DÜSSELDORF (dpa-AFX) - The real estate group LEG, like the entire industry, continues to struggle with the significant rise in interest rates. The company therefore wants to reduce its debt by selling properties. However, the environment for this remains difficult. The company therefore devalued its portfolio. The bottom line was therefore a loss of billions in 2023. In contrast, day-to-day business fared better thanks to strong demand for residential space. The Management Board also intends to pay a surprisingly high dividend for 2023. The company confirmed its targets for the current year. The share price rose by more than three percent in the morning.

"We expect further earnings growth and increasing transaction activity on the real estate markets in the new 2024 financial year," said CEO Lars von Lackum. Last year, however, the company made significantly slower progress than hoped with the planned sales of apartments. More than 1,300 apartments and several commercial units were sold at book value on average. LEG plans to sell more than 5000 apartments in total.

Day-to-day business was significantly better in 2023 due to demand for residential space. Net cold rent rose by 4.4 percent to around 834 million euros by the end of December, as the MDax group announced in Düsseldorf on Monday. Rental income on a like-for-like basis rose by four percent to 6.58 euros per square meter.

The operating result measured by the so-called AFFO (cash flow from operating activities adjusted for capitalized investments) increased by two thirds year-on-year to a good 181 million euros. The LEG Management Board intends to distribute the full amount to shareholders. This will result in a dividend of EUR 2.45 per share for 2023. This is to be paid in cash or shares. The company had canceled the dividend in the previous year.

According to analyst Andre Remke from Baader Bank, the real estate group has delivered a solid business performance in a challenging environment. The resumption of a dividend payment was a positive surprise. Analyst Neil Green from the US bank JPMorgan praised the real estate group's key figures as "robust". The key earnings figure AFFO exceeded both his and the average analysts' expectations, while the growth in rental income was at the upper end of the outlook range.

Analyst Jonathan Kownator from the US investment bank Goldman Sachs wrote that real estate stocks are increasingly expected to bottom out. However, investors should continue to focus on the management's plans to bring the leverage ratio back into the right range.

The bottom line for 2023 was a loss of EUR 1.56 billion due to the devaluation of the real estate portfolio. In the same period of the previous year, LEG Immobilien reported a profit of a good 237 million euros. The company devalued its real estate portfolio by 11.9 percent. LEG expects the valuation level to stabilize in the current year.

As already announced, the Management Board is targeting an operating result (AFFO) of 180 to 200 million euros for the current year. In the worst-case scenario, the operating result would remain virtually at the previous year's level. However, rental growth in 2024 is likely to be slightly lower than in the previous year. The company expects an increase of 3.2 to 3.4 percent.

Unlike last year, there will be no regular rent increases in the required portfolio, explained von Lackum. With around 32,000 requested units - just under 20 percent of the portfolio - LEG is one of the largest providers of social housing in Germany.

Meanwhile, the company intends to invest even less money in its portfolio. LEG is still planning to invest around 32 euros per square meter after around 35 euros in the previous year./mne/lew/mis