Ladies and gentlemen, welcome to the LEG Immobilien Q1 2026 conference call and live webcast. I'm Vicky, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing Star and One on your telephone. For operator assistance, please press Star, then zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Frank Kopfinger, Head of Investor Relations. Please go ahead.
Thank you, Vicky. Good morning everyone from Düsseldorf. Welcome to our call for our Q1 2026 results, and thank you for your participation. We have in the call, as always, our entire management team with our CEO, Lars von Lackum, our CFO, Kathrin Köhling, as well as our COO, Volker Wiegel. You'll find the presentation document as well as the quarterly report and documents in the IR section of our homepage. Please note that there is also a disclaimer, which you'll find on page 2 of our presentation. Without further ado, I hand it over to you, Lars.
Thank you, Frank. Good morning, everyone, and thank you for joining our analyst and investor call today. Our message today is short and unambiguous. LEG is fully on track to deliver its 2026 targets. Rent growth, EBITDA margin, AFFO, and LTV are all moving within or towards guidance, and they are doing so on the back of the same disciplined operating model you have come to expect from us. Like for like rent growth came in at 3.7% on a clear path into our guidance corridor of 3.8%-4%. The EBITDA margin expanded by 180 basis points to 77.4%, underlying the operational leverage of our platform. AFFO, our core steering metric, came in at EUR 58.6 million, fully confirming our full year guidance range.
As a brief cross-check, operating cash flow developed in line with this picture, rising by 14.5% year on year. Let me address the AFFO line directly because I expect questions on it. AFFO is slightly below last year, and the bridge is purely a timing and phasing effect. Two drivers. First, a deliberately more linear CapEx profile in 2026 versus a Q1 heavy ramp up in 2025 on the back of the BCP integration. Second, a modest step up in cash interests as new financings are written at current rates. The investment spending is a phasing pattern, not a quality of earnings issue. Underlying cash generation, margin development and rent growth all confirm the trajectory, and we therefore reiterate the full year AFFO range without any reservation. On valuation, we remain cautiously constructive for H1.
A flat to slightly positive result of up to +1%. Momentum may soften somewhat. Transaction volume stays subdued and buyers remain on the sidelines, but we do not see a reversal of the trend. LTV improved by 60 basis points to 46.2%, driven by disciplined cash generation and lower net debt. Our 45% target remains in reach. It has become more ambitious in the current environment, but the direction of travel is unchanged and the cash flow engine that gets us there is intact. Let me now turn to slide 6. Slide 6 captures in one picture where LEG continues to stand out in a sector where the quality of earnings is increasingly being questioned. 5 points. First, the market. We operate against a backdrop of geopolitical tension, capital market volatility and sticky deflation risk.
The structural driver of our business, the German housing shortage, is not cyclical. Demand exceeds supply by a wide and widening margin. New construction continues to slow. Household numbers continue to rise even as net immigration flattens. LEG is positioned squarely in affordable housing in North Rhine-Westphalia, Germany's largest state by population and GDP. That is what underpins the durability of our cash flows. Second, the balance sheet, and here I want to be quantitative rather than narrative. Our 2026 maturities are fully covered on a pro forma basis. Liquidity stands at more than EUR 500 million. Our hedging ratio is around 98%. Our interest coverage ratio is at 4.2 times, comfortably above all with models. The next sizable maturity is the EUR 500 million bond in November 2027, which gives us the option to refinance gradually rather than under pressure.
This is what genuine financing resilience looks like, measured in numbers, not objectives. Third, cash discipline. AFFO remains our core steering metric, and as long as we steer the company on AFFO, you have the assurance that we will not relever. The underlying cash dynamics support this approach. Operating cash flow rose by 14.5% in the quarter, but it is AFFO with its full deduction of investments that anchors our capital allocation. Every additional euro of spending is benchmarked against a strict hurdle rate driven investment logic. That same discipline is what preserves the firepower for selective opportunities when they arise, as we did with BCP. Fourth, strategic focus. We do what we are good at, managing value creating assets in the affordable segment. We do not tie up capital in riskier, more capital-intensive businesses. Our disposal policy remains prudent, non-core only at or above book value.
