Audited consolidated financial statements for the fiscal year

Transcription

LEG-JB 2011 komplett engl. (6.11.)_LEG-GB 2004 Bildteil 13.11.12 16:50 Seite 1
LEG
Annual Report 2011
2011
LEG-Jahresbericht
Milestones
INVESTMENT OVERVIEW OF THE LEG GROUP
L EG N RW G M B H
LEG Management GmbH,
Düsseldorf
CENTRAL MANAGEMENT AND
INTERNAL SERVICE PROVIDER
CENTRAL PORTFOLIO
MANAGEMENT
LEG Wohnen NRW GmbH,
Düsseldorf
OPERATING AREAS
RESIDENTIAL
OTHER
DEVELOPMENT
LEG Wohnen GmbH,
Düsseldorf *
LEG Wohnungsbau Rheinland GmbH,
Düsseldorf *
LEG Rheinland Köln GmbH,
Düsseldorf
GWN Gemeinnützige Wohnungsgesellschaft Nordwestdeutschland
GmbH, Münster *
GeWo Gesellschaft für Wohnungs- und
Städtebau Castrop-Rauxel mbH,
Castrop-Rauxel
Ravensberger Heimstättengesellschaft
mbH, Bielefeld *
Gemeinnützige Bau- und Siedlungsgesellschaft Höxter-Paderborn mbH,
Höxter
Ruhr-Lippe Wohnungsgesellschaft mbH,
Dortmund *
Ruhr-Lippe Immobilien Dienstleistungsgesellschaft mbH, Dortmund
Wohnungsgesellschaft Münsterland mbH, Münster *
OTHER INVESTMENTS
LEG Bauträger GmbH,
Düsseldorf
LEG Beteiligungsverwaltungsgesellschaft mbH, Düsseldorf *
Münsterland Immobilien Dienstleistungsgesellschaft mbH, Münster
LEG Standort- und Projektentwicklung
GmbH, Düsseldorf *
LCS Consulting und Service GmbH,
Düsseldorf
LEG Vertrieb und Consulting GmbH,
Düsseldorf
Köln GmbH, Cologne *
EGRP Entwicklungsgesellschaft
Rhein-Pfalz GmbH & Co. KG, Mainz **
Bielefeld GmbH, Bielefeld *
Essen GmbH, Essen *
LEG Immobilien GmbH & Co. KG,
Düsseldorf **
* Each including investment companies
** Each in addition to general partner GmbH
As of: August 31st, 2012
CONTENTS
RESIDENTIAL PROPERTY PORTFOLIO OF THE LEG GROUP
(Stand: December 31st, 2011)
LEG NRW GmbH
LEG Wohnen GmbH
APARTMENTS
COMMERCIAL
UNITS
GARAGES
9.172
444
4.386
30,447
193
5,411
LEG Wohnungsbau Rheinland GmbH
5,682
24
1,288
LEG Rheinland Köln GmbH
4,817
17
1,631
LEG Gesellschaft für Vertrieb und Consulting GmbH
237
8
129
21,214
98
3,830
Wohnungsgesellschaft Münsterland mbH (WGM)
6,341
50
1,929
Ravensberger Heimstättengesellschaft mbH (RH)
5,133
23
957
Gemeinnützige Wohnungsgesellschaft Nordwestdeutschland GmbH (GWN)
1,964
12
433
Gesellschaft für Wohnungs- und Städtebau Castrop-Rauxel mbH (GeWO)
3,796
33
491
858
6
178
89,661
908
20,663
Ruhr-Lippe Wohnungsgesellschaft mbH
Gemeinnützige Bau- und Siedlungsgesellschaft Höxter-Paderborn mbH (GBS)
Subtotal
Portfolios managed by other LEG divisions
Group total
Residential/commercial space in m², total
Average residential/commercial space in m² per unit
246
72
263
89,907
980
20,926
5,789,865
209,115
64.4
213.4
1,091
1
188
222
0
60
EDITORIAL
2
MANAGEMENT INTERVIEW
“WE’LL BE READY FOR THE CAPITAL MARKET IN 2013”
4
BUSINESS PERFORMANCE
MANAGEMENT REPORT
10
ANNUAL EARNINGS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR 2011 FOR
LANCASTER GMBH & CO. KG
28
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR 2011 FOR
LANCASTER GMBH & CO. KG
29
KEY PERFORMANCE INDICATORS 2011
30
Other residential property company holdings
KHW Kommunale Haus und Wohnen GmbH*
Beckumer Wohnungsgesellschaft mbH**
CORPORATE STRATEGY
OVERVIEW
34
RESIDENTIAL STRATEGY
38
PURCHASING STRATEGY
42
HR STRATEGY
44
COMMUNICATIONS STRATEGY
46
IT STRATEGY
48
REFINANCING STRATEGY
50
* 40.6% non-controlling interest held by RH in KHW
** 33.3% interest held by WGM in Beckumer Wohnungsgesellschaft
Please turn over for overview of investments >
1
Dear customers
and business partners,
dear friends of LEG,
➞
LEG’S MANAGEMENT TEAM
left to right:
Eckhard Schultz (CFO)
Thomas Hegel (CEO) and
Holger Hentschel (HOO)
The LEG Group is on the right track. In just
three years the company has successfully
undergone a restructuring process that
could otherwise have easily taken twice
as long. This is an accomplishment that
demanded much of everyone involved –
first and foremost our employees. They
made the company’s goals their own.
And the results speak for themselves:
LEG NRW will be ready for the capital
market in 2013. Adopting IFRS international accounting standards is a key step
towards this. We are delighted to have
implemented this as planned and that we
can document this in the 2011 Annual
Report for the first time. Parallel to this, we
have launched a completely new IT system
in the Aareon SAP solution Blue Eagle
Individual, without which the Group’s
entire restructuring process would not have
been possible. This includes automated
work flows, a sophisticated reporting
system, and high transparency.
Furthermore, the residential property
industry has never bevore undertaken an
accounting migration and the launch of
a new IT system simutaneously. We are
proud of our employees’ achievements and
partners, to which this success is owed.
Their efforts are paying off. Today our
employees have more time to take care of
day-to-day business, the maintenance and
development of our portfolios, and, above
all, of our tenants. By definition, our tenants
are at the very heart of the way we think
and operate at LEG.
Thomas Hegel
Chief Executive Officer (CEO)
This is shown by our low vacancies and
accounts receivable, not to mention an
average tenancy of twelve years. This goes
to show how happy our tenants are.
But it takes some work from our side.
For example, on the one hand, the average
investment per square meter of residential
and usable space was again well above the
social charter’s limit of €12.50 per square
meter in 2011. In total, this amounted to
€81.9 million for maintenance expenses
and improvements. On the other hand, we
offer a bundle of services that we are constantly optimizing. A central role in acquiring
customers and building customer loyalty
is played by our on-site customer centers
and custodians, who serve as a nearby, first
point of contact for our tenants’ day-today concerns, needs and wishes. The way
we see it, customer service is a fundamental part of being ready for the capital market.
We successfully implemented the
measures described as part of “Project
ONE” (Organization for New Efficiency),
the first step in transforming a complex
group with a conglomerate of companies
and services into a clearly structured,
efficient and forward-looking enterprise.
This has been followed by the “LEG
Future” project, which is intended to
secure the company a position among the
top five most successful private residential
property companies in Germany. We want
to be in the top three in terms of customer
satisfaction. The key to this is what we call
our “strategy flower”. The six sub-strate-
Eckhard Schultz
Chief Financial Officer (CFO)
gies: residential, procurement, HR, communications, IT, and financing are all interconnected. They are being implemented as
part of a dynamic process according to the
specifications of a detailed and ambitious
timetable with clearly defined milestones.
Our claim for “LEG Future” is “We
are the residential specialist in NRW”. This
goal is supported by the three pillars of
sustainability, returns and commitment,
which we will explain to you, together with
the “strategy flower”, its six sub-strategies
and much more, in our annual report.
Operating earnings again improved
significantly in 2011: rental and letting
income rose by €11.1 million in the core
residential division. This is because of a
stable, high-level tenancy rate and an
increase in the average rent per square
meter from €4.63 to €4.75. These figures
clearly illustrate the growing success of
the company’s new direction.
However, the successes of the completed reorganization will not be properly
recognized in income until the fiscal year
2013.
On the one hand, the costs of the restructuring process — which have amounted to
several millions — will no longer be incurred,
while the efficiency enhancements will
take effect and be reflected in operating
earnings.
As you can see, it’s worthwhile staying with LEG as it continues on its journey.
We hope you will do so with a spirit of
commitment and constructive critique.
Holger Hentschel
Member of Management (HOO)
3
basic principles of housing management with new, capital market-oriented thinking – this combination is the
foundation for future success.
„
The LEG Group combines successful
We’ll be ready for the
capital market in 2013
„
Following the transition to IFRS and
the introduction of the SAP solution
Blue Eagle, employees now have more
time for operating activities. Starting
2013, earnings will benefits from
savings running into the millions of
Euros thanks to the discontinuation
of restructuring and implementation
costs; while the efficiency enhancements will take effect during this
period. The staff — like the owners —
In 2011 LEG NRW GmbH prepared its
accounts in accordance with IFRS for
the first time. What does that mean
for the company?
SCHULTZ: IFRS accounting is a key requirement for being capable of functioning in
the capital market, something for which we
are striving. We have achieved it with this
transition. It was one of our strategy’s key
milestones.
has played their part in this success.
This has been reported by both
managing directors, Thomas Hegel
and Eckhard Schultz, and Holger
Hentschel, member of management.
They spoke to real estate journalist
Frank Peter Unterreiner.
Is accounting in line with IFRS more
transparent?
SCHULTZ: Accounting under the HGB, the
German Commercial Code, is driven more by
the prudence principle and is geared more
heavily to the past. IFRS accounting involves
the measurement at market value of real
estate and liabilities in addition to the disclosure of hidden reserves. Naturally, this can
lead to fluctuations which are then shown
in earnings as gains or losses on remeasurement. This is different under HGB.
Other than the transition to IFRS,
what are the next key steps towards
being ready for the capital market?
HEGEL: The next step is the conclusion of
our refinancing strategy. We want to have
a clearly set out financing structure and
move away from having lots of small-scale
loans and toward a graded, risk-optimized
maturity schedule. This is something the
capital market expects of a healthy company. Other steps on the way to achieving
the highest standard of management were,
4
and still are, establishing the appropriate
skill sets and expertise within the company.
The entire residential management operating division has been aligned accordingly
and made more professional. Our employees have now internalized the concept of
thinking about profitability and results in
everything they do and the way they act.
The big change at LEG – especially mentally – is particularly clear regarding this. It is
also important to concentrate on customers.
Customer service is part and parcel of
being ready for the capital market. We have
raised employee awareness of this and
expanded the management team accordingly.
HENTSCHEL: Not forgetting the automation of our reporting system with 100%,
quickly deliverable data transparency, which
forms the basis for the management of our
operating activities.
When will you be ready for the capital
market?
SCHULTZ: In 2013. But the process never
ends; there’s always a need for optimization. In regards to the SAP optimization,
reporting transparency and the speed of
financial statement preparation, for example.
What has been your experience with
the Aareon SAP solution Blue Eagle?
SCHULTZ: We successfully went live on
January 1st, 2012. In the initial phase we
concentrated on functioning core processes.
