LEG Immobilien Raises Profit Forecast on Financing Costs

LEG Immobilien AG, Germany’s third-largest residential landlord, said 2014 profit beat its target and raised a forecast for 2015 on expectations of lower financing costs.

Funds from operations excluding asset sales, a measure of a property company’s ability to generate cash, last year climbed 16 percent to 163.6 million euros ($186 million), or 3.04 euros per share, LEG said in a statement Tuesday. The Dusseldorf-based company said FFO for 2015 will be between 195 million euros and 200 million euros.

“The dynamic profit momentum will also be reflected in a corresponding development of the dividend,” LEG said. The company plans to refinance 900 million euros of debt at lower interest rates, boosting this year’s earnings.

German residential landlord’s profits are rising as housing shortages in large cities lift rents and low interest rates help companies reduce borrowing costs. LEG owns 110,000 apartments in cities including Dortmund and Essen.

LEG rose as much as 8.2 percent to 79.76 euros in Frankfurt trading, the highest since the company first sold shares to the public in 2013.

LEG’s 2015 FFO forecast corresponds to 3.42 euros to 3.50 euros per share. In 2016, FFO will reach 223 million euros to 227 million euros, or 3.91 euros to 3.98 euros per share. The company had forecast FFO of 158 million to 161 million for 2014.

The refinancing will cut LEG’s average interest rate to less than 2.3 percent from 2.84 percent, the company said.

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