With a portfolio consisting of approx. 134,000 residential units LEG is one of the leading managers of residential property in Germany. The regional focus is on the metropolitan region of North Rhine-Westphalia (NRW), Germany's most populous federal state characterized by a growing demand of affordable housing for both 1-2 people households and immigrants. The company's offer is tailored to this demand. LEG's growth- and customer-focused business model pursues a sustainable, value-oriented approach that reconciles the interests of shareholders and tenants. The growth strategy aims at sustainable growth of the existing portfolio, selective development of tenant-oriented services and value-enhancing acquisitions.

Our corporate strategy in detail

Organic growth

LEGs portfolio achieved continuous rental growth in excess of the market average in recent years (+2.4% p.a. since 2010 on a comparable basis). This development reflects the quality of the companys property portfolio, its management expertise as well its resistance against economic fluctuations. The main growth drivers in the free financed segment are regular Mietspiegel adjustments and adjustments to market rents when properties are re-let. In the subsidized portfolio, inflationary developments are passed on to the tenants every three years in the form of regular adjustments of the cost rents. Over the coming years, rent control for parts of this portfolio will continue to gradually expire. This offers scope for rent adjustments especially in those cases where rents are significantly below market level.

Expansion of tenant-oriented value added services und further increase in customer satisfaction

With a portfolio of approx. 134,000 residential units and a customer base of around 360,000 tenants LEG has the potential to create value added for its tenants and generate additional income by offering selective services. Due to a cooperation agreement between LEG and Unitymedia tenants benefit from a significantly improved product package for the use of TV and Internet services at favourable conditions. The successive development of these services offers potential for future earnings growth.

Since 1 January 2016, EnergieServicePlus GmbH (ESP), a joint venture between LEG and RWE, supplies a part of its apartments with environmentally friendly energy at stable prices. In order to increase customer satisfaction LEG continuously invests in maintenance and modernisation above and beyond the level stipulated by the Social Charter. The positive development of the occupancy rate and the further improvement in the fluctuation rate confirm this strategy.

Value-enhancing acquisitions

LEG pursues a selective, value oriented acquisition strategy that is geared towards clear financial targets in terms of the FFO I yield and rent multiples. The integration of additional residential units into the management platform leverages economies of scale, thereby increasing the operating margin. A broad-based presence in its NRW core markets, quick decision-making processes based on local market expertise as well as financial flexibility are LEGs key competitive advantages and provide access to off market transactions. Since its IPO in February 2013 LEG already acquired more than 40,000 units and clearly outperformed its growth target.

Strong balance sheet and defensive financing strategy

LEGs business model is secured by a defensive risk profile which also benefits shareholders, tenants, employees and business partners. The strong balance sheet shows a LTV of around 42.3%* (31.12.2017) while also securing the companys further growth. The financing structure is designed for the long-term with an average remaining loan term of around 8 years, average financing costs of 1.74 % and interest rate hedging of 91.5%*. Thus, the business of LEG is unaffected by potential turbulences in the financial markets and secured against interest rate risks.

Leading profitability and further improvement in cost efficiency

With a concentrated portfolio in the core regions of NRW, LEG is a leader within the industry in terms of profitability, thereby allowing it to distribute attractive dividends. With a high degree of cost discipline and further process optimisations, revenue growth shall be translated into an above-average increase in profitability. Further efficiency improvements can be generated, in particular, from the introduction of new information systems and the continued optimisation of procurement activities.

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