The proposed scrip dividend supports the same logic for actively strengthening the balance sheet versus a full cash dividend. Fifth, growth. As outlined at our full year call, we expect AFFO to grow by around 5% in the medium term. The drivers are tangible. Subsidized units coming off restriction in 2028 will add around 1 percentage point to rent growth. Reinventions target approximately EUR 20 million contribution by 2028 on an aggregated basis. Digitalization and AI initiatives will deliver some EUR 10 million of efficiency gains by 2030. Together, these more than offsets the refinancing headwinds we will face as we adjust to current rate levels. If you take one message away from this chart, take this one. LEG's business model continues to perform exactly as designed.
Predictable like-for-like rent growth, an expanding EBITDA margin, disciplined AFFO steering, and a quantitatively robust balance sheet. Our cash flow resilience is demonstrated by AFFO-based steering, fully covered financing, and a stable vacancy rate. In our view, that is the right lens through which to assess quality in our sector today. Cash resilience and discipline, not adjustments. It is a combination that remains rare in the current environment, and it positions us exceptionally well for the remainder of 2026 and beyond. Let's move to slide 7. After 3 months, we are well on track for our 2026 guidance and operational performance remains rock solid. Net cold rent grew by 3.3%, driven by strong like-for-like growth, partially offset by disposal effects. The EBITDA margin improved by 180 basis points year-over-year to 77.4%.
AFFO came in at EUR 58.6 million, slightly below last year. Effect to FFO I, which we know remains an important reference for many of you. With this short overview, I hand over to Volker for the operational highlights.
Thank you, Lars, and good morning, everyone. Let me start with the rent development on slide 8. On a like-for-like basis, our average rent per square meter rose by 3.7% year-over-year, reaching EUR 7.15. Pre-financed units continued to benefit from strong market momentum, achieving rental growth of 3.8%. By market segment, the range goes from a solid 3.5% in higher yielding markets to 4% in stable markets. This clearly underlines our operating strength and the resilience of the portfolio. 2026 is a cost rent adjustment year. As a reminder, we can adjust the cost rent for subsidized units every 3 years based on CPI development. This adjustment took place in Q1 and translated into a 3.3% like-for-like increase across our subsidized portfolio of around 30,000 units.
On the breakdown of rental drivers, rent tables were the strongest contributor, accounting for 1.9 percentage points of the 3.7% like for like growth. Modernization and reletting added 1.3 percentage points, and the cost rent adjustment contributed 0.5 percentage points across the total portfolio. We continue to monitor new rent tables closely, and you will find our outlook on slide 24 in the appendix. To give some color, the new table for Mönchengladbach implies an uplift of around 6% for typical LEG apartments. The table for Unna in Westphalia, an uplift of around 8%. All in all, we are well on track to deliver on our rental guidance for full year 2026.
Finally, on a like for like vacancy, we kept the rates stable at the previous year's low level of 2.4%. Moving to investments on slide 9. In the first quarter, adjusted investments amounted to EUR 98 million or EUR 8.82 per sq m, roughly a quarter of the full year volume, which we expect to come in at more than EUR 35 per sq m in line with guidance. Beyond the absolute level, we are deliberately steering towards a more evenly quarterly distribution in 2026. Last year, this was only partially possible as BCP had not yet been fully integrated in Q1. As a result, our Q1 2026 investments came in 17% above the prior year quarter. You will find an illustration of past quarterly investments patterns on the following slides.
For 2026, please assume a markedly more even distribution across the year. On the composition, in Q1 2026, CapEx accounted for EUR 52.8 million, or EUR 0.75 per sq m, while main-maintenance came in at EUR 45.2 million, or EUR 4.07 per sq m. Our Cap rate rose by 1 percentage point to 54%. Let's now turn to disposals on slide 11. Year to date, we have completed or signed sales for around 1,000 units, with total proceeds of EUR 74 million. Of these, around 250 units were transferred in Q1 for around EUR 80 million. The remaining around 750 units of gross proceeds of around EUR 56 million are due to be transferred from Q2 onwards. Disposals were generally executed at or above book value. This is a deliberate and important point.
We sell only non-core and only at or above book. Disposals serve our LTV management, not our earnings. You will not find recurring sales contributions doing the heavy lifting in our P&L or in our cash generation. That is what makes our disposal contribution to LTV reduction credible and repeatable rather than opportunistic. Against the backdrop of a German residential transaction market characterized by fewer large volume deals and limited international investor activity, additional context on slide 33 in the appendix, we remain confident in delivering on our disposal program. Our flexibility to offer smaller portfolios or even individual multifamily houses tailored to buyer needs is a structural advantage in the current markets. The total disposal program still comprises up to 5,000 units.
