- Record AFFO Growth: Achieved EUR 220.5 million, 10% Y/Y increase, driven by EUR 60 million from higher net cold rent and BCP acquisition.
- Dividend Payout: Proposed 8% increase to EUR 2.92 per share, maintaining 100% AFFO payout ratio.
- Deleveraging Progress: Loan-to-value (LTV) ratio improved to 46.8%, on track to reach 45% in 2026, with liquidity exceeding EUR 800 million.
- Subsidized Rent Potential: 30,000 units at EUR 5.40/sq.m (vs. EUR 9/sq.m market) to unlock 1% rental growth in 2028 as restrictions lapse.
- FFO I & EBITDA Performance: FFO I rose 5.2% to EUR 481.5 million, while adjusted EBITDA margin hit 78.1%, exceeding guidance of 76%.
Financial Highlights
The main driver of the AFFO growth was higher net cold rent, contributing roughly EUR 60 million, with EUR 28 million from organic rent growth and EUR 49 million from the acquisition of BCP. The average interest cost remains competitive at 1.66%. The loan-to-value ratio improved to 46.8%, on track to reach 45% in 2026. The interest coverage ratio stands at a strong 4.3x, with ample headroom in bond covenants.
Valuation and Growth Prospects
With a P/E Ratio of 3.39 and a Dividend Yield of 4.13%, the company's valuation appears reasonable. The ROE stands at 18.02%, indicating a strong return on equity. LEG Immobilien guides for AFFO between EUR 220 million and EUR 240 million in 2026, with a target LTV of around 45% by year-end 2026. The company expects a 5% annual growth in AFFO despite the headwind from interest rates, driven by the core business, value-added businesses, and a new digital operating model.
Growth Drivers and Opportunities
The company has a significant growth driver in subsidized units coming off restriction from 2028, with around 30,000 units currently rented out at EUR 5.40 per square meter, below market levels. This gap offers a substantial rent increase potential, estimated to contribute around 1 percentage point to overall rental growth in 2028. LEG Immobilien is also investing in technology and digitalization, partnering with ServiceNow and SAP to create a new operating model, expected to drive AFFO and FFO I optimization.
Debt Profile and Liquidity
The company has refinanced debt successfully with a Baa2 rating and has a strong liquidity position, with over EUR 800 million available and undrawn revolving credit facilities of EUR 750 million. The average cost of debt is expected to increase by 220-230 basis points as EUR 1 billion of debt matures over the next 6 years. However, LEG Immobilien expects to continue to refinance at attractive levels.