The fact that we did this at the same time as
our accounting transition is, to our knowledge, unprecedented in the industry. Now
that it’s up and running, the job is to keep
on developing Blue Eagle and to optimize it
in terms of reporting and other processes.
HEGEL: It also has to be said that this issue
has a high level of complexity. A lot of companies have had IT projects take twice as
long as planned and cost three times as
much. We can say that we stayed within
our cost budget – with the required adjustments. This is thanks to the excellent work
by our partner Aareon and the LEG team
which supported the process.
HENTSCHEL: For the first time, Blue Eagle
has enabled us to implement work flows
and thereby operate more efficiently and
more professionally. SAP is a platform
from which we will significantly benefit in
years to come.
Did the launch of SAP first have a
negative effect on earnings?
SCHULTZ: The entire restructuring
process from 2010 to 2012 certainly costs
money. This means introducing SAP and
IFRS, which includes operational, organizational, procedural and HR changes, and
comprises license, consulting and launch
costs. These are all one-off costs of the
restructuring, which reduced earnings in
2011.
HEGEL: Despite the cost of the project,
operating earnings improved again in 2011.
And it is remarkable that Mr. Hentschel
and his team have kept our operations
exactly on the ambitious course that we
imagined.
You intend to be ready for the capital
market in 2013, by which time key
parts of the corporate strategy will
largely have been implemented. How
will that affect earnings in 2013 and
subsequent years?
SCHULTZ: It means that we will largely no
longer be incurring costs for the restructuring
or the implementation of our refinancing
strategy. Replacing old loans will entail a
lot of costs such as prepayment penalties,
bank fees and consultant and notary costs.
Accordingly, these non-recurring, projectrelated costs, which have run into the millions, will no longer be a factor in the near
future. In addition, the completed efficiency enhancement projects will also have a
positive effect on operating earnings.
HENTSCHEL: We are essentially taking
5
Vacancy management, rent adjustments. What options are open to LEG?
HENTSCHEL: We have developed our
own target rent system and are taking a
highly individual path. We don’t raise rents
across the board for the entire LEG portfolio, instead we look at each individual settlement, at each individual apartment even.
What’s the standard market rent for this
type of apartment? On the other hand we
look at: What can the tenant afford? We
have enjoyed very stable growth in recent
years with this individual and sustainable
procedure, and naturally we always have to
be able to pull off the balancing act of
keeping a balanced ratio of rents to vacancies. If we see that rent increases are having
a negative impact on vacancies, we immediately adjust our rent strategy. We already
have a low level of vacancies which can still
be optimized in one or two areas. And we
are posting historic lows in outstanding
rent receivables.
„
6
We now combine traditional
housing management with
new, capital market-oriented
thinking.
„
Then your owners must be satisfied...
SCHULTZ: Yes, and the cooperation with
our owners has developed very positively.
We can talk about and even debate our
issues constructively. We’ve known our
owners to give us vital new stimulus –
which naturally moves us forward as well.
We combine successful basic principles of
housing management with new, capital
market-oriented thinking. You can’t have
one without the other if you want to be a
success. Our projects and strategies are
designed with this in mind.
LEG’s portfolio is located almost exclusively in North Rhine-Westphalia.
Rents are already stagnating in structurally weak parts of NRW, some are
even falling. How does this affect
firstly your results and secondly your
portfolio strategy?
HEGEL: Of course we see these trends in
individual settlements or some regions of
NRW; their development varies greatly. We
have very prosperous markets and we have
other, more rural areas where we have to
proceed very carefully in matters of rent
policy. We generate growth in rents there
as well, but to a different degree. This way
we ensure that the value of our portfolio
increases overall. Our portfolio strategy
means that we make targeted investments.
We take a tailored approach to the individual location. It is also not the intention
of our modernization strategy to do everything the same way in our settlements,
such as introducing a consistent energy
standard that goes beyond the statutory
requirements. Rather, our modernization
work takes into account how much tenants
can pay, and is therefore necessarily selective. At LEG, ecological sustainability does
not come at the expense of social sustainability.
Your tenants are getting older and
the effects of demographic change are
becoming noticeable. How are you
handling this?
HENTSCHEL: There are several aspects to
the issue of senior-focused living. Firstly,
there is the technical conversion: making
apartments more accessible for this target
group. Here we can see that given the
financial options open to LEG, and its
tenants, it isn’t feasible to bring all our
properties to a senior-focused standard.
However, if we are working on the physical structure of an apartment or building
anyway – including for new rentals –
we take these aspects into account. The
second aspect is that of services, and we
have various options available to seniors.
For example, there are care concepts in
the individual settlements. We are thinking
about services such as shopping assistance,
but also, above all, advice services provided
by social and charity organizations that we
are happy to arrange.
HEGEL: We actually always talk about “just”
the older generation, but the young generation with children plays at least just as big a
role in our portfolios. We are currently developing various concepts to bring young and
old together. To name one example, we
know that many of our tenants have to have
their children looked after during the day.
We also know that older people now tend
to stay healthy and sprightly longer and are
looking for activities to do. So seniors could
perhaps look after the children of younger
neighbors.
How is your portfolio expected to
develop?
SCHULTZ: We’ve already made good
progress in our portfolio strategy. We also
made sure to dispose of peripheral areas
before the ownership changeover. The
portfolio has now largely been streamlined and is being maintained. We want to
grow and are working intensively to identify portfolios available for sale. We have
already looked at an impressive number
of offers but we don’t intend to buy at
just any price. Ideally, we would like to
buy more in locations where we already
have an established presence to fit our
portfolio.
„
care of the classic value drivers: rents,
vacancy development, receivables management and investments. We are already
seeing that the project ending is giving
employees a lot more scope and we can
gradually focus more on the development
of our operating activities again. What this
means is that we can continue to develop
our rents in line with market conditions
and sustainably in order to keep on showing stable growth in the coming years.
Our portfolio strategy
means that we make targeted
investments.
„
What is the market situation like?
Is it disadvantageous for LEG because
there are a lot of potential buyers?
Or is it perhaps excellent because the
interest rate environment is good?
SCHULTZ: There are a lot of offers of
widely varying quality, partly because so
many distressed portfolios are landing on
the market. We are watching this very closely. And at these prices it can be said that
the low interest rates have not resulted in
properties being overpriced. What we are
seeing is not the beginnings of a bubble,
it’s realistic asking prices. It is a significant
component of our strategy that we are
able to integrate portfolios highly efficiently with our new IT and our analysis tools.
One efficiency lever is being able to catch
up essentially with the capacity we already
have. Thus, we can generate corresponding
revenues while costs rise only marginally.
Let’s talk about cost savings: You won
the DW Future Prize for your procurement strategy. What exactly is this?
HEGEL: The first step was bundling all the
procurement activities throughout the
Group. As we have already said, we devel-
7
You also stipulate the prices that
workmen can charge for jobs, for
example.
HENTSCHEL: Yes, we looked at the individual jobs and broke them down to find out
how much they can cost. At the moment
we are running some pilot projects to test
general minor repairs management rather
than going to individual workmen. The
goal here is to increase efficiency and cut
costs. Central procurement already allowed
us to put a seven-figure amount in our virtual piggy bank by the end of 2011 — we
want several times that by 2015.
Your standard prices are probably
less than workmen would otherwise
charge. Is that being accepted in the
market?
HENTSCHEL: We need these cost advantages to keep rents affordable. Especially
when letting a new apartment, it’s important to have it set up cost effectively.
SCHULTZ: Our workmen benefit from it
as well. They’re motivated because we are
saving them productive working time. If a
workman doesn’t have to speak to the tenants on the phone himself and can arrive
on site with good instructions, he saves
time.
He can also save on multiple journeys if he
already has the materials he needs.
HENTSCHEL: There will also be a concentration of suppliers and therefore higher
volumes as well. This means that workmen
can have longer-lasting working relationships.
8
You have tenant fluctuation of 11%.
That sounds like a lot. What are you
doing to increase tenant loyalty and
to reduce this fluctuation?
HENTSCHEL: On average in the industry,
11% fluctuation is completely normal.
However, this figure can vary from location
to location, from less than 7% to sometimes
higher than this 11%. However, we see
our average fluctuation rate as a sign that
our tenants are very satisfied. The average
period of tenancy in our portfolio is twelve
years, which shows that our tenants are
very happy with us.
HEGEL: We operate at 160 locations in
NRW. Our own custodians and tenant
managers are close to the tenants and take
care of their concerns. They are the main
point of contact for day-to-day operations.
As a result tenants identify strongly with
LEG because we know their concerns,
needs and requirements. We also offer
extensive services for tenants.
SCHULTZ: I would like to add from a financial perspective that the stable fluctuation
for years is in no doubt because of our
activities, but also to appropriate rents and
good products. Certainly, we want to prevent
cost-intensive tenant changeovers, but a certain degree of fluctuation is also important
for rent development. When we rent to new
tenants we can often implement market
rents in compliance with the law sooner,
whereas established rents are often tied to
rent index regulations, which are often
below the market level for politically motivated reasons.
Let’s switch from tenants to employees. You wanted to train you employees to be “results-minded” business
people. Have you made any progress
with this?
SCHULTZ: Overall, yes. If you compare the
LEG of today with the LEG of a few years
ago, you can see a big difference in this respect. A key factor in changing our employees’ attitude towards the company has been
making our activities even more transparent.
For example, we redesigned operating
reporting so that we can effectively see at
the touch of a button which measures led to
which monetary results or, to put it differently, which were profitable and which had
to be topped up. This is done regularly in
department meetings and customer center
meetings.
How is employee satisfaction? Has it
changed? Are employees noticing the
effects of the professionalization and
major projects such as Blue Eagle?
HEGEL: Satisfaction is very high.
Our staff appreciates that we care intensively about their concerns. We offer training,
do a lot for employee advancement and
have introduced the LEG-POWER project,
which involves regular personnel interviews,
target agreements and selective promotion.
We are constantly engaged in an intensive,
ongoing discussion with our employees. At
the moment they are understandably glad
that a lot of projects have been completed.
HENTSCHEL: And the focus on earnings
has also led to higher employee satisfaction.
If you want to be successful then individual
employees — whether they are custodians,
letting staff or customer advisors — have
to be more flexibel. And now they are.
We have communicated our requirements
and objectives. It’s very much up to individuals how they achieve these. Being able
to make your own decisions within this
framework is significantly more motivating
than to have everything laid out to the
smallest detail. The best example is variable
target rents for individual apartments. The
only thing that’s set is the intended rent
volume for the entire building or block.
There is a shortage of good staff,
which is affecting the real estate industry as well. Are you getting the
employees you need?
HEGEL: I’m pleased to say that we cover
our HR requirements very well, and that’s
just from speculative applications. When we
advertise positions we get a very good response. The word is out that LEG is a very
exciting company and that we do a lot for
our staff. In particular, and this is something
that cannot be underestimated, we offer
very interesting jobs. We are one of the
companies in the real estate industry that
opens up development potential for every
employee, regardless of their position or
hierarchy level. In the industry people talk
about our human resources strategy and
about our employee loyalty instruments. We
are one of the few companies at GdW level
to even have a full HR strategy.
SCHULTZ: We also do an awful lot for our
trainees. We have developed a top internal
training system. That’s the basis for the
future. And we also work intensively to
develop our existing workforce and to equip
them for the rising challenges. We spend a
lot of money on this: Per employee we’re
talking about a training budget of around
€670 per year. Our leadership development
program is new. This is where we identify
which younger employees could potentially
handle management roles. This not only
increases employee loyalty, it also develops
talent – whether hidden or already apparent
– in the appropriate areas.
