting from synergies 52.7 52.7
2014/2021 convertible which
Adjusted EPRA-NAV (excl. goodwill) 6,914.6 6,613.7 was nearly completed at end of
Q3 (92.5% and the remainder
Adjusted EPRA-NAV per share in € 100.20 96.10 in October 2019)
Effects from a simulated executed conversion 22.2 -185.7
Pro forma NAV (excl. goodwill) post-conversion 6,936.8 6,428.0
Pro forma NAV post conversion per share in € 100.52 93.40
Attractive rental yield of 5.3% (thereof free financed portfolio 5.4%) and low value per sqm (€1,295) still reflect an
average gap to current transaction prices
Value of services business as attractive hidden gem not included in NAV
Scenario: additional value approx. €5.20-€7.80 per share (discount rate of 4.0%-6.0%)3)
1) And goodwill resulting from deferred taxes on EPRA-adjustments 2) Actual number of shares outstanding: 3) Assumption: expected 2020 FFO, growth rate of 0%
68.6m (30.09.2019), 63.1m (31.12.2018)
36 I January 2020Agenda
I. LEADING OPERATING PERFORMANCE Leading operating performance and profitability on
basis of a regionally focused business model
II. ATTRACTIVE NRW MARKET Metropolitan region benefitting from sound growth
prospects; net immigration as key growth driver
III. MARKET LEADING PLATFORM WITH Proven track record for value accretive acquisitions in
EXTERNAL GROWTH POTENTIAL core markets with high synergies
IV. INNOVATION & VALUE-ADDED SERVICES Creating additional value by leveraging value of the
customer base; aspiration to become a digital leader
V. FINANCIALS: HIGH PROFITABILITY – Sound FFO and dividend growth on basis of leading
STRONG BALANCE-SHEET operating profitability and long term secured financing
VI. BUSINESS UPDATE & OUTLOOK
37 I January 2020VI. Business Update Accelerating external growth Portfolio growth supported by the broadening of the regional scope LEG remains net buyer with acquisition of portfolios with c. 5,700 units YTD (thereof 210 newly built apartments) Purchase of c. 2,600 units outside of NRW underpins LEG’s sourcing capabilities also outside its previous core region Bulk of the transactions become effective in 2020; annualised FFO impact of €13-14m (c. €6-7m net after disposals) Several smaller deals in negotiations Firepower for further acquisitions in 2020 > €400m Further capital growth ahead Expected valuation uplift of approx. 8% for FY-2019 (+5.1% in H1-2019) Drivers are yield compression and rent performance Early refinancing of loans: Extension of maturity profile at lower interest cost Early loan redemptions (volume c. €340m), positive net FFO effect of c. €7m p.a. (one-time cost c. €27m) Commitment to corporate social responsibility Additional foundation planned (capital contribution of €16m); objective: support of preventative measures for tenants Voluntary commitment to lower modernisation yields (depending on affordability) and more conservative approach with regard to adjustments from rent tables 38 I January 2020
VI. Business Update
Accelerating external growth
Acquisitions Residential Purchase price Rent multiple Price / sqm FFO p.a.
signed in 2019 units
5,516 approx. €500m 21.7x €1,433 c. €13m
(FY 2020)
Top 5 locations Units Federal state Market segment
Bremen 1,160 Bremen stable
Greater Aachen region1 1,094 NRW high growth
Oldenburg 912 Lower Saxony high growth
Dortmund 269 NRW stable
Duisburg 193 NRW higher yielding
1) Baesweiler, Alsdorf, Übach-Palenberg
Development Residential Purchase price Rent multiple Price / sqm FFO p.a.
Projects2 units
2103 approx. €38m 26.5x €2,576 c. €0.9m
2) Dortmund, Bielefeld, Lüdenscheid
3) including 99 subsidised units
39 I January 2020VI. Business Update
Outlook for 2019 & 2020
2019 2020
KPI
prev.
FFO I €338m - €344m €370m - €380m €356m-€364m
prev.
L-F-L rent growth 3.0-3.2% c. 3.0% c. 2.8% (3.0 % excl. refinancing) prev.
