LEG Immobilien 2012 FFO Jumped 22% as Rents Increased

LEG Immobilien AG (LEG), Germany’s largest residential landlord by market value, said 2012 funds from operations jumped 22 percent as rents increased and the costs of financing and maintenance fell.

FFO excluding asset sales, a measure of a property company’s ability to generate cash, climbed to 136.5 million euros ($179 million) from 111.8 million euros a year earlier, the company said in a statement today. FFO for 2013 is forecast to rise to between 137 million euros and 140 million euros, excluding acquisitions, and rental revenue is projected to gain 2 percent to 3 percent, LEG said.

“We want to continue growing FFO by making targeted acquisitions and thereby improve the outlook for further dividend growth,” the Dusseldorf-based company said in the statement.

LEG in February was taken public by former owner Goldman Sachs Group Inc. in the German property industry’s biggest initial public offering. The company is benefiting from rising rents as household growth in Germany outpaces construction. Interest expenses declined by 7.3 million euros after the company refinanced about 2 billion euros of debt, generating a “significant contribution” to earnings, LEG said.

LEG was little changed at 41.80 euros at the 5:30 p.m. close in Frankfurt, giving the company a market value of 2.21 billion euros. The IPO price on Feb. 1 was 44 euros a share.

Growing Households

The company owns 91,000 apartments in North Rhine- Westphalia, Germany’s most populous state. About 18 percent of LEG’s apartments are in the Dusseldorf area, where the number of households is increasing and rents rose 6 percent in last year, according to data compiled by research firm BulwienGesa AG.

LEG’s FFO in 2012 was boosted by a one-time tax reimbursement of 3.5 million euros, Chief Executive Officer Thomas Hegel said on a conference call with analysts. Recurring FFO was 133 million euros, he said.

LEG will pay 65 percent of its FFO to shareholders as a dividend starting in 2013, and use the remaining 35 percent for acquisitions. For 2012, it plans to pay a dividend of 41 cents per share, Hegel said.

The company said it’s in talks to buy about 2,000 homes and plans to purchase 10,000 apartments by the end of 2014.

LEG shares have fallen 5 percent since the IPO through yesterday. The underwriting banks bought back shares every day for a month after the listing to stabilize the price, Goldman Sachs said on March 6.

The performance is “clearly not satisfying” for investors or management, the CEO said. LEG is “determined to make the share float a success” for its shareholders and Hegel said he expects future growth to boost the price.

Hegel said he is confident that LEG can join Germany’s MDAX index during a fast-track review of listings in June.

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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