Slide 12, the AFFO bridge for the 1st quarter. I will focus on the main movements. Net cold rent increased by EUR 7.6 million. Rent growth contributed EUR 8.9 million, partly offset by a EUR 1.3 million disposal effect. Net cash interest rose by EUR 3.7 million. This reflects both lower interest income from our liquidity position as well as the gradual upward reset of refinancing costs. The main reason for the slight year-on-year decline in AFFO was the higher level of investments, as Lars and Volker already explained. Importantly, this is a phasing effect, not a structural one. With AFFO of EUR 58.6 million, we are firmly on track for our full year guidance.
Slide 13 shows the key facts on our financing structure. I want to spend a moment on this because this is where the resilience of LEG is most visible. Loan to value declined by 220 basis points versus Q1 2025, driven mainly by valuation effects and supplemented by disposals. Versus year-end 2025, LTV came down by 60 basis points, supported by strong cash generation and positive CapEx effects. Net debt fell by almost EUR 100 million, supported by two complementary sources. First, our recurring operating performance. It is reflected in disciplined AFFO steering and healthy operating cash flow. Second, our disposal program. While large volume transactions have clearly slowed market wide, our ability to place smaller portfolios and open stream is set to become a larger structural contributor to deleveraging, supported by a remaining pipeline of up to 5,000 units.
Both levers work hand in hand, a recurring operating engine that funds the business and a targeted disposal program that takes leverage down structurally, even in a transaction market that is anything but easy. The average interest cost stood at 1.8%, 25 basis points above Q1 2025, and 14 basis points above year-end 2025. The average maturity slightly increased to 5.8 years, supported by around EUR 350 million of refinancing closed in Q1 at an average maturity of 9.5 years and an average interest rate of 3.6%. In 2026, debt of EUR 233 million will mature almost entirely in Q2.
With cash and cash equivalents of EUR 508 million at the end of Q1, our 2026 interest coverage ratio stood at 4.2 times, comfortably above the level required by our bond covenant. We also have ample headroom on all other bond covenants. The full overview is in the appendix for those interested. As Lars mentioned, we will most likely again offer shareholders the option of a scrip dividend. Assuming an acceptance rate broadly in line with last year's 38% and all else being equal, this would retain approximately EUR 85 million of liquidity within the company and have a positive LTV impact of around 40 basis points. In summary, the balance sheet is resilient, the maturity profile is well structured, and we operate from a strong financing position with ample flexibility going forward. With that, back to Lars.
Thank you, Kathrin. Let me close with our 2026 guidance summarized on slide 4, EUR 240 million. Continued growth on top of a strong 2025. FFO I is expected at EUR 475 million-EUR 495 million, supported by an adjusted EBITDA margin of around 78%. Our operational drivers, rent growth, and investment are likewise reconfirmed. On valuation for H1, a flat to slightly positive result of up to +1% with momentum potentially softening as transaction volumes remain subdued. The one area where we acknowledge sensitivity is LTV. Depending on the trajectory of inflation, interest rates, and the transaction market, our 45% target may become more challenging in its precise timing. Let me therefore be precise on this point. Circa 45% remains our clear commitment, and we have the levers to get there in our own hand.
AFFO based steering, a disciplined disposal program, and the scrip dividend as an additional balance sheet instrument. What we will not do is force the LTV down through value-destructive disposals or through actions that would compromise the long-term cash generation capacity of the business. Our deleveraging will be done on quality and on our own terms, not under pressure. To sum it up, LEG remains on a clear and consistent path, generating reliable cash flow discipline and building long-term value for shareholders and tenants alike. Cash flow remains king, and AFFO remains the right steering metric to for our business. Our 2026 guidance reconfirms the strength and the resilience of our model, measured again in numbers rather than narrative. With that, we conclude the presentation and look very much forward to your questions.
Thanks, Lars. With this, we begin the Q&A session, and we hand it over to you, Vicky, to guide us through the Q&A.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star then two. Questioners on the phone are requested to disable speaker mode and eventually turn off the volume of the webcast while asking a question. Anyone who has a question may press star and one at this time. The first question is from Marios Pastou, Bernstein. Please go ahead.