You’ve asked a lot of your employees in
recent years.
HENTSCHEL: Yes, we have. We are experiencing the restructuring of a company in a
massively compressed form. What other
companies have taken ten years doing we
are doing in just under four years – and that
is extremely trying. But our employees can
see what’s finished and what’s been achieved.
This is a fantastic success experience!
Ultimately we were open and honest. In
2010 we very clearly stated what we intended to do and we established a timeline.
2010: harmonization, that was Project
ONE. 2011: focusing on results, 2012 and
2013: being ready for the capital market,
and then we want to be one of the best five
private residential property companies in
Germany. Everything that we do is based on
this timeline with no deviation. That creates
a sense of orientation.
HEGEL: What is crucial is that we set ourselves a vision and a strategy and explained
this to our employees. We also attach a
great deal of importance to internal communications. We derived our measures
from this and said what each individual’s
contribution was. I believe that this has
made the strain a bit more bearable for
staff. Nonetheless, I have to emphasize
that we are a team that pulled together.
A team which said, that this is not only my
employer’s goal, this is my goal too and
I’m going to do my part.
„
op uniform processes for LEG, and as part
of our central procurement activities we
also turn uniform tender and allocation
procedures into uniform standards – and
this happens throughout LEG. In addition,
we reanalyze every issue related to investments from A to Z from a critical and creative standpoint. This leads us to new work
flows that entail cost benefits and make
things easier for our employees, so that in
turn they have more time to take care of
the customers.
We are experiencing the
restructuring of a company
in a massively compressed
form.
„
9
en!
ANNUAL EARNINGS
CORPORATE STRATEGY
SUCCESSFUL BUSIN ESS PERFORMANCE
The LEG Group is one of the leading residential property companies in Germany with 89,907 apartments, 980 commercial properties (as of December 31st, 2011) and around 250,000 tenants.
Following the completion of its reorganization as of April 1st
2010, the LEG Group is represented by nine branches, 15 customer centers and around 100 tenant offices in the three North
Rhine-Westphalian regions of the Rhineland, the Ruhr area, and
Westphalia. Its focus is on its core business area of residential
property. The company is systematically continuing the process
of professionalization that it began in 2008. The business success of the implementation of its corporate strategy is illustrated by the €11.1 million increase in rental and letting income to
€499 million in the core residential division. The result of this
will be a company which is ready for the capital market in 2013.
This annual report on the fiscal year 2011 presents the key
milestones in the Group’s transformation.
10
11
ANNUAL EARNINGS
CORPORATE STRATEGY
MANAGEMENT REPORT
STRATEGIES AND MILESTONES
“Promised and delivered” – the 2011 reporting year at the LEG Group was
dominated by the successfully implemented corporate strategy and the milestones achieved in the most comprehensive corporate transformation in the
history of LEG. The outstanding results of the combined efforts of the partners,
management and, above all, the staff include both the company’s operating
strength, which was documented in accordance with IFRS international
accounting standards for the first time, and individual central projects.
The operating and legal corporate structure of the LEG Group – which is the
Lancaster Group one to one – has been fundamentally changed and simplified since
2008. Effective August 29th, 2008, Lancaster GmbH & Co. KG acquired a majority of
shares in LEG NRW GmbH with its investment companies from Beteiligungsverwaltungsgesellschaft des Landes Nordrhein-Westfalen, NRW.BANK Institution under public law
and Deutsche Rentenversicherung Westfalen. Lancaster GmbH & Co. KG is the holding
company of the LEG Group. The sole general partner of Lancaster GmbH & Co.KG,
which was founded in May 2008, is Lancaster Holding GmbH, Düsseldorf, which also
forms the management of Lancaster GmbH & Co. KG.
The focus of the Lancaster Group is the management of the LEG Group, which is the sole
asset of Lancaster GmbH & Co. KG. The core business of the LEG Group essentially comprises the administration and management of the property holdings of the LEG investment companies. By pooling employees in the companies LEG Management GmbH and
LEG Wohnen NRW GmbH, the LEG Group leverages synergy effects to increase its efficiency. LEG Management GmbH and LEG Wohnen NRW GmbH work for the LEG Group
as service companies within the framework of agency agreements.
The LEG Group consists of 40 consolidated companies and eight further companies
which, for reasons of materiality, are not included in the consolidation. Except for the
companies in the development area, which is being wound up, the companies concentrate
on the property letting and management area.
The strategic steering of the LEG Group is handled by the management team at LEG
NRW GmbH. This corporate structure enables the LEG Group to meet the requirements
of the residential property industry, which are subject to constant change owing to demographic and economic developments. The LEG Group is a strong, future-proof organization in the residential property industry.
As part of its focus on its core residential business, the LEG Group sold its facility management company in 2010 and LEG Betreuung von Wohneigentum GmbH as of January 1st,
2012. Effective December 31st, 2011, the 49% of shares held in EGC (Energie Contracting
Gesellschaft) by LEG Beteiligungsverwaltungsgesellschaft were also sold in this context.
A process of professionalization within the LEG Group began in August 2008, which is
being systematically continued with the gradual implementation of the corporate strategy. Fiscal year 2011 centered on the operationalization of the individual sub-strategies.
Of particular note are the projects to launch a new, SAP-based ERP system (Blue Eagle),
the preparation for IFRS accounting and the implementation of improvement activities
within the strategic orientation of the LEG Group.
12
The aim of the ongoing corporate transformation in the 2011 reporting year was increasing the value added from residential property management and a consistently strong
customer focus with optimal on-site support for tenants and new customers. The transition to central and uniform management of the LEG Group was already completed in
fiscal year 2010, allowing the non-redundant regional management of the portfolio companies’ apartments.
On the basis of IFRS accounting standards, the LEG Group was divided into Residential
and Others segments in the 2011 reporting year.
The Residential segment comprises the portfolio companies and LEG Wohnen NRW
GmbH. It bundles all residential and commercial property holdings in addition to the buildings used by the Group itself. Property holdings from completed project developments
that are now let under long-term agreements and exclusively owned by the Group are
also assigned to the Residential segment.
As of December 31st, 2011, the Residential segment and all consolidated companies of
the LEG Group held a total of 89,907 apartments, 980 commercial properties and 20,926
garages and individual parking spaces (previous year: 90,180 apartments, 950 commercial
properties and 20,755 garages and individual parking spaces). Living space amounted to
5.8 million square meters (previous year: 5.8 million square meters). The Residential segment was characterized by targeted investments in real estate holdings in 2011. As part of
its modernization and maintenance work, the LEG Group invested a total of €81.9 million
(previous year: €83.1 million). This corresponds to an average investment of €13.64 per
square meter of residential and usable space (2010: €13.87 per square meter of residential
and usable space). The average investment per square meter therefore exceeds the value
stipulated in the social charter of €12.50 per square meter.
The rent level in the LEG Group was raised to an average of €4.75 per square meter per
month (previous year: €4.63 per square meter). As a percentage of revenue, rent arrears
amounted to 1.89% or €9.7 million as of December 31st, 2011 (previous year: 1.8% or
€8.9 million). Sales deductions due to vacancies within the LEG Group declined from
4.6% or €16.1 million in the previous year to 4.3% or €15.1 million in 2011. The vacancy
rate (based on the total portfolio of residential units), which varies from region to region,
averaged at 3.9% for the LEG Group as a whole (previous year: 3.9%).
LEG counters the demographic change in Germany and North Rhine-Westphalia with a
differentiated portfolio strategy that develops holdings in line with target groups. The
tenancy rate is gradually improved by targeted location concepts, the differentiating and
selective use of modernization and maintenance budgets, individual pricing and special
marketing campaigns.
The share of publicly subsidized apartments declined to around 37.6% or 33,769 residential units (previous year: around 38.6% or 34,864 residential units). As of December 31st,
2011, the residential portfolio contracted slightly as against 2010 by 273 residential units
due to sales and demolition.
The Others segment comprises the development companies and the companies
LEG Management GmbH, LCS Consulting und Service GmbH and LEG Betreuung von
Wohneigentum GmbH. Leased properties from development business which are available
13
ANNUAL EARNINGS
CORPORATE STRATEGY
MANAGEMENT REPORT
for sale are also reported in the Others segment. LEG Management GmbH, which is
assigned to the Others segment, essentially focuses on internal services functions for the
Group and corporate management activities.
The condensed form of the income statement is shown below:
CONDENSED INCOME STATEMENT (in €million)
In light of the changes in the economy as a whole, the market situation and the volatility
of the division, the decision was made at the start of 2009 to no longer continue the
development area. The ongoing projects have been and are being ended or sold. Project
companies are also being sold to investors or project developers for further development.
No further new developments will be started; for project developments that have already
begun, no further investment will be made barring an express contractual obligation.
Generally, such projects only involve property development services.
Net rental and lease income
The income statement in accordance with IFRS for fiscal year 2011 reports a consolidated net loss for the year of €15.12 million after taxes and extraordinary effects (previous
year: positive net income of €28.66 million). Earnings before income taxes amounted to
€9.20 million (previous year: €57.77 million) and were influenced in particular by extraordinary expenses in connection with the refinancing of individual Group companies, the
projects to launch a new, SAP-based ERP system (Blue Eagle) and the preparations for
IFRS accounting.
Administrative expenses and other expenses
2011
2010
243.67
240.55
Net income/expense from the sale
of investment property
-0.40
0.76
Net income from the remeasurement
of investment property
10.98
30.99
Net income from the disposal of inventory properties
-5.63
-5.12
Net income from other services
Other income
Operating result
Net interest income/expense and other financial expenses
Net income before income taxes
Income tax expense
Net profit/loss for the period
0.86
0.07
-66.63
-47.69
0.89
1.88
183.74
221.44
-174.54
-163.67
9.20
57.77
-24.32
-29.11
-15.12
28.66
With stable net rental and letting income, operating earnings (before taxes) amounted to
€183.74 million in the reporting year (previous year: €221.44 million).
Net rental and lease income:
NET RENTAL AND LEASE INCOME (in € million)
Rental income
Other income
2011
2010
497.61
486.48
1.36
0.80
Rental and lease income
498.97
487.28
Purchased services
-212.69
-204.90
-28.46
-27.73
Staff costs
Depreciation and amortization
Other operating expenses
Cost of sales in connection with rental and lease income
-3.33
-3.19
-10.82
-10.91
-255.30
-246.73
243.67
240.55
In 2011, rental income for the LEG Group rose by €1.13 million compared to the previous
year. This increase was mainly due to rental increases. The largest portion of rental
revenue results from the rental of apartments – around 92% of all contractual rents in
total. Income from the rental of commercial space and parking spaces accounted for the
remaining 8%.
14
15
ANNUAL EARNINGS
CORPORATE STRATEGY
MANAGEMENT REPORT
Net income from the disposal of investment property:
NET INCOME/EXPENSE FROM THE SALE
OF INVESTMENT PROPERTY (in €million)
Income from the disposal of
investment property
Carrying amount of the investment
property sold
Cost of sales in connection with investment
property sold
Net income/expense from the sale of
investment property
Administrative and other expenses broken down as follows:
ADMINISTRATIVE AND OTHER EXPENSES (in € million)
2011
2010
16.73
18.34
-15.40
-16.12
-1.72
-1.45
2011
2010
Other operating expenses
-44.78
-24.73
Staff costs
-18.75
-19.15
-2.19
-2.89
Purchased services
-0.39
0.77
Administrative and other expenses
-0.91
-0.92
-66.63
-47.69
Administrative and other expenses increased throughout the Group in 2011, mainly as a
result of the higher, non-recurring costs of the Group’s restructuring.