3.2-3.4%
L-F-L vacancy prev. slighty stable (≙3.3%) slightly decreasing (~3.0%)
decreasing
EBITDA margin ~73% ~74%
Investments ~30-32€/sqm ~31-33€/sqm
Dividend €3.60 (>70% of FFO I) 70 % of FFO I
40 I January 2020VI. Business Update
Attractive Dividends from Robust Cash Flows
NAV per share (€), excl. goodwill Dividend per share (€)
100.521)
93.401)
80.901)
3.53
67.15 3.04
2.76
58.92
2.26
52.69
1.96
49.39
1.73
2013 2014 2015 2016 2017 2018 Q3-2019 2013 2014 2015 2016 2017 2018
1) For 2017, 2018, Q3-2019 pro forma NAV per share is shown and applied.
41 I January 2020LEG Share Information
Basic data Well-balanced shareholder structure
• Prime Standard, Frankfurt Stock Exchange
• Total no. of shares: 69,009,836 (68,573,216 as at 30.09.2019)
• Ticker symbol: LEG
• ISIN: DE000LEG1110 MFS 10.5%
• Indices: MDAX, FTSE EPRA/NAREIT, GPR 250,
BlackRock 7.5%
Stoxx Europe 600
BNP Paribas 3.2%
• Weighting (30.09.2019): MDAX 2.75%; EPRA 2.68%
Flossbach von
• Rating: Baa1 (stable) by Moody’s Storch 3.0%
Share price (indexed; 31.01.2013 = 100)
300
250
Other free float
75.8%
200
150
100
50
0
05-2014
08-2014
11-2015
08-2016
02-2018
02-2013
05-2013
08-2013
11-2013
02-2014
11-2014
02-2015
05-2015
08-2015
02-2016
05-2016
11-2016
02-2017
05-2017
08-2017
11-2017
05-2018
08-2018
11-2018
02-2019
05-2019
08-2019
11-2019
EPRA Germany LEG Source: LEG; shareholdings according to voting rights notifications
42 I January 2020Financial Calendar Date Report/Event 14.-15.01.2020 Commerzbank German Investment Seminar 2020, New York 20.01.2020 UniCredit/KeplerCheuvreux GCC 2020 09.03.2020 Annual Report 2019 08.05.2020 Quarterly Statement Q1 as of 31 March 2020 20.05.2020 Annual General Meeting, Düsseldorf 07.08.2020 Quarterly Report Q2 as of 30 June 2020 12.11.2020 Quarterly Statement Q3 as of 30 September 2020 43 I January 2020
Contact
Investor Relations
Frank Kopfinger
Head of Investor Relations & Controlling
Tel: +49 (0) 211 4568-550
frank.kopfinger@leg.ag
Karin Widenmann
Senior Manager Investor Relations
Tel: +49 (0) 211 4568-458
karin.widenmann@leg.ag
LEG Immobilien AG Phone: +49 (0) 211 4568-400
Hans-Boeckler-Str. 38 Fax: +49 (0) 211 4568-22 204
40476 Düsseldorf, Germany E-Mail: ir@leg.ag
44 I January 2020Appendix
LEG Management Board
Lars von Lackum Dr. Volker Wiegel
CEO COO
• Strategy, M&A, Organisation and • Portfolio Management • Asset and property
Digitisation • Corporate Finance & Treasury management, including
• Executive and Supervisory Board Office • Investor Relations & commercial management
• Law, Compliance & Internal Audit Controlling and district management
• Human Resources • Accounting & Tax • Modernisation &
Responsibilities • Corporate Communications Procurement
• Acquisitions • Rent, Capex / Opex, Mgt.