Great. Thank you. Good morning, and thank you for the presentation. I've got two questions from my side. Firstly, of course, buyers are on the sidelines, but I'm interested to see how things are progressing with the various deals you've had under discussion for a couple of quarters. Are you seeing any signs that those buyers are pulling away from any prior agreements, being at your existing units, or your land? Secondly, going back to your slide on the overall strategy, if those planned disposals are not possible and financing costs remain elevated, what changes? Thank you.
Good morning, Marius, thanks for your 2 questions, I try to give you an answer to those both. With regards to the buyers' behaviors since the start of the geopolitical tensions in the Middle East, we have not seen buyers moving out of end processes, certainly those processes dragging on and on and on. That is partly being driven by buyers' behavior, also by the financing banks. What we can see is a big, big reluctance of financing banks to really come to term sheets or even financing agreements, which unfortunately is postponing deals substantially. You made, with your question, also reference with regards to the biggest transactions we've been able to agree this year, which is the Gerresheim plot in Düsseldorf. Heine has that call option.
They are in very constructive and good talks with the city of Düsseldorf, and we are still very confident that we are going to see Heine really making use of that call option. Therefore, no change at that end as of today. With regards to our assumption with regards to the disposal volume, and we try to give you at least an insight with regards to the H1 development of values. With regards to all those geopolitical volatility, the change to energy prices, interest rates, et cetera, that is very difficult to foresee of how many of those disposals we will be able to do. What we definitely expect, that we are getting closer to our 45% LTV target. Will we be able to reach it if we are not seeing a single transaction?
I think that will be certainly an uphill battle, but it depends on the further development, certainly not only of the disposals, but also the valuation we are going to see with regards to our assets. For H1, we are seeing a valuation increase of up to 1%.
Thank you very much. Should we expect to see maybe some of those prior disposal agreements closing in the first half? Or is there a kind of a longer road ahead to achieve that? I suppose as a bit of a follow-up as well, if no disposals are possible at all, does anything in your strategy change to kind of get back to a period of growth?
Yeah. With regards to disposals activity, we have some of the disposals in our pipeline where we are now at a stage where buyers are just waiting for the reconfirmation by those financing banks that they will be there and that they are signing the financing contract. If that is going to take place, we are expecting notarization of deals within H1, but nowadays it is some notarization dates already being fixed and penciled in our diaries. Hope and certainly keep our fingers crossed that those are taking place as foreseen.
Thank you very much.
The next question from Charles Boissier, UBS. Please go ahead.
Yes. Hi. 2 questions from my side. First, on what you just mentioned about the reluctance from banks, what are the funding conditions that are being offered currently in the market?
What we can see is that German residential is still seen to be the sweet spot for financing banks. It is not the case that if you are a willing buyer, you will not be able to see financing offerings. What you can still see is that there is a huge interest in doing due diligence by financing banks not seen degree of detail in the past. Those degree of detail includes the includes evaluators, not only 1 or 2, but a number of technical due diligence being done on assets, et cetera, which unfortunately is postponing processes. Therefore, there is enough financing capacity in the market, but to really get to a final contract, that takes time.
Right. Does that mean that, if they're upon their own evaluators, as you just mentioned, sometimes they come to the conclusion that the values should be lower on those portfolios than what you have in the book?
No. What normally happens, Charles, is that those evaluators come up with numbers with regards to the market value, but the market value is normally not the point, especially if you do an asset-backed financing as a reference point. There is a certain valuation point which is below that market, and that valuation point is then the reference point for what they are really are expecting as an LTV. Finally, it ends up in a way that you are, quote-unquote, "Getting 60% LTV," but this is for internal valuation purposes, a reference point which is comparing to the market value, normally a 40% leverage. That hasn't changed over the last year.
The leverage ratio has not changed because it is certainly driven by the Pfandbrief law, so that asset- backed securities with which German banks are refinancing themselves, which is restricting them with regards to the volume of LTV they can offer within a financing contract.
Very interesting. A second question from my side on the Mietspiegel. If I look at appendix 24 in your presentation, you note that all the 4 cities where the Mietspiegel was expected to be published year to date have seen delays. You already had some delays last quarter, but now it includes some of your key markets like Bielefeld and Düsseldorf. Could you help us understand, you know, what's driving those delays, but also to what extent this might impact your ability to deliver on those 3.8% to 4% rental growth for this year? Thank you.