Net financial income:
In both 2010 and 2011, the LEG Group generated slightly higher income from disposals
in net terms as compared to the carrying amount. Net sale income was down slightly
compared to the previous year; at the same time, higher internal selling expenses were
required to conclude the planned sales, which resulted in a slightly negative net income
from disposals of €0.39 million (previous year: €0.77 million).
NET INTEREST INCOME/EXPENSE AND
OTHER FINANCIAL EXPENSES (in €million)
Interest income
Interest expenses
Net income from the remeasurement of investment property amounted to
€10.98 million in 2011 (2010: €30.99 million). The main reason for the lower growth in
value compared to the previous year was the increase in land transfer tax in NRW and its
impact on the remeasurement of the real estate portfolio.
2011
2010
2,80
1,96
-174.99
-167.53
Net income/expense from other investment securities
1.20
3.64
Net income from associates
2.95
0.64
Net income from the fait value measurement of derivatives
Net interest income/expense and other financial expenses
-6.50
-2.37
-174.54
-163.66
2011
2010
Net income from the disposal of inventory properties:
Interest expenses:
NET INCOME/EXPENSE FROM THE DISPOSAL
OF INVENTORY PROPERTIES (in €million)
2011
2010
INTEREST EXPENSES (in €million)
Income from the disposal of inventory properties
19.61
53.28
Interest expenses from real estate financing
-93.84
-89.51
-49.62
-50.54
-13.96
-6.64
Carrying amount of inventory properties sold
Cost of sales in connection with inventory properties sold
-19.92
-46.64
Interest expense from loan amortization
-5.31
-11.76
Prepayment penalties
-5.62
-5.12
Interest expense from interest rate derivatives
-4.58
-1.73
Interest expense from change in pension provisions
-4.56
-4.70
Interest expense from interest cost
-3.99
-4.90
Interest expenses from lease financing
-0,92
-1.06
The sale of the remaining properties from the development division was continued in 2011.
The real estate inventory still recognized under inventories as of December 31st, 2011 amounted to €21.9 million, €20.0 million of which relates to properties under development.
Additions to provisions for outstanding project services, which were reversed in 2011,
resulted in a sharp decline in the cost of sales. The continued reduction of the development
division allowed further savings in staff costs.
Other interest expenses
Interest expenses
-3.54
-8.45
-174.99
-167.53
Interest expenses rose overall compared to the previous year. This is due in part to the costs
of the refinancing of individual Group companies. The newly concluded loans were essentially
used for the early repayment of existing loans already in place.
Reconciliation to FFO (funds from operations)
A key performance indicator in the LEG Group is FFO. This shows the operating performance of LEG, adjusted for non-cash remeasurement effects, the non-recurring costs of
the Group’s restructuring and proceeds from sales.
16
17
ANNUAL EARNINGS
CORPORATE STRATEGY
MANAGEMENT REPORT
The LEG Group distinguishes between FFO I (not including net income from the
sale of investment property) and FFO II (including net income from the sale of investment property). Details of the system of calculation for each indicator can be found in
the glossary.
The LEG Group reported NAV of €2,384.39 million as of December 31st, 2011.
(in €million)
Equity (before miority interests)
Effect of exercising options, convertible bonds
and other rights to equity
FFO I and FFO II were calculated as follows in 2011:
NAV
(in €million)
2011
2010
Net profit/loss for the period in accordance with IFRS
-15.12
28.66
Fair value measurement of derivative
financial instruments (net)
Interest income
-2.80
-1.96
Deferred taxes
Interest expenses
174.99
167.53
Net interest income/expense
172.19
165.57
Other financial expenses
EPRA-NAV
2.36
-1.90
24.33
29.11
183.76
221.44
6.63
6.58
EBITDA
190.39
228.02
ASSETS
Fair value measurement of investment property
-10.98
-30.99
Investment property
21.70
9.37
3.45
0.40
-1.76
-0.76
Income taxes
EBIT
Project costs of a one-off nature
Extraordinary and out of period income and expense
Net income from the disposal of investment property
5.63
5.12
Adjusted EBITDA
210.59
209.00
Interest income and expenses impacting cash
-97.43
-93.42
-1.36
-3.14
111.80
-0.40
112.44
0.76
111.40
113.20
Income taxes impacting cash
FFO I (not including the sale of investment property)
FFO II (including the sale of investment property)
A further central performance indicator in the LEG Group in terms of value-oriented corporate management is net asset value (NAV).
2010
2,240.58
0.00
0.00
2,145.87
2,240.58
30.31
3.85
208.21
191.37
2,384.39
2,435.80
The condensed consolidated statement of financial position is as follows:
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (condensed, in €million and %)
2011
in %
2010
4,736.13
94.95
4,703.11
106.44
2.13
100.06
Receivables and other assets
61.55
1.23
113.68
Cash and cash equivalents
81.82
1.64
83.57
Other non-current assets
Assets held for sale
2.43
0.05
1.29
4,988.37
100
5,001.71
2011
in %
2010
Equity
2,145.87
43.02
2,240.58
Financial liabilities (non-current)
1,996.56
40.02
1,626.22
Other non-current liabilities
417.67
8.37
412.58
Financial liabilities (current)
309.99
6.21
584.18
118.19
0.09
2.37
0.01
138.15
0.00
4,988.37
100
5,001.71
Total ASSETS
EQUITY AND LIABILITIES
Other current liabilities
The FFO I of around €112 million, virtually unchanged compared to the previous year, reflects
the stable operating business performance of LEG.
2011
2,145.87
Liabilities from assets held for disposal
Total Equity and Liabilities
Total assets amounted to €4,988.37 million Euro in the reporting year (2010: €5,001.71).
The largest item on the assets side is non-current assets at €4,842.57 million. The main
asset of the LEG Group is its investment property of €4,736.13 million as of December
31st, 2011 (December 31st, 2010: €4,703.1 million), which accounted for 94.9% of total
assets as of December 31st, 2011 (2010: 94.0%).
The main items on the equity and liabilities side are equity at €2,145.87 million (2010:
€2,240.58 million) and the financial liabilities of €2,306.55 million (2010: €2,210.40
million). The Group-wide equity ratio of 43% is, by industry standards, also an extremely
solid figure.
18
19
ANNUAL EARNINGS
CORPORATE STRATEGY
MANAGEMENT REPORT
The LEG Group reported total provisions of €140.44 million, of which €0.07 million were
for taxes and €102.99 million for pensions and similar obligations.
The headcount of the LEG Group – the average number of employees in the LEG
Group, broken down by segment – developed as follows compared to the previous year:
The moderate total liabilities in the reporting year are reflected in a loan-to-value (LTV)
ratio of 46.95% (2010: 45.21%).
LOAN-TO-VALUE RATIO (in €million)
Financial liabilities
Less cash
Net financial liabilities
Investment property
Loan-to-Value Ratio (LTV) in %
December 31st,
2011
December 31st,
2010
2,306.55
2,210.40
81.82
83.57
2,224.73
2,126.83
4,736.13
4,703.11
2.43
1.29
4,738.56
4,704.40
46.95 %
45.21 %
Financial standing is in order. Equity amounted to €2,145.87 million (previous year:
€2,240.58 million). This corresponds to an equity ratio of 43.02% (previous year:
44.80%).
As it is common for residential companies, the company’s assets are essentially financed
by loans from banks and other lenders secured by land charges.
In their agreements for loans secured by land charges, the companies of the LEG Group
have agreed on standardized performance indicators and reporting duties. Financing
partners are regularly informed in their respective reports. Obligations under such loan
agreements were satisfied without exception.
The options to prolong loans already in place for property finance were unaffected by the
volatile general financial market situation. Funding of LEG NRW GmbH not secured by
land charges was repaid as part of the refinancing and restructuring of individual subsidiaries.
Since 2009, the LEG Group has been successfully pursuing a refinancing strategy with the
particular aim of achieving greater transparency in its financing structures, the optimization of its collateral options and a reduction of debt service.
The refinancing also entails basic company law restructuring, the main aim of which is to
boost the equity of LEG NRW GmbH as a sub-group parent company.
Housing
Average number of
employees
2011
Employee
capacity (FTEs)
2011
Average number of
employees
2010
Employee
capacity (FTEs)
2010
627
503
664
522
Other
279
253
280
256
Total
906
756
944
778
In 2011, the LEG Group employed a total average of 906 employees, 627 of whom worked
in the Housing segment. 279 employees were assigned to the Others segment in various
subsidiaries.
The LEG Group offers its employees a motivating working environment with personal
development options and partially performance-based remuneration. This ensures
employee satisfaction and loyalty to the company among top performers. The LEG Group
also pays particular attention to the development of its employees. Employee training is
made possible by a comprehensive internal program. Training activities are organized and
offered on a needs-driven basis. The LEG Group invests heavily in the advancement of
its employees. In the fiscal year 2011, the company spent around €670 per employee – the
average investment by companies in GdW (the German Federal Association of Housing
and Real Estate Companies) was only around €400 per employee.
A social charter was agreed as part of the sale of LEG. This contains far-reaching provisions, some of which enforceable by penalties, safeguarding the interests of the tenants
and employees of the entire LEG Group for a period of ten years (August 29st, 2008 –
August 28st, 2018). The wording of the regulations and provisions can be found on the
company’s homepage at www.leg-nrw.de.
An audited report is prepared each year on all measures and actions relating to the provisions of the social charter, on the basis of which the Ministry for Construction, Housing,
Urban Development and Transport of the State of North Rhine-Westphalia monitors
compliance with the social charter. In January 2012, following its detailed examination,
the Ministry fully confirmed LEG’s compliance with the social charter for the 2010 reporting year (as it had already done for the years 2008 and 2009).
The review of compliance with the provisions of the social charter for fiscal year 2011 and
the preparation of the corresponding report are currently being implemented.
The LEG Group was solvent at all times.
The LEG NRW Tenant Foundation was created by the shareholders of LEG NRW
GmbH in cooperation with the State of North Rhine-Westphalia for the social concerns
of its tenants and the community. The aim of this is to create additional, not for profit
benefits for the tenants and the general public. For example, this non-commercial benefits
could be an accessible apartment or a pro-integration and intercultural event in a residential area, also open to non-tenants of LEG. The Foundation has a capital of €5 million.
20
21
ANNUAL EARNINGS
CORPORATE STRATEGY
MANAGEMENT REPORT
Since it began work in June 2010, a total of 40 projects (29 in 2011) or tenants in need
of care have received funding.
Of these projects/care cases, 17 (13 in 2011) were of a benevolent nature and 23 (16 in
2011) of a charitable nature.
Within its sustainable corporate strategy, the LEG Group stands out due to its strong
social commitment to the cohabitation of its tenants. Social responsibility is practiced at
LEG. In addition to local aid, this includes supporting district initiatives and local institutions. For example, the LEG NRW Tenant Foundation also supports the performance of
around 150 tenant events in residential areas per year.