• Project development • Repairs Management
• Energy Services
With LEG Since 2019 Since 2013
In Industry 6 years 6 years
46 I January 2020The LEG portfolio is highly attractive
Aachen Düsseldorf Duisburg Hamm
Köln Minden Münster Osnabrück
Ratingen Remscheid Siegburg Solingen
47 I January 2020Portfolio Structure
30 September 2019
Construction Years Free Financed / Rent Restricted Units
After 1989
Until 1949
5% 12% Rent
restricted
units
1970-1989 25% 25%
75%
57% Free
1950-1969 financed
units
Building Types1) Apartment Size2)
> 90Portfolio
Sound property fundamentals basis for value growth
As of 30.09.2019; IAS 40 only, IFRS5 excluded
Market
Multiples, GAV
GAV % of Total Estimated Commercial/
Residential Residential Residential GAV/ In-Place Rental Other
Market Units Assets (€m) GAV sqm (€) Rent Multiple Values1) Assets (€m) Total GAV
High-
Growth 41,497 4,946 46% 1,798 23.1x 20.0x 236 5,182
Markets
Stable
Markets 48,313 3,474 32% 1,124 17.4x 16.1x 125 3,599
Higher-
Yielding 39,476 2,222 21% 932 15.3x 14.3x 65 2,287
Markets
Subtotal NRW 129,286 10,642 98% 1,294 19.0x 17.2x 426 11,068
Portfolio outside
1,849 169 2% 1,369 18.8x 17.6x 2 171
NRW
Total Portfolio 131,135 10,811 100% 1,295 19.0x 17.2x 428 11,239
Other Assets 237
Total 11,476
1) As of June 30, 2019.
49 I January 2020Portfolio Overview
Above inflationary rent growth and high occupancy
• EPRA-vacancy of 3.3% (l-f-l) as of FY-2018
• Significant rent upside1) potential with current in-place rents of € 5.65/sqm/month (as of FY-2018), approx. 13% below market
rent levels
• In-place rent for unrestricted units has increased by approx. 3.9% (l-f-l) yoy, outperforming inflation
Residential Market Rent CAGR last 5 Occup. CAGR
Market (FY-2018) Units % of total rent Rent /sqm rent3)/sqm % to market1) EPRA-Vacancy yrs (lfl)* last 5 yrs*
High-Growth
41,423 37% 6.36 7.48 18% 2.0% 2.9% -0.9%
Markets
Stable
48,965 35% 5.34 5.92 11% 3.1% 2.7% 5.1%
Markets
Higher-Yielding
41,731 27% 5.23 5.68 9% 5.9% 2.8% -2.2%
Markets
Total2) 133,969 100% 5.65 6.38 12.8% 3.5% 2.9% 0.4%
% Sub- % free
Market sidised EPRA-Vac. Rent CAGR Occ. change last financed EPRA-Vac. Rent CAGR Occup. CAGR
(FY-2018) units Rent/sqm (%) last 5 yrs (lfl)* 5 yrs* units Rent/sqm (%) last 5 yrs (lfl)* last 5 yrs*
High-Growth
29% 5.03 0.8% 1.0% 22.9% 71% 6.96 2.4% 3.8% -2.0%
Markets
Stable
29% 4.70 2.1% 1.1% 27.7% 71% 5.63 3.5% 3.5% 3.8%
Markets
Higher-Yielding
21% 4.49 4.4% 0.9% 9.5% 79% 5.45 6.2% 3.4% -2.4%
Markets
Total2) 26% 4.77 2.1% 1.1% 20.6% 74% 6.00 3.8% 3.7% -0.5%
Source: LEG, CBRE
* As of FY-2018 and FY-2014
Note: Rent change free financed/subsidised is same store. 1) rent upside is defined as the difference between LEG in-place rent and market rent, the latter of which is an 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) Total includes an additional 1,850 residential units located outside NRW 3) Cf. Footnote 1 for a definition of market rent
50 I January 2020Portfolio Overview
Well-balanced portfolio with significant growth potential
30.09.2019 Units Gross Asset Value Rental Income
1% 2% 2%
21%
30% 32% 26% 38%
46%
By Market
37% 32%
35%
High Growth Markets Stable Markets Higher Yielding Markets Non-NRW Markets
Subsidised Subsidised Subsidised
25% 26% 23%
Restricted
vs.