Charles, please, it is not to be understood that those cities do that on purpose. It just takes time, and it is once again, only an indication from our side to help you understand when we are expecting rent tables to be published. There are certainly obligations, but those cities sometimes just take longer to do the data collection, do the regression analysis, whatever. We certainly try to be as close as possible to the cities and to those rent table committees, but it is not to be understood that those cities are on purpose delaying the publication of new rent tables.
It is not that these rent tables are not coming out eventually. For example, we had the Q, we had for January, we expected the Mönchengladbach rent table, and it just came out now as Volker mentioned. It's not that the rent tables are not coming out, it's just the delay of a few months sometimes.
Okay. Thank you.
Thank you.
The next question from Paul May, Barclays. Please go ahead.
Hi, guys. Hopefully you can hear me. Thanks for taking my call. Sorry, if I repeat anything, I was just something at my daughter's school, learning how to do math, funnily enough. I had a couple of questions. I recall at Q4 you mentioned that when you last budgeted on a longer term basis, that was around October last year, if I recall correctly. I was wondering if you've updated that post, the sort of move in financing rates, and if that's had any impact on your longer term AFFO and FFO CAGR expectations. Second question, apologies again if you've commented on this, I think you mentioned at the full year results that the Mietspiegel tables had peaked in terms of the level of growth, and you expected lower growth moving forward.
Just checking if that is still the assumption given with where inflation is expected to go and how that's gonna affect over your medium term rather than sort of the next 12 months, but medium term rental growth expectations. Thank you.
Yeah. Thanks a lot, Paul. Coming back to your first question. We haven't rerun and redone our midterm planning, so we always do it in autumn. Certainly you're right to refer to that. Certainly the increase in interest rates are posing in a headwind. I think Kathrin can give you more details at which rates we are currently refinancing, so that you get a flavor of what we've been able to agree with banks on In the current market. Certainly we will need to take that into consideration going forward. With regards to the current indication we can give you, we are quite confident that we can stick to our midterm planning, with that, perhaps quick to Kathrin and a few numbers with regards to our latest financings.
So far, we are really quite confident with this year's numbers still, given that the impact is not as big as when we look at the numbers from last year and this year. Maybe it's around 30 basis points or something. It's not that we have to refinance a lot. The impact is absolutely manageable from our side. What we have also seen is that spreads on the positive side are still quite tight. When we did the planning originally, the spreads were actually even a little bit higher than they are now. We are currently looking for a 10-year on the unsecured side, maybe at around 140, 150 basis points. This is still on the super quite tight side.
Also on the secured side, we are currently looking at around 100 basis points for 10 years. That's quite a good number, so this is definitely helping us. As I said, we just settled the first EUR 350 million this year for our 3.8%. Everything is on track.
Paul, on your second questions on the rent table development might be misunderstanding that they decrease in growth. We just wanted to say that there's no accelerating in growth expected. It's more a plateau what we see and if you look at the numbers I mentioned for Unna, I think it's city. Only very few of you are aware where it is. Of 8% it's quite decent growth, so we see that this is continues to grow decently. Of course, as you mentioned, if inflation kicks in again, this will be reflected in rent tables. We don't really hope for inflation for other reasons.
Thank you very much. Apologies. Can I have one quick last one? Just on the valuation expectation over the first half, I think it's sort of up to 1%, I think is the number in the statement. How much of the value has reflected that move in rates year to date? Or are they looking at it as a sort of slightly transitory movement and therefore not much impact on yields? Or have they not yet properly reflected that and we could see an increase in the first half and possibly a decrease in the second half when they sort of reflect that? Just trying to get an understanding as how they're thinking about it.
Well, as you know, cutoff date is 31st of March, and it's always a bit backward looking. Is the full geopolitical conflict, the change in interest rates being fully baked in into the latest valuation? Most probably not. There might be an additional impact with the H2 numbers. As no one knows of how geopolitical development play out, how interest rates will develop over the coming months, I think it's too early to say. What we try to get across is at least what we've seen over the last three halves building up, a very positive momentum with regards to valuation that has softened. Compared to last year, where we've seen increasing valuation uplifts in H1, H2, now in this first half year, that's coming down. It will be somewhere between 0%-1%.
From our perspective, it's too early to talk about H2. Yeah. Volatility is too high. There are market participants out there which are giving full year guidance. We do not see ourselves in that position. Therefore, all we can say is what we currently see with our H1 numbers.