A central risk management system (RMS) has been implemented at LEG Management GmbH in order to detect, analyze and prioritize risks and opportunities affecting
the LEG Group early on. The RMS is an essential component of responsible corporate
governance for the management. It is used to create a Risk and Opportunities Report
of the LEG Group, in which all LEG companies are integrated. The ongoing economic
development and growth of the LEG Group results from the early detection of possible
opportunities. It also analyzes risks on an ongoing basis in order to be able to react to
them accordingly in a timely manner.
Furthermore, a Group-wide internal control system (ICS) has been established in
the LEG Group. Central to this method is a risk management system for the accounting
process.
In addition to safeguarding assets, the aim and purpose of the ICS is to ensure the correct
and complete recognition and presentation of all business transactions to facilitate an
accurate assessment of the accounting of the LEG Group. The basis for accounting, in
addition to statutory requirements, are the national and international accounting standards and a group-wide accounting policy.
The vision of the LEG Group is to develop into a model for private residential property
companies by 2013 that sustainably combines
• superior return
• socially acceptable portfolio development
• strong customer satisfaction and
• a motivating working environment for dedicated employees.
SUMMARY
The general economic development, vision and strategy and the local projects derived
from them form the basis for the Group’s future success. Merging and alingning of the
various companies has resulted in a streamlining of organizational structures. These, in
turn, will lead to improved processing efficiency in the medium term with significant cost
savings, implemented in compliance with all social charter criteria. At the same time, operating activities will make a key contribution to earning improvements with an ambitious
plan to reduce rent and vacancies.
The refinancing and restructuring measures already implemented and those still planned
will improve the financial situation of the Group, enhance the equity situation of
Lancaster GmbH & Co. KG in the medium and long-term and potentially enable it to distribute dividends. Together with the strategic projects newERP, IFRS and “optimized target processes”, these are key requirements for developing LEG into a leading residential
property company with stable cash flows and returns in the medium-term.
The new LEG Group is in an excellent position to take advantage of the opportunities of future development with its broadly diversified portfolio of properties in North
Rhine-Westphalia, its focus on the Residential segment and the strict organization of its
portfolio management.
Furthermore, the introduction of the SAP-based IT system “Blue Eagle” opens up new
opportunities. In addition to greater transparency, further processes can be optimized
while further developing the reporting system.
The LEG Group believes that the positive economic situation described in the introduction
will continue in 2012. The company is a reliable partner for its tenants, offering a good
price-performance ratio and allowing them to live well and securely. The day-to-day thinking and actions of the employees of the LEG Group is geared toward constantly enhancing
customer satisfaction – in terms of both customer loyalty and attracting new tenants.
A key success factor in this is the friendly, prompt and professional local support from
committed employees. The goal is the constant improvement of customer loyalty and
letting performance.
22
23
ANNUAL EARNINGS
CORPORATE STRATEGY
MANAGEMENT REPORT
GLOSSARY:
General
The key figures reported here – EBIT, EBITDA, adjusted
EBITDA, FFO, EPRA NAV and LTV – are not standardized
key figures under IFRS or the German Commercial Code
(HGB). Therefore, they are comparable only to a limited
extent with performance indicators of other companies
that are publishing using the same or similar terms.
EBIT
Operating result: earnings before interest and taxes
EBITDA
EBITDA represents earnings before interest and taxes,
adjusted for depreciation of property, plant and
equipment and amortisation of intangible assets.
Adjusted EBITDA
Adjusted EBITDA is calculated by adjusting the EBITDA
for net income or expense from the measurement of
investment property, project costs of a one-off nature
and other extraordinary and prior-period income and
expenses. Project costs of a one-off nature relate to
major projects of the Lancaster Group (including the
introduction of SAP/Blue Eagle and conversion to IFRS).
LTV
The LTV is the ratio of our financial liabilities (including
EK 02 tax liability) less cash to investment property and
assets held for sale.
Project costs
Project costs include expenses for projects that are largely non-recurring with a complex structure and objectives
that are achieved with the provided funding in the planned period.
The Lancaster Group calculates FFO I by adjusting the
FFO I
(not including sales) relevant period’s adjusted EBITDA for interest income
and expenses impacting cash and taxes impacting cash.
24
FFO II
(including sales)
The Lancaster Group calculates FFO II by adding net
income or expense from the sale of investment property
to the FFO I for the relevant period.
EPRA-NAV
EPRA NAV is used to represent the Lancaster Group’s
long-term equity. It is calculated based on the net asset
value (NAV) including the fair value of financial instruments (net) and deferred taxes. The EPRA NAV includes
fair value adjustments for all main balance sheet items
that are not recognised at fair value as part of the NAV
in the IFRS accounts.
25
ANNUAL EARNINGS
CORPORATE STRATEGY
ANNUAL EARNING S INCREASED
The extensive restructuring of the Group is bearing fruit: In
2011, the LEG Group increased its net rental and letting income by 1.3% to €243.7 million. At the same time, rental and
letting revenue rose from €487.3 million to €499 million in
2011. This demonstrates the operating strength in LEG’s core
business of residential property management and had a positive impact on the measurement of the residential portfolios.
The carrying amounts of LEG’s residential portfolio grew
slightly by around 0.8% to €4.736 billion. Owing to the high
non-recurring costs of the current Group restructuring and a
lower result on remeasurement, the net profit for the period
declined from €28.66 million in 2010 to a net loss of €15.12
million in the reporting year. Adjusted EBITDA rose slightly
from €209 million in 2010 to €210.59 million in 2011. FFO II
reached an outstanding value of €111.40 million. The LTV of
47%, the consolidated equity ratio of 43% and the NAV – as
defined according to the European industry standard EPRA –
of €2.384 billion are also evidence of the healthy structure
of the LEG Group.
26
27
ANNUAL EARNINGS
CORPORATE STRATEGY
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
L A N C A ST E R G M B H & CO . KG , D Ü S S E L D O R F
CO N S O L I DAT E D STAT E M E N T O F COM P R E H E N S I V E I N COM E – J A N UA RY 1 s t - D EC E M B E R 31 s t , 2 011
L A N C A ST E R G M B H & C O . KG , D Ü S S E L D O R F
CO N S O L I DAT E D STAT E M E N T O F F I N A N C I A L P O S I T I O N – D EC E M B E R 31 s t , 2 011
Dec. 31st, 2011
Dec. 31st, 2010
Jan. 1st - Dec. 31st, 2011
Jan. 1st - Dec. 31st, 2010
€ thousand
4,842,572
4,736,126
75,669
6,345
8,102
5,692
2,542
8,096
€ thousand
4,803,172
4,703,113
66,360
3,109
10,549
6,045
2,670
11,326
€ thousand
€ thousand
Non-current assets
Investment property
Property, plant and equipment
Intangible assets
Investments in associates
Other financial assets
Deferred tax assets
Current assets
Inventories for property and other inventories
Income tax receivables
Cash and cash equivalents
Total assets
145,800
21,812
38,574
1,155
81,824
2,435
4,988,372
198,541
36,248
74,555
2,881
83,570
1,287
5,001,713
Dec. 31st, 2011
Dec. 31st, 2010
Equity
Equity interests
Capital reserves
Cumulative other reserves
Equity attributable to the shareholders of the parent company
Non-controlling interests
€ thousand
2,145,873
1
544,265
1,226,557
1,770,823
375,050
€ thousand
2,240,582
1
591,125
1,256,330
1,847,456
393,126
243,669
498,972
-255,303
-399
16,726
-15,405
-1,720
10,980
-5,629
19,609
-19,918
-5,320
861
12,462
-11,601
-66,633
894
183,743
2,802
-174,985
1,195
2,951
-6,506
9,200
-24,325
-15,125
240,549
487,277
-246,728
764
18,337
-16,120
-1,453
30,991
-5,121
53,282
-46,640
-11,763
68
12,727
-12,659
-47,685
1,869
221,435
1,956
-167,526
3,642
638
-2,375
57,770
-29,107
28,663
Non-current liabilities
Provisions for pensions
Other provisions
Other liabilities
Tax liabilities
Deferred tax liabilities
2,414,231
97,214
14,572
1,996,559
51,375
38,202
216,309
2,038,796
92,190
19,228
1,626,218
52,104
46,359
202,697
-23,057
4,564
-18,493
-5,081
1,565
-3,516
-37,134
49
-7
42
-2,415
830
-1,585
27,120
-3,599
-11,526
4,445
24,218
Current liabilities
Provisions for pensions
Other provisions
Provisions for taxes
Other liabilities
Tax liabilities
Liabilities in connection with assets held for sale
Total equity and liabilities
428,268
5,779
22,808
68
309,995
65,747
23,783
88
4,988,372
722,335
5,599
17,570
65
584,185
91,192
23,724
0
5,001,713
-7,361
-29,773
4,181
22,939
ASSETS
EQUITY AND LIABILITIES
28
Rental and lease income
Cost of sales in connection with rental and lease income
Income from the disposal of investment property
Carrying amount of investment property sold
Cost of sales in connection with investment property sold
Net income from the remeasurement of investment property
Income from the disposal of inventory properties
Carrying amount of inventory properties sold
Cost of sales in connection with inventory properties sold
Net income from other services
Income from other services
Expenses in connection with other services
Administrative and other expenses
Other amounts and expenses
Operating result
Interest income
Interest expense
Net income from other financial assets and other investments
Net income from associates
Net income from the fair value measurement of derivatives
Net income before income taxes
Income taxes
Net profit/loss for the period
Change in amounts recognized directly in equity
Change in unrealized gains/losses
Income taxes on amounts recognized directly in equity
Change in fair value of hedged interest rate derivatives
Change in unrealized gains/losses
Income taxes on amounts recognized directly in equity
Actuarial gains and losses from the remeasurement of pension obligations
Total comprehensive income for the period
Net profit/loss attributable to:
Shareholders of the parent company
Total comprehensive income attributable to:
Shareholders of the parent company
29
ANNUAL EARNINGS
CORPORATE STRATEGY
KEY PERFORMANCE
INDICATORS 2011
Calculation of indicators: see glossary on page 25
KEY PERFORMANCE INDICATORS 2011
New rentals
(in residential units):
due to measures
and sales
0.3 %
+ 0.76 %
2011
2010
Loan to Value (LTV) ratio:
FFO I:
2011
2010
2011
2010
Operating strength and
rising property values
– LEG’s success story
„
Net Asset Value (NAV):
- 4.22 %
+ 1.74 % percentage
points
€210.6 million
€209.0 million
€111.8 million
€112.4 million
46.95 %
45.21 %
€2,146 million
€2,241 million
- 0.54 %
2010
€4,703 million
€240.5 million
Adjusted EBITDA:
2011
€4,736 million
€243.7 million
2010
€83.1 million
€487.3 million
2011
€13,64/m2
€499.0 million
2010
2010
+ 0.7 %
- 1.4 %
2011
€16.1 million
11.2 %
+ 1.3 %
2011
Value development of IAS 40
property:
Investments in our portfolio:
€81.9 million
+ 2.4 %
Net rental and letting income:
€15.1 million
11.4 %
2010
3.59 %
10,088
2011
- 6.2 %
3.58 %
10,234
2010
- 0.01 % percentage
points
3.9 %
€4.63/net, basic
2011
due to market
3.4 %
3.9 %
€4.75/net, basic
2010
+/- 0.0 % percentage
points
Sales deductions:
due to measures
and sales
0.5 %
due to market
3.6 %
2011
Rental and letting income:
30
+ 0.2 % percentage
points
+ 1.4 %
€13.87/m2
+ 2.6 %
Vacancy rate as of Dec. 31st, 2010
and Dec. 31st, 2011:
Average vacancy rate 2010 to 2011:
Fluctuation:
„
Average rent:
2011
2010
2011
2010
2011
2010
2011
2010
31
ANNUAL EARNINGS
CORPORATE STRATEGY
Die LEG-Geschäftsführung im Interview: Ulrich Tappe (links) und Thomas Hegel
STRATEGIES IMPLE MENTED
In 2011, LEG achieved significant milestones on its path to
getting ready for the capital market. Assisted by the launch
of the new ERP system Blue Eagle, target processes were
redefined in the field of portfolio management while uniform
work flows and interfaces were created. As part of this, for
the first time LEG prepared its accounts in accordance with
the internationally recognized IFRS policies. The refinancing’s
transformation creates a risk-adequate equity and liabilities
side of the balance sheet, ensuring that LEG remains fit for
the future.