Free- Free- Free-
Unrestricted financed financed financed
75% 74% 77%
51 I January 2020Sustainability
What we have done so far
Creation of an organisational and reporting structure
Sustainability Manager
Management Board
• Management Board bears overall responsibility
• Top decision-maker: CEO
• Steering Committee for strategic decisions and pooling of the activities Steering Committee
includes more than 10 Heads of key divisions/functions
• Sustainability Officers/Data Owners in various departments for
monitoring the achievement of goals and for data collection Data Owner
• Sustainability Manager as interface
Disclosure and assessments
• Annual Sustainability Reports 2017 and 2018 based on GRI
standard, including EPRA Sustainability Performance Measures
(third party assurance: limited assurance by PwC)
• Participation in GRESB Real Estate Assessment
52 I January 2020Sustainability
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.e., 3% p.a. on average from 2017-2021
• Thereby reducing the number of residential buildings in energy efficiency
classes G and H by more than 20%
• Increasing tenants’ awareness (consumption transparency through utility and
heating cost invoicing; tenants’ manual)
LEG residential portfolio by energy efficiency classes (in %, FY 2018)
24 22 In 2018, reduction of
20
>7,300 metric tons of CO2
12 12
9 achieved
0 2
A+/A B C D E F G H
53 I January 2020Sustainability
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-
related services or offers (multimedia, green electricity vielfalt.de)
at attractive prices) • Gender equality and reconciliation of work and
• Annual inspections of all buildings to ensure tenants‘ family (audit certificate, www.berufundfamilie.de)
health, safety and well-being • Transparent remuneration structures (own collective
• Socially oriented neighbourhood and integration bargaining agreement)
management • Occupational health management (e.g., health and
• Numerous tenant events safety checks, preventive measures, training)
• Monitoring of tenant satisfaction • Regular surveys on employee satisfaction
(www.greatplacetowork.de)
• Customer advisory council
• LEG Tenant Foundation for short-term financial
Suppliers
assistance
• Suppliers Code of Conduct
• New €16m foundation for sustainable social work
54 I January 2020Sustainability
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 regulation, data protection, tax compliance, capital
German Real Estate Association market and product compliance
• Code of Conduct (as part of employment contracts
and supplier contracts)
Board Structure
• Training of all employees, dedicated Intranet page
• Two-tier structure of Management Board and
and compliance manual
Supervisory Board
• Whistleblower system for employees and third parties
• Supervisory Board 100% independent
• Compliance Officer, Anti-Corruption Officer and
• Diversity concept for Management and Supervisory
external ombudsman
Board
• Further information: cf. LEG Annual Report
55 I January 2020Leading Performance
Capex – Watch the value traps
Investment / IRR at 7% yield Required yield on
Measure Life cycle Rent increase in %
apartment (in €) on costs costs (6% IRR)
Floor covering 15 years 1,100 0.1% 10.3% 2.6%
Bathroom 30 years 5,000 5.7% 7.3% 8.5%
Kitchen 10 years 3,000 negative 13.6% 9.5%
Conclusion for LEG:
Bottom-up investment approach with strict IRR targets
Capital discipline is key – not overpaying for growth
LEG aims at capital efficiency
56 I January 2020Rent revisionary potential
Refinancing of subsidised loans lifting value
Rent Potential Subsidised Units Number of Units Coming Off Restriction and Rent Upside
In the following 10 years more than # Units c. 17,000
c. 8,800
24,000 units will come off rent 2,166
restriction 1,733 1,589
697 827
Units show significant upside to 164 242
36
market rents
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 et seq.
Subject to general legal and other
restrictions, the economic upside can
theoretically be realised the year Spread to Market Rent (in €/sqm/month)
after restrictions expire
3.36
2.67
1.81 1.74 1.92
1.43 1.35
≥10 years 1.03 1.43 1.18
25.8% ≤ 5 years
18.9%
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 et seq.
≤ 5 years2) 6 – 10 years2) ≥ 10 years2)
In-place rent €4.60 €4.90 €4.90
6-10 years
Market rent1) €6.48 €6.72 €6.01
55.3% Upside potential3) 41% 37% 23%
Upside potential p.a.3) €10.9m €22.1m €10.2m
Source: LEG as of Q3-2019
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 = 2019-2023; 6-10 years = 2024-2028; ≥10 years = 2029ff.
3) Rent upside is defined as the difference between LEG in-place rent as of Q3-2019 and market rent (defined in footnote 1) as of Q2-2019.
57 I January 2020You can also read