Cool. Perfect. Thank you very much. Hopefully, the world does calm down before then, but that's great. Thanks, guys.
Yeah. Thank you all.
The next question from Veronique Mertens, Van Lanschot Kempen. Please go ahead.
Hey, good morning, all. Thank you for taking my questions. It's 3 from my side went and 5% from midpoint. I was wondering what will be the driver the rest of the year or where you think you can make up to still reach your target for the full year?
Yeah. Happy to take your questions, Veronique. We are still confident on the FFO I number, as we already said. I mean, you have to take into consideration that seasonalities are at play here also from on the FFO side. If you may have a look at last year's numbers, we were even a little bit lower on the FFO I side, and we ended quite comfortably at EUR 481 million FFO contribution at the end of the year. As we are not steering on the FFO, but on the AFFO for total numbers, we are not steering on in-between numbers on FFO neither. Of course, there are things that take place in between. For example, the capitalization ratio, when you look at it currently, it's at 54%.
Ladies and gentlemen, please hold the line. We lost connection. We will reconnect shortly. Thank you. Ladies and gentlemen, the line is connected. You can go ahead. Thank you.
Hi, Veronique. This is Kathrin again. Something new every time. Glad to be back. I think I lost you all when I talked about the capitalization ratio as one. In fact, that is still changing over the year, and that it will increase FFO I numbers. We are currently looking at 54% capitalization ratio. Last year's total number was 57. We still expect this to go up.
Okay. Thank you. That's clear. Maybe my last question is, it seems that you're a little bit less confident on reaching that 45% LTV target, and you stick to your view that you're not selling below book value and still offering scrip dividend. Has it also crossed minds to lower this dividend significantly or cut dividend to reach that LTV target? Thank you.
Thanks a lot, Veronique. Exactly, that's the case. I think it's not necessary to cut dividend or do anything else. What we do is on purpose offer the scrip dividends, and we think that is a measure which will help us to get closer to the LTV target. It's not being taken off the table. Please also get that message clearly from us today. We only say it's more ambitious, yeah, in an environment where you have the head of the IEA saying that we are heading the biggest energy crisis in history. I think it would be premature to already now say we will for sure get to that 45%. You've also heard about the very soft transaction market in Germany. That certainly was expected to be different.
Our hope beginning of March was that we are going to see an end to those geopolitical tensions in the Middle East much quicker. That unfortunately has not taken place. Therefore, what we try to get across, Veronique, we will do whatever is being needed from our side to get us close to there. That will be the scrip dividend, that will be disposals above book value. Certainly, we will look and face the situation in the current environment where most probably there will be a lighter development of valuations than initially expected at the beginning of the year.
If you indeed mention that there is so much uncertainty, doesn't that even increase the push to lower your LTV? Why be so strict around that selling at book values, especially since we are not even certain where book values are going to go in the future?
For us, Veronique, the book values are the best indicator for the current fair values because that is exactly what we are accounting for. Therefore, we do not see the need to now try to guess the next development of the book value. That is the incentive for ourselves to be as disciplined as possible with regards to sales. Therefore, what we will do is sell at or above book value, but not below that. We think it has paid out over the last 2.5 years and will pay out for the next years.
Okay. Thank you.
Thank you.
The next question from Andres Toome, Green Street. Please go ahead.
Hi. Good morning. A couple of questions, please. Firstly, on balance sheet management, since you are sitting on some cash that seems to be earmarked for debt repayment, I was just wondering if there is any potential for bond buybacks ahead of the term end, which potentially could be a creative way to address your upcoming maturities. I'm just wondering how the math stacks up there from your perspective.
Sure. We are always looking also at cost potential liability management that we could do. I mean, it's part of our opportunistic refinancing. So far, we haven't identified any because you haven't seen us doing it, but it's not off the table. We just have to take into consideration what costs the new money and does it make sense from that perspective. Currently we take the next EUR 233 million or EUR 32 million exactly in June to pay back another maturity that is coming.
Understood. Secondly, just with the general even though, you know, you sort of mentioned already that the pace of disposal at the moment is a bit slower.
Andres, we would entertain whatever interest comes up in the market. Are we currently seeing investors being interested in really buying bigger? No, we don't. We try to give you a bit of a feeling for the development of the German transaction market and yourself, you are working for a house which has all the market insights at hand. You know of how transaction activity in the German market developed, especially transactions above the EUR 100 million are very rarely to find. The share of those has decreased from around 40%-30% in the German market. We currently do not foresee a market now opening up so quickly that we would really see bigger transactions taking place this year. Also not including any bigger transactions from LEG side.