32
10
11
33
ANNUAL EARNINGS
CORPORATE STRATEGY
OVERVIEW
IT
1
IT
IT
€
2
6
€
€
IT
IT
5
IT
3
IT
➞
€
€
Everything is connected –
the strategy flower
The corporate strategy is a guideline for all sub-strategies. All
strategies are connected to each
other.
They are implemented as part
of a dynamic process according
to the specifications of a detailed
and ambitious timetable with
defined milestones.
1
2
3
4
5
6
Residential strategy
Procurement strategy
HR strategy
Communication strategy
IT strategy
Refinancing strategy
€
4
The members of the
strategy team (l to r):
Oliver Gabrian, Thomas
Breuer, Holger Hentschel,
Dr. Thomas Görgemanns,
Thomas Hegel, Jens
Radtke, Eckhard Schultz
and Susanne Hofmann
The transition to a common, general IT platform provided the basis for defining target
processes in residential property management and leasing. Additionally, this plattform
helped streamlining workflows and interfaces.
ENTERPRISE VALUE – OPERATING STRENGTH
– SOCIAL RESPONSIBILITY
LEG focuses on its core residential business. Its goal is to rank among the best five private
residential property companies in Germany. LEG wants to be in the top three for customer
satisfaction. The forward-looking strategy plan “2018+“ is derived from this corporate
vision. The company is gradually working its way into the inner circle of the best in the
industry.
The first step was successfully concluded in 2010 with “Project ONE” (Organization for
New Efficiency).
The company has since continued its corporate transformation with the “LEG Future”
project. The company’s strategy is built on three pillars:
– Economic sustainability is achieved through selective investment in maintaining and
developing the portfolio, thereby ensuring constant and appropriate growth in enterprise
34
€
value. Another goal is social responsibility towards employees and tenants.
– An appropriate return is achieved with an efficient and effective structural process
organization to raise performance in all areas of the company – from letting to customer
support and financing.
– A precondition for success is the commitment of all employees, their identification
with the company’s goals, their expertise, professionalism, as well as customer service and
team spirit.
STRATEGY TEAM
By 2013, the company shoud be ready for the capital market. Gradually, the real estate
holdings will be further developed into a competitive and target group-oriented portfolio
in promising regions. The systematic development of executives will ensure a sustainable
management quality.
STRATEGY:
CREATIVITY FOR ALL DIVISIONS
The strategy team was created in mid-2011. This committee discusses fundamental aspects
of the ongoing development of LEG in a small group that transcends hierarchy levels. It
debates issues openly without a strict agenda and thereby releases its creativity. The team
tracks the implementation of corporate strategy and devises recommendations for its
further development. It also coordinates current and future major projects, identifies and
addresses new action areas to strengthen LEG.
35
ANNUAL EARNINGS
CORPORATE STRATEGY
OVERVIEW
The strategy team regularly looks at the company’s projects in terms of their qualitative
and quantitative benefits and weighs these up. If it finds that a project is tying up too many
resources in relation to the expected benefits, this is adjusted accordingly.
DEMOGRAPHIC CHANGE: KNOWING CUSTOMER REQUIREMENTS, ANALYZING MARKETS
Residential property companies in Germany have to adapt both their strategic outlook
and their operating activities according to the demographic change. This requires a
precise understanding and servicing of customer requirements and the ability to diversify
products accordingly. The high investment requirements of the coming years can only be
refinanced if the scope for rent adjustments can be leveraged, vacancies reduced in the
long term and sales deductions minimized.
Jens Radtke (Managing
Director of Radtke &
Associates, Düsseldorf)
Strategy work is the
key to sustainable
business success.
Only a clear and
comprehensible
market positioning will allow a
targeted orientation inwards and
outwards – the implementation
brings the success.”
In particular, LEG is tackling the challenges of demographic change in its “Residential”
corporate sub-strategy. A differentiating strategy for residential properties is the basis for
the flexible rent pricing of each individual apartment. The tenancy rate is thereby systematically improved. This is also aided by specific location concepts, the selective and targetgroup oriented use of modernization and maintenance budgets, individually agreed additional features in apartments and special marketing campaigns. Operating successes show
that LEG can successfully let apartments even at structurally weaker locations.
The locally very different housing markets are analyzed precisely, especially in regards
to standard market rents, the standards of features and the profitability of modernization
measures. LEG uses the 2011 NRW Residential Market Report as its basis for this. This
scientific study helps to better classify one’s own business activities on the one hand and,
on the other, to optimize market transparency and thereby professionalism in the specialized residential property industry in North Rhine-Westphalia.
➞
RESIDENTIAL PORTFOLIO
The LEG Group’s portfolio map with its three
regions, nine branches
and 15 customer centers.
LEG is also represented
in all larger estates with
around 100 tenant offices.
Westphalia region
Ruhr area region
Rhineland region
Westphalia region
Ruhr area region
Rhineland region
36
45
ANNUAL EARNINGS
CORPORATE STRATEGY
R E S I D E N T I A L ST R AT EGY
FOCUSING ON TENANTS
IT
Prof. Volker Eichener
(Director of the
EBZ Business School,
Bochum)
Sustainability means
satisfying the needs
of the present without risking that future
generations will be
unable to satisfy theirs. Sustainably
residential property management
therefore requires a reasonable
balance of ecological, economical
and social concerns. An excessive
modernization that saves energy
but costs so much that lower
income tenants can no longer
afford the rent is not sustainable.“
LEG’s tenants are at the heart of the residential strategy. The company
presents itself as a residential specialist that offers a good price-performance ratio and forthcoming services at good locations in North RhineWestphalia. Overall, LEG Wohnen NRW GmbH manages roughly 250,000
tenants in around 90,000 apartments. LEG accommodates their desires
and options with a differentiating and individual product strategy.
€
PROFESSIONAL
RENT MANAGEMENT: TARGET RENTS,
DIFFERENTIATION AND OPTIONS
When developing the portfolio, the focus is on market-driven rents, standard features
in apartments and modernization measures. A central instrument in increasing income
according to market conditions is the target rent system, with which the potential to raise
rents can be recognized and realized in a targeted manner. A precondition for this is to
have as much comprehensive data as possible from the regional markets and a highly
detailed understanding of the respective local conditions. A key database is provided by
the LEG Residential Market Report for North Rhine-Westphalia.
To help determine prices for new rentals, LEG has developed its own tool: product/price
differentiation. The intended average rent for a building is defined with the target rent.
Within this framework, the price tag per apartment is stipulated, taking into account
criteria such as standard features, floor plan, micro-location within the building, view,
garden usage and general condition. Thus, the specific rent can be determined individually
and flexibly for each apartment in a building. Each apartment gets a non-binding rent
recommendation in line with its appraisal. This “price tag” gives the landlord greater scope
at a local level in the marketing process. It also allows him to react flexibly and to deviate
upwards or downwards in individual negotiations, as long as he meets the target total rent
for the respective property. The product/price differentiation tool has proved a logical
supplement to the target rent system.
The Dortmund-Wickede example: fair prices – more rentals
Product/price differentiation has been in testing at Dortmund-Wickede since April 2011.
Apartments in selected settlement areas were appraised according to market conditions
and by taking demand into account. By December 2011, 147 new rentals in all price
segments had been signed; significantly more than without product/price differentiation.
A flexible approach to accommodating the desires and possibilities of potential tenants
allows for a multi-product strategy with which the standard housing features can be
38
➞
varied. Our range therefore includes both products for greater living comfort and those
for customers with lesser aspirations and payment scope. Customers have an influence
on the price of their rent by choosing between different features. Using this method has
shown initial success in reducing structural vacancies. The project was launched in March
2011 using 805 vacant apartments. 111 of these were let by the end of December. The
concept is now gradually being rolled out for LEG’s entire portfolio.
TARGET PROCESSES
Specialists at work. Even
more customer focus with
newly defined processes.
SETTLEMENT CONCEPTS SPECIFICALLY FOR AREAS
WITH UNTAPPED POTENTIAL
Product/price differentiation and the multi-product strategy are primarily used in socalled settlement concepts. At LEG this term describes a specific procedure for a settlement or group of buildings that still has untapped letting potential. LEG leverages this
with a combination of product quality, pricing and special advertising methods to raise
image. Settlement teams with pronounced marketing expertise were created in defined
locations as central controlling groups. Together with the teams from the respective
customer centers and branches, they develop a comprehensive and competitive market
analysis from the perspective of target customer groups, taking into account currend
demand considerations. Tailored action concepts are then designed individually for each
settlement.
At the end of 2011, the settlement meetings focused on 22 settlements. Since 2011, these
pilot projects have influenced products and prices for around 8,600 apartments in these
quarters. This raised the tenancy rate rapidly: vacancies were reduced by more than 150
apartments within nine months.
A further tool for addressing target groups professionally are residential campaigns.
Campaigns such as “Start the Year with a Bang”, “Super Summer Savings”, “Happy
Families” or the “LEG Furniture Bonus” appeal to different, pre-determined target groups.
Campaign coupons supplement and round out LEG’s traditional forms of advertising and
###Bild zu Wickede###
➞
PRODUCT/PRICE
DIFFERENTIATION
Each apartment has its
price tag – LEG takes a
flexible approach to marketing, at the DortmundWickede location, for
example.
39
ANNUAL EARNINGS
CORPORATE STRATEGY
attract new potential tenants. In particular, campaigns promote the leasing of specific
apartments at selected locations. The residential campaign offers fit into the differentiated
product strategy and are developed and utilized according to vacancies, apartment quality
and target group settings.
MODERNIZATION:
TREND TOWARDS INDIVIDUAL OFFERS
Well-planned repair and modernization work in line with market conditions plays an
important role in portfolio development, both technologically and financially. LEG’s
repairs strategy distinguishes between three different categories: minor repairs, renovation
of vacant apartments (turn costs) and modernization/major repairs (capex). A total of
around €19 million was spent on turn costs in 2011. LEG invests an annual sum of around
€35 million in modernization and major repairs (capex).
When implementing energy-saving measures in portfolios, ecological sustainability
cannot come at the expense of social sustainability. LEG therefore employs different
modernization concepts that are geared towards tenants’ respective financial capabilities
and avoid the displacement of lower income tenants.
Cologne Ford estate: lower energy consumption, more living space
The Ford estate in Cologne-Niehl, which is now one of the “50 solar estates in NRW”, has
undergone renovation and energy optimization. The new construction standard as per the
German Energy Conservation Regulations (EnEV) has been surpassed by more than 30%.
In addition, 300 apartments with an average of 47 square meters have been turned into
264 family-sized apartments. Furthermore, 81 new apartments were created by adding
floors to the building. The refurbishment received “Special Recognition” at the German
Builder Prize 2011/2012.
Ratingen-West: Houses in the sky for blue skies
The first “House in the Sky” in Ratingen-West is the biggest low-energy building in North
Rhine-Westphalia; the second and third buildings of this type will now also achieve this
standard, cutting CO2 emissions by more than 300 metric tons per building per year.
Tenant service is improving as well: There will be a custodian’s office in the entrance area
of each House in the Sky.
➞
MODERNIZATION
SOCIAL: DISTRICT MANAGEMENT, INTEGRATION AND
COMMUNITY
LEG’s professional district management is intended to identify customers’ residential
desires in the district and thereby increasing general satisfaction. In most settlements, the
tenant population is broadly mixed, coming from different social strata and a range of
sometimes very diverse cultural backgrounds. District management is a centrally based
instrument. Together the with the local settlement teams it devises strategies and
action concepts tailored to the district. District management primarily focuses on social
measures, district, culture and youth work. If tenants suddenly find themselves in need of
assistance through no fault of their own, district management can help them quickly and
individually, for example by contacting the LEG NRW Tenant Foundation.
There are also integrative measures, which are intended to ensure good cohabitation in
residential quarters. Tenant fairs, school holiday programs and Kids’ Olympics foster
cohesion among neighbors and promote a sense of community. At the start of 2011, a
cooperative community involving LEG in Dortmund-Scharnhorst was awarded the “Social
City 2010” prize for its exemplary district management.
ORGANIZATION:
CUSTOMER PROXIMITY, EFFICIENCY AND EXPERTISE
Within the company, the organizational optimization focused on the core residential
business. Customer acquisition and tenant support have also been reorganized since
April 2011: instead of a “generalist” in charge of all aspects of rental business, the ever
more complex market requirements now demand a specialized organization where all
employees operate according to their individual skills in the fields of letting, customer
support and claims management.
Social responsibility in
life: Our district management ensures harmonious cohabitation.
➞
DISTRICT MANAGEMENT
A much-discussed issue is the easy access conversion of apartments. This usually
happens when the apartment is already in need of modernization. LEG is particularly
happy to take such tenant requests into account when signing new rental agreements.
Modernization in moderation. Above: LEG’s Ford estate
in Cologne-Niehl. Below:
Houses in the sky in Ratingen-West. LEG refurbishes
its apartments in line with
tenants’ purchasing power,
sustainably and considering
ecological and social considerations.
40
41
ANNUAL EARNINGS
CORPORATE STRATEGY
PROCUREMENT STRATEGY
P R O C U R E M E N T S T R AT E G Y
CUTTING COSTS
BY BUNDLING
IT
Prof. Andreas Pfnür
(Technical University
of Darmstadt)
The automotive industry led the way. It
has the iron principle
“The profits are in
the procurement”.
Although the residential property
industry is known for commissioning billions in modernization and
maintenance and is therefore one
of the main clients of the German
construction industry, for many
companies a truly strategic
orientation in procurement is still
the exception. Strong efficiency
gains and cost reductions can be
achieved here very quickly with a
manageable organizational and
HR outlay. It would therefore
make financially sense for the
management of residential property companies to focus more on
the reorientation of their procurement in future in addition to the
core operating activities of letting
and managing apartments.”
68
42
LEG bundles the procurement of technical and other services and optimizes
supplier management. The Central Procurement/Technology (CP/T)
€
division underwent a strategic and organizational restructuring in 2011. LEG
has thus established effective and future-proof procurement with significantly improved process quality, particularly in terms of adherence to
schedules, costs and quality. At the heart of the new procurement strategy is
the bundling of procurement services by signing general agreements for minor repairs, the
renovation of vacant apartments (turn costs) and modernization/major repairs (capex). It
also includes the selection of effective cooperation partners on the basis of detailed business
assessment and comprehensive quality management. As a result, the company is procuring
at least 10% more with a constant annual procurement budget of around €100 million. This
benefits the quality of construction work and therefore our tenants.
GENERAL AGREEMENTS MEAN SAVINGS
Since launching the new procurement strategy, services have largely no longer been ordered
individually in the Group. While all modernization/major repair contracts were still commissioned as an independent order without reference to a general agreement in 2010, specific
action strategies have now been developed for each type of investment, enabling faster
overall processing. This has allowed LEG to achieve substantial savings.
Standardized contract specifications for work with unit prices which are recalculated on a
yearly basis and correspond to general agreements guarantee high planning and revenue
stability – both for LEG as the customer and for its contractors.
Thus, in 2011, LEG began to move away from a bid-award-invoice model toward a modern
contract-award-invoice model. Individual suppliers were replaced by a general agreement.
The transition is going smoothly. The goal to execute around 75% of the Group’s future constructions through general agreements.
➞
SUPPLIER RETENTION
We demand the utmost
standards of quality,
reliability and price from
our suppliers.
PROOF OF SAVINGS — THE SAVING BOX
The main focus of procurement controlling is to show that the potential for beneficial
pricing for LEG is really being used. This is the only way to measure the economic success
of ambitious purchasing management through procurement. In order to document these
successes and savings, LEG has introduced its “saving box”. Its content consists of a comparison of the savings for each job of work as compared to the previous year, as well as the
successes of renegotiating individual suppliers, reimbursements and discounts. The amount
saved is added to the saving box. It allows the company to clearly show the result of its
savings in actual figures at any time.
The fact that LEG is on the right path with its new procurement strategy is shown by its
winning the DW Future Prize 2012, which was presented by the journal “DW Die Wohnungswirtschaft” and the IT systems house Aareon AG. LEG’s procurement strategy was awarded
first prize in the category of “Procurement Processes”.
RETAINING HIGH-PERFORMANCE SUPPLIERS
Given the annual investment volume of around €80 million in construction work just for
modernization and maintenance, supplier management is a vital action area. The challenges
are: standardized qualities, reliability and performance. To achieve the greatest possible
transparency, all LEG partners are subjected to a business assessment based on objective
criteria that can be reviewed at any time. Constant quality management and the certification
of business performance also minimize the risk of supply bottlenecks. It also allows LEG
to recognize a supplier’s innovation potential early on. If this is categorized as positive,
companies are offered exclusive agreements. LEG wants to develop qualified construction
companies and craftspeople into long-term cooperation partners, centralized its work
partners regionally and minimize the overall number.
➞
DW FUTURE PRIZE 2012
The reward for strategy
development: the DW
Future Prize 2012 in the
category “Procurement
processes”.
43
ANNUAL EARNINGS
CORPORATE STRATEGY
HR STRATEGY
H R ST R AT EGY
CLEAR LEADERSHIP
PRINCIPLES
Norbert Heinrich
(partner at ifp – Institut
für Personal- and Unternehmensberatung,
Cologne)
A generation of welltrained and ambitious young workers
with excellent communications skills is
growing up in the real estate industry. They have a healthy awareness of their abilities and are very
career-focused. LEG NRW targets
these young people with a sophisticated corporate strategy and
can get them interested in great
goals. The long-term commitment to the company is achieved
– beyond monetary incentive –
through systematic HR development.“
LEG is managed according to ethical, social and returns-oriented considerations. In the past fiscal year, the residential property company encapsuIT
lated its management culture for the first time in seven statements. The
name of the game is “lead by principles”. LEG’s leadership principles are
bold, understandable guidelines and basic concepts that can be comprehended and practiced by everyone. At their core, they reflect an open, team-oriented and
trusting culture of interaction. Each individual principle covers an important aspect of this.
All the principles exist in mutual relationship to each other and are dependent on each
€ transparency and setting an example are right at
other. Terms such as fairness, courtesy,
the top of this list of values. These seven leadership principles are:
1.
2.
3.
4.
5.
6.
7.
Be a role model
Create trust through open communication
Shape change
Care about goals and their implementation
Promote and develop employees
Delegate work, thereby transferring responsibility and trust
Live for the team
POWER INSTRUMENT FOR SYSTEMATIC
HR DEVELOPMENT
Since 2006, LEG has been introducing a systematic human resources development
campaign with which it hopes to establish itself in the top third of the real estate industry
and retain highly qualified employees for the company in the long term by offering them
attractive professional prospects. In addition to broadly varied training activities, LEG’s HR
development strategy also includes promoting management from within the company.
The HR development program at LEG for the targeted advancement of employees is
called POWER. In German this stands for Personnel, Organization, Training, Development
and Feedback. This instrument was expanded to include POWER 2.0 in 2011. One of
its features is systematic and standardized employee interviews and target agreement
discussions. The training and seminars agreed as part of LEG Power can help motivated
employees to achieve new and better positions.
➞
advances employees who have demonstrated (initial) leadership skill in projects and activities, who distinguish themselves by taking responsibility for results and showing initiative,
who are willing to learn and change both personally and professionally and who achieve
above-average performance. Participants whose leadership potential is confirmed in the
selection process can participate in a leadership development program. In doing so, LEG
hopes to increasingly recruit new managers from within the company.
HR DEVELOPMENT
We want the best: Initial
and systematic ongoing
training are core components of LEG’s employee
development.
The weight of HR development is also reflected in the company’s investment in it. In 2010,
more than €500,000 was spent on additional training. In the 2011 reporting year, this
averaged around €670 per employee. The company is therefore well above the industry’s
average.
HIGH-QUALITY TRAINING ENSURES A QUALIFIED
FUTURE WORKFORCE
LEG has 36 trainees in the company. Twelve young people began training as real estate
salespeople in the past year. In addition to the conventional training route, LEG also offers
the possibility of simultaneous work and study, combining academic training with practical
experience. Different training locations ensure a broad range of experiences. The Düsseldorf Chamber of Industry and Commerce has again certified LEG’s excellent work in professional training.
The LEG orientation center offers employees with a high degree of development potential
differentiated feedback in terms of strengths and learning areas. The leadership center
44
45
ANNUAL EARNINGS
CORPORATE STRATEGY
COMMUNICATIONS STRATEGY
COM M U N I C AT I O N S ST R AT EGY
COMMUNICATION
BUILDS TRUST
IT
Professor Jörg
Erpenbach, BiTS
College, Iserlohn
Competitive conditions for companies
in the residential property industry are today becoming increasingly difficult in many sub-markets. Given the general conditions,
companies must succeed in
achieving a unique positioning in
their relevant market and in standing out from other providers.
In this context, in which classic
product competition is supplemented by communications competition, the coordinated utilization of classic and innovative communications instruments (social
media and mobile marketing) and
systematic brand management
become central success factors.
LEG NRW GmbH has successfully
adapted to the new requirements
by transitioning from regional
brands to an umbrella brand and
by using holistic, target group-specific and cross media communications.”
46
The communications strategy makes the visions, strategies and goals of
LEG transparent, in addition
to providing a comprehensible information
€
range to employees, the media and other stakeholders. This is done both
internally and externally. External communications position LEG as a strong
brand with high recognition value. It is seen as a competence leader on
the NRW residential market. LEG has the image of a company that offers good price-performance ratio and forthcoming services at good locations in North Rhine-Westphalia With
its corporate social responsibility projects, LEG is positioned as a responsible company at
local, regional and national level. Its communication also reach stakeholders in the realms
of politics, associations and tenant organizations.