Understood. I guess, you know, related to that then, and from the previous sort of analyst as well, in terms of the price point that you're aiming for and again, considering the fact that anything above, let's say EUR 100 million is quite a bit more difficult, is that just not the market price then from your perspective for these portfolios and assets? You know, wouldn't you just need to accept that to get your de-leveraging targets done?
If you came down now to 46.2. The difference between the 46 and the 45 is not huge. We still foresee an improvement going forward, not only because of the H1 revaluation, but also due to the disposals we have done so far. Therefore, from our perspective, no need to really adjust our approach. From our perspective, we can stick and will stick to that book value as the best proxy for the fair values to be realized in the markets, and this is what we will do also going forward. We will offer all the portfolios at book value and try to reach that reference point.
Understood. Thank you.
Thank you.
The next question from Thomas Rothaeusler, Deutsche Bank. Please go ahead.
Hi. Morning. I've got one question on your non-rental business. I know you don't report on a quarterly basis. Maybe you could provide some update and what you expect for this year.
Well, that's unchanged from what we guided you for, at the full year numbers. This will grow basically in line with AFFO.
Would you say you see some headwinds given the current environment also for the non-rental business?
No. No, that's unchanged.
Okay. Thank you.
Thank you.
Thanks.
The next question from Neeraj Kumar, Barclays. Please go ahead.
Morning, everyone. Just trying to understand a bit more about your refinancing strategy going forward. Do you see the unsecured bond market more attractive than the bank debt, given the enhanced due diligence process from the banks you mentioned earlier? Do you plan to refinance a lot of debt ahead of your debt maturities, given the current spread level seems to be unchanged with the recent volatility in the rates market, what would be your preferred route for refinancing? Do you prefer to do through tap issuance of low coupon bonds to preserve your AFFO, or are you happy to do a benchmark size bond issuance going forward?
Hi, Neeraj. Happy to take your question. On the refinancing part, we will just continue with what we have done also over the past years. We will just continue to be opportunistic here. We like to stand on all the legs we are standing on currently. We like the secured bond market, we like the unsecured bond market, we like our convertible bonds, we like private placements. Did I miss something? I think I got it. This is also something where we will continue to play in. Depending on where we see the most opportunities coming up or rising, we will act. There is no immediate need to act as you said, because we are covered for this year. As we all know, next year's numbers are coming up.
We will try to be proactive, and we will try to be ahead of time, but we also have to take into consideration what it costs us, and so it needs to make sense overall. We do not exclude any instruments, and we will just seize the opportunities when they come.
Nice to hear that LEG standing on all the legs. Thanks for that. Any update on your Moody's rating, given the recent weakness you're potentially kind of referring to on the LTV metric?
Yeah. We are still having the positive outlook for Moody's. We are still in constant talks with them. We haven't heard anything else, and we are still striving for the best.
Got it. Thank you. All the best.
Thank you.
The next question from Jonathan Kownator, Goldman Sachs. Please go ahead..
Good morning. Thank you for taking my questions. Three, if I may. The first one, can you help us understand what was the yield on the disposals that you closed and signed this year, please? Second, on the scrip dividend, keen to understand if you think you're going to continue going forward, or is that for this year? Maybe third question, what is happening on the regulatory debate side? Obviously, you have an update in your presentation, but just keen to understand would you expect any significant positive or negative developments for you on that front. Thank you.
Did on disposals. You might have seen that the number of transactions we've done has been very thin in Q1, and the breadth of those yields is enormous because on the one hand side, we certainly were able to sell, single flats, which then sometimes come at yields around 2%-2.5% up to something like 10% yields for a multi-family house with substantially additional maintenance and investment CapEx to be done. That is the breadth of disposals we were able to do.
With regards to the scrip dividend, we are offering this this year because EUR 80 million, if we translate those 40% of payout, which most probably will once again being executed in shares and not in cash, that certainly is help in the current situation where we see a thin transaction market and where is a bit of more uncertainty with regards to the future valuation developments. Therefore, we consider the scrip dividend for this year to be helpful. Is that a decision to offer a scrip each and every year? No, it's not. We take the optionality and the freedom to decide this always with the next dividend on which we are deciding.
Therefore, please do not take that as a decision also for the coming years, because certainly at the current share price, the scrip dividend is something which will be dilutive and certainly something which we have taken into consideration while deciding on it, but with regards to strengthening our balance sheet, we thought this to be the right measure at the current situation. Finally, with regards to regulation, you've seen that we've added three pages on regulation. If you want to, I can certainly elaborate for the next hour about regulation in Germany. The most important point, I think, is first of all, although we are not active in Berlin, and all the noise around the expropriation discussion, we do not foresee that this is constitutional possible.
I think that is the most important point from a German residential landlord and a public listed entity to be known to each and every investor. We do not foresee this to become law in Germany. The second part is with regards to rent regulations. You read about the rent regulation efforts in Berlin with regards to capping index links, capping furnished apartments, et cetera. All of that without an impact on our rental growth. We are not having many index rents. We do not do furnished apartments, et cetera. Yes, we see that there is additional regulation being put in place, but with no impact on our leases. The third point, which is of importance, it's all around the CO2 reduction efforts of the European Union and on a federal level.
You've seen that, the Germans have decided to not come up with an obligation for each and every landlord to do additional investments into a CO2 reduction of its buildings, which certainly is a positive. We also see that there is a better understanding for the needs of the industry, not only our industry, but also the energy industry and many other industries, that we need to come up with ways to reduce CO2 with a lower cost. That is something which is now also being considered and baked into the new heating law, the GEG, which we also explained, and that will certainly give us more freedom and will help to come up with more innovative, low cost alternatives towards just replacing fossil by heat pumps, but it will also enable us to do bivalent heating systems.
Combining a heat pump and a fossil-based heating system. From our perspective, that's also a very positive development for German residential landlords.
Thank you. If I just can follow up on the yield and disposals, what would be the average yield of the units that you've disposed or agreed to sell?
I do not have that number with me, Jonathan. Apologies.
Is it on the high side? Is it towards the, you know, more towards the 10%.
Apologies, I don't have it here. Yeah.
Thank you.
Okay, thanks, Jonathan.
As a reminder, if you wish to register for questions, please press star and one on your telephone. The next question from Kai Klose, Berenberg. Please go ahead.
Hey. Yes, say good morning. I've got a quick question on page 16 on the AFFO calculation. Just on the direction of travel for the non-personal operating costs and non-recurring special effects. In Q1 last year, they were pretty stable compared to Q1 2024. This time it was a bit of a stronger change, a higher change. Could you indicate maybe if there was anything special behind or some seasonal effect?
Yeah. Hi Kai. You see here the first effects of our digitalization initiative. You know, when we were talking about how we want to reach EUR 10 million in AFFO by 2030, and where we are changing our entire CRM system and stuff like that. You see the first effects here on that one. Part of this will also then end up in the non-recurring special effects and being taken out again. That's the effect you see here.
Just quickly, I see that in which of the 4 cost items or the 3 cost item: operating costs, special effects or admin?
You see it in the non-personal operating costs, in the non-recurring special effects costs. What else did you ask? Sorry.
In the admin or the administrative expenses recurring was just.
Yeah. Actually, a number that is lower than last year. Yeah.
Okay. Thanks so much.
Thank you.
We have a follow-up question from Paul May, Barclays. Please go ahead.
Sorry, guys, just had an incoming that I thought I'd ask as well. Just wondered on the accounting treatment of issuing a tap issuance at a lower par value or so lower absolute value versus the coupon. How does that get applied to FFO and AFFO? 'Cause I understand under IFRS the amortization would come into it, but am I right in saying that it's just the coupon payment, not the full yield that gets reflected in FFO and AFFO? Sorry, apologies, it's quite a specific one, but just had that question. Thanks.
Happy to take your question. The coupon that we are actually paying goes into net cash interest and those in the FFO and AFFO numbers. The accretion that you were talking about ends up in P&L but not in FFO.
Oh, perfect. Thank you very much.
Thank you.
That was the last question. I would like to turn the conference back over to Frank Kopfinger for any closing remarks.
Yeah, thank you, Vicky, and thanks for all your questions. As always, should you have further questions, please do not hesitate and contact us. Otherwise, please note that our next scheduled reporting event is on the fourth of August when we report our Q2 results. With this, we close the call, and we wish you all the best and hope to see you soon on one of the upcoming road shows and conferences. Thank you and goodbye everybody.
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