LEG is a member in a variety of associations and organizations. The corporate communication department supports management in performing their many mandates and tracks
industry work and lobbying. A further relevant part of communications serves to attract
and maintain customer relationships. A key component of this is a website designed to
appeal to appropriate target groups with its own housing listings and a comprehensive
presence on the leading rental platforms in the Internet.
The extensive services are communicated with the “Clear and to the point” campaign.
T
˝ hese five statements show what it is that LEG stands for and the services that it offers its
tenants. Thus, LEG is constantly expanding its image as a residential specialist. Each year,
up to 150 tenant events and fairs, school holiday and leisure programs promote tenant
communication and support the general public’s positive perception of LEG. This is unique
in Germany.
➞
BRANDING
From website to flyers:
LEG elaborates on its
merits for customers with
a uniform brand presence.
Training sessions, meetings, workshops, conventions and conference calls all play a role in
helping to maintain a constant flow of information at all levels of the company.
LEG’s corporate communication department sees itself as an internal service provider for
the operating divisions. It makes it easier for them to concentrate on the letting business
by providing them with the right tools and accompanying press work, and gives them
comprehensive support in all issues relevant to media and advertising. Marketing and
public relations work under one roof in LEG’s corporate communication department.
This guarantees seamless communication and offers additional opportunities for effectively
conveing LEG’s messages to the general public.
INTERNAL COMMUNICATION CREATES COMPREHENSION
AND A GROUP IDENTITY
LEG attaches importance not just to cognitive approval of strategy and company orientation, but also to an emotional connection between the employees and the company.
In short: we want employees to stand by LEG and its goals. The central goal of the internal
communications strategy in 2011 was to familiarize employees with the new corporate
philosophy. On a regular basis, all employees receive important information on corporate
strategy and the individual sub-strategies that are not just relevant to their daily work. This
is done using the intranet, by e-mail, through the employee newspaper “LEG Internal”
and, last but not least, by management.
➞
COMMUNICATION TOOLS
Variety trumps: Corporate
communications uses all
communication channels
to make sure that LEG’s
messages reach their target groups.
47
ANNUAL EARNINGS
CORPORATE STRATEGY
IT STRATEGY
I T ST R AT EGY
NEW SYSTEM
ENHANCES EFFICIENCY
AND TRANSPARENCY
The SAP-based software solution “Blue Eagle Individual” from Aareon AG
has replaced the old “WohnData” ERP (enterprise resource planning)
IT
system. The reason for this was the need for information prepared in exactly the right way, delivered in the shortest amount of time —which can only
be achieved with high-performance IT. This enables LEG to practice valueoriented management that safeguards income in the long term and makes LEG ready for
the capital market.
Dr. Manfred Alflen
(CEO of Aareon AG,
Mainz)
TENANT
PORTAL
Contract
management
Auditing
work flow
SAP / BLUE EAGLE
Contract desktop
SERVICE
PROVIDER
PORTAL
Receivables
management
Maintenance
Suggestions management
Implemented
Planned from 2012
Automatic
switchboard
Basic telephony
SWYX IP telephony
Service providers, workmen
Aareon DMS
Electronic
tenant file
➞
IFRS STEERING COMMITTEE
No Blue Eagle, no IFRS
accounting. Two millioneuro projects had to be
planned and implemented in parallel. An enormous challenge, successfully mastered.
EXTENSIVE SAP TRAINING PRIOR TO LAUNCH
Mobile applications
Leasing
4874
It serves as a platform for optimized business processes and as a foundation for the implementation of the new corporate strategy. As a result, key job-related information on
customers is available in real time at the workplace. Professional IP telephone systems and
archiving solutions facilitate work. Blue Eagle also allows the simultaneous mapping of
the four types of accounting: tax accounts, HGB, US GAAP and IFRS. This direct mapping
capability and the ability to compare individual accounting figures is an essential requirement
for operating on the capital market.
SAP/BLUE EAGLE LAUNCH (highly simplified process matrix)
Tenants, interested parties
For big companies
such as the LEG
Group, being ready
for the capital market
is a key success factor.
This takes investment decisions
according to strict efficiency criteria. To make such decisions, management needs precisely prepared
information. Valuable support is
available here from an IT solution
that can perform well in excess
of the core processes of real estate
management and that enables
professional quality management,
risk management and accounting
in line with US GAAP, IFRS, HGB
and tax ordinances.”
Blue Eagle increases transparency
and accelerates business processes and work flows through€
out the entire Group (see graphic below). As an integrated end-to-end solution, it offers a large
range of quality management options and thus supports corporate management at all levels.
Blue Eagle was gradually implemented and tested between April and September 2011. In
total, around 800 employees at regional locations received training on more than 3,000
seminar days in 2011 while day-to-day operations continued. 80 LEG employees especially
skilled in IT served as newERP coaches and assisted their colleagues with questions and
problems. When newERP went live as of January 1st, 2012, LEG was already able to
operate the new system. Since the second quarter of 2012, the system has been gradually
optimized and fine-tuned to the specific needs of the LEG Group. LCS, LEG’s in-house
IT company, will then assume full technical support.
An SAP-based service provider portal, the digital optimization and centralization of
invoice management and IT-based contract management are currently being developed.
There are also plans for electronic tenant files, intended to ensure access to tenant information from all locations, and the management of tenants’ concerns or suggestions,
which cannot be solved directly. Using a tenant portal, tenants will also be able to edit
information on their own residential situation, such as certain certificates or account
balances. This information will be provided to them by the ERP system. Moreover, a
technical file is to be supplemented with additional information on the properties themselves, floor plans, technical drawings and maintenance plans.
Computer/
telephony integration
49
ANNUAL EARNINGS
CORPORATE STRATEGY
REFINANCING STRATEGY
R E F I N A N C I N G ST R AT EGY
CONCENTRATED CREDIT –
LOWER COSTS IN MEDIUM
TERM
IT
A transparent financing structure commensurated with risk is a crucial
pre-condition for being ready for the capital market. The equity and liabilities side of the consolidated statement of financial position has been systematically improved to this end. In 2008, LEG had more than 6,000 loans
from 200 creditors. Since then, the majority of these has been terminated
early and replaced by financing without cluster risks and with the new loans set to mature
on a staggered basis. At the same time, the number of creditors and loans — and therefore
complexity — has also been significantly reduced. In order to keep LEG’s risk as low as
possible, not more than 25% of its credit exposure is bundled at any one banking institution.
€
Prof. Dr.
Nico B. Rottke
(EBS Business School,
Wiesbaden)
➞
BANKS VALUE LEG
Since the residential
property industry has
been traditionally
substantially financed
by borrowed capital
(and will remain so for good
reason), residential property
companies must increasingly pay
attention to their equity and liabilities. But interest rates, repayments and loan-to-value ratios are
critical for anyone with up to 80%
borrowed capital on their balance
sheet. However, collateral, avoiding cluster risks and choosing
the right finance partner are also
increasingly becoming issues of
competitive survival. If you are
already one step ahead strategically given the backdrop of international liabilities and the banking
crisis then you’ve already done
much of your homework.
Operative strength and forwardlooking refinancing – two sides of
the coin when it comes to success
in the residential property industry.”
50
LONG-TERM CASH FLOW BENEFITS
Refinancing also reduces repayments and thereby boosts LEG’s cash flow and investment
muscle. The old financial architecture was characterized by incrementally accruing, annuity
repayments and a high and ongoing repayment share. This meant a substantial cash
outflow, which is inefficient for a private enterprise. Each bank now has clearly defined
collateral – either the entire holdings of a refinanced company or, at larger companies, a
separate portion of a portfolio. The new financing structure benefits cash flow in the long
term: While the average interest level is roughly the same, repayments have been significantly reduced.
These benefits justify the non-recurring expenses of terminating the old loans in the
form of prepayment penalties and the costs of concluding new agreements for portfolio
financing. The refinancing of liabilities to banks – with the exception of the WfA loans
which are not refinanced – is scheduled to be concluded in 2012, which means that LEG
will begin to enjoy the liquidity and risk benefits from 2013 on.
The time to begin refinancing in 2009 was ideally chosen given the attractive interest rate.
As a holder of residential portfolios with low financial risk, LEG was and is a welcomed
customer among its financing partners, even in times of global crisis. This is because many
banks fondly remember traditional, secure values and appreciate the stable, risk-reduced
cash flow of a residential property company. LEG’s residential portfolio was a good fit for
the current business models of financial institutions. The company’s equity and liabilities
were and will continue to be refinanced at attractive market conditions. At the same time,
the equity of LEG NRW, the parent company of the companies which hold the portfolios,
receives a significant boost from its paralleling company-law restructuring activities. LEG is
excellently prepared for possible increases in lending costs against the back drop of stricter
EU regulations (Basel III) and rising demand for the prolongation of large-volume credit
transactions. Its financing structure is both cost-efficient and future-proof thanks to longterm fixed interest rates and well-diversified maturities.
SURVEYOR INSPECTION
Banks today are very
interested in day-to-day
operations and the
quality of management.
LEG is happy to show
off its capabilities and
the quality of its properties.
The previous and extremely heterogeneous loan-to-value (LTV: that ratio of indebtedness
at individual portfolio companies to their assets) structure has also been standardized.
Formerly, very different assets were used for financing. The aim of this was to use the
assets of the Group for financing, as financing secured by land charges is generally more
favorable to unsecured loans or loans beyond the loan-to-value ratio.
51
IMPRINT
Publisher
LEG NRW GmbH
Hans-Böckler-Strasse 38
40476 Düsseldorf, Germany
Tel. +49 211 4568 416
Fax +49 211 4568 500
[email protected]
www. leg-nrw.de
Editorial staff and overall concept
LEG Management GmbH –
Corporate Communication
Manfred Neuhöfer
Jens Schönhorst
Martina Gawenda
Visual concept and design
GornigDesign, Mülheim a. d. Ruhr
Photography
Ansgar M. van Treeck, Düsseldorf
Heleen Berkemeyer, Düsseldorf
Corbis Bildagentur
F1online Bildagentur
Max Hampel, Düsseldorf
et al.
Printed by
Clasen Satz & Druck OHG, Düsseldorf
Print run
500 copies
52
EVERYTHING UNDER ONE ROOF
LEG moved into its new headquarters at Hans-Böckler-Strasse 38 in DüsseldorfDerendorf in March 2012. The staff from the Ross- and Vagedesstrasse office
buildings also moved. The staff at LEG’s IT service provider LCS will join them
at the end of 2012. The bundling of the individual office locations enhances
internal communications and optimizes cooperation between departments.
➞
LEG HEADQUARTERS
Walls were moved, electrical installations were updated, carpets changed and around
65 kilometers of IT cables were laid – this office building in northern Düsseldorf was
renovated from top to bottom and move-in ready in just under one year. The new LEG
headquarters has a total office space of around 7,000 square meters distributed on six
floors. It features bright office with large windows for a motivating working environment.
Short pathways facilitate communication between the various departments and ensure
a fast flow of information. LEG’s new location can be conveniently reached by car from
anywhere in the region thanks to the nearby highway and expressway network. The closest
subway station is just 250 meters away. It is around 600 meters walking distance from the
Rhine river, while the Königsallee in the city center is roughly two kilometers away. The
main train station is only 3.5 kilometers away.
LEG Annual Report 2011
Milestones
LEG NRW GmbH
Tel. +49 211 45 680
Fax +49 211 45 68 261
[email protected]
www.leg-nrw.de

Audited consolidated financial statements for the fiscal year

Transcription

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