LEG Immobilien SE

XETRA:LEG

Earnings Call Transcript 2020-Q1

[Frank Kopfinger, Head of Investor Relations]

Yes, good morning. Thanks, Stuart. Good morning, everyone, from Düsseldorf. Welcome to our Q1 2020 results call. I'm here with our CEO, Lars Von Lackum; as well as our COO, Volker Wiegel. As usual, they will lead you through the presentation and we will then open it up for your questions. You'll find the presentation document as well as the quarterly report within the IR section of our home page. Please note that there is also a disclaimer, which you'll find on Page 2 of our presentation.And with this, I hand it over to you, Lars.

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

Thank you, Frank. Good morning, ladies and gentlemen, and welcome from my side to our first quarter 2020 earnings call.In the first quarter, the world entered into a human and economic catastrophe. Our home state of North Rhine-Westphalia went into lockdown by mid-March, and more than ever, we became the provider of the home, not just residential space to our tenants. We immediately decided to offer rent suspension, organize neighborhood assistance and put in place a set of additional measures to support our tenants and our employees during this challenging time.Our business model proved again to be very resilient. The COVID-19 crisis partly affected us operationally as well as financially. So far, also in Q2, we experienced only minimal effect to our business. Therefore, we are very happy to present today a strong Q1 result and to confirm our guidance with an FFO I in the range of EUR 370 million to EUR 380 million. This comes on the back of a strong balance sheet and our expectation of further revaluation gains in 2020. We also confirm our dividend proposal of EUR 3.60.Let me briefly take you through some of our Q1 highlights on Page 4. We report a strong increase of our FFO I of 11% to EUR 94 million for the first quarter. Major drivers were the rent increases and the additional income from last year's acquisition. On a like-for-like basis, rental growth was 2.8%. Our EBITDA margin improved strongly by 110 basis points to 74.1%, which is in line with our target. We put our acquisitions on hold by mid-March, but we stick to our ambition to acquire 7,000 units by year-end. We expect markets to open up again after the reduction of some of the lockdown measures and already see substantial opportunities emerging.On Slide 5, I would like to walk you through the different impacts from the COVID-19 crisis we have experienced so far. As you might have probably seen, we voluntarily suspended the increases according to the rent table, the Mietspiegel, already by mid-March. We have not canceled those increases completely, but plan to recapture some of the effect in the second half of the year. We currently expect that the temporary suspension will have a 20 bps negative effect on our rental growth ambition.While we continue the work on all modernization measures already started precrisis, we postponed the beginning of all other modernization projects which have not yet begun. Therefore, there will be an additional suppressing effect on the like-for-like rental growth. However, we might be able to recapture part of it until year-end.As of beginning of May, we saw deferrals for significantly less than 1% of our residential units. The effect is, therefore, very small in the overall group context of our 136,000 residential units. Due to the generous German social security system, we expect this to only impact liquidity, but not earnings.On new lettings, we have been able to continue new lettings despite the crisis. Certainly, due to the new regulations and distancing rules, the letting process slowed down somehow, but only to a minor extent. Since mid-March, when the government put the lockdown in place, we only closed 200 contracts less compared to the previous year's period. Additionally, I am happy to share with you the good news that lately, we see an increasing activity as the society is reopening.On terminations, we observed a positive trend as well as the number of canceled contracts decreased by 400 compared to the previous year's period. This reduced the tenant churn rate by around 200 bps. We expect this number to normalize in the course of the year. Obviously, those numbers are very small being put in group context.CapEx spending remained nearly unaffected. As stated, we have been able to continue the modernization measures, which we have started precrisis. At the same time, we have continued our strong reinvestment into single flats at the time of reletting to crystallize additional value.With regard to our balance sheet, we did sign EUR 250 million of secured and unsecured financing with a duration of 10 years at an attractive yield of 1.2%. The financing has been agreed at the very peak of the crisis mid-March, emphasizing our ability to quickly act even in dislocated markets. Additionally, we are about to increase the total volume of RCF to EUR 350 million to EUR 400 million due to the higher volatility and still difficult state of the commercial paper market.As already mentioned, we experienced the residential real estate acquisition markets to revive. As we had a very healthy pipeline before the crisis and sourced some substantial interesting offers post-peak of crisis, we feel comfortable to stick to our ambition to acquire 7,000 units in 2020. However, as we cannot assess the effects of COVID-19 on the economy completely and as the reopening of society and business increases the risk of a higher infection rate and therewith of another unexpected lockdown, we took some first precautionary measures. As a first step, we have decided to put all external hiring on hold. Additionally, we identified areas for potential non-personnel cost savings, mostly for back office activities.On the following slide, on Slide 6, we wanted to illustrate the limited impact of the great financial crisis on LEG, which, from our perspective, is due to 3 key factors. Firstly, housing is a basic human need. Secondly, LEG, in particular, provides affordable living. With an average rent of EUR 5.88 per square meter, we offer a value product for an affordable price. Thirdly, this is clearly a result of the strong social system in Germany, consisting of several layers of social security and offerings. These factors contributed to the fact that German residential as an asset class was nearly unaffected by the last crisis, neither by the great financial crisis nor by the crisis following the burst of the internet bubble. You will not be surprised to hear that we are of the core belief that within this asset class, LEG is uniquely positioned, which we depict on Slide #7.While we clearly operate in a resilient subsector, LEG offers all the attributes to navigate successfully through the crisis. We do not only offer a stable industrial environment, we also hold a strong balance sheet and sector context with an LTV of only 38%. Simultaneously, we provide an attractive gross yield of 5.1% in times of negative interest rates and at peak volatility in capital markets.However, the strongest differentiator is the simplicity of our business model. We focus exclusively on German residential. We avoid adding complexity to our business model by increasing domestic or international regulatory risks, dealing with limitations and cross-border synergies or adding significant tail risks via development activities in times of economic uncertainty. We believe that our lean and admittedly simple setup makes us a stronghold in the crisis and the time thereafter.With this, I hand over to Volker, who will take you through our portfolio and our operational highlights.

[Volker Wiegel, COO & Member of Management Board]

Thank you, Lars, and good morning from my side.Let us now have a look at Slide #9 where we provide an overview of our operating performance. Overall, the in-place rent in the LEG portfolio rose by 2.8% on a like-for-like basis. Our free-financed units, which account for 75% of the portfolio, contributed 3.1%. In January 2020, as in every third year, we could also adjust the cost trend of our subsidized units. This led to a like-for-like rent increase of 1.7% for the restricted part of our portfolio.Looking at our portfolio as a whole, it becomes obvious that the rent development in the commuter belt areas did not lose its momentum. Actually, like-for-like growth in these areas, which we define as our stable markets, was 3.2% or 10 basis points higher than in the high-growth markets. Both market segments benefited from our modernization program. In the higher-yielding markets, modernization activities were less pronounced and we only had a few new rent tables, Mietspiegel, in 2019. Nonetheless, rents in this segment still rose by 1.8%. In the free-financed part of the portfolio, we realized the strongest rent increases in the stable markets with plus 3.7% like-for-like, followed by the high-growth markets with plus 3.6% and the purple markets with plus 1.8%.We have been able to increase the occupancy rate for the total portfolio by 20 basis points. This translates into a like-for-like EPRA vacancy rate of 3.4% at the end of March. In our high-growth markets, mostly all of our units are ledged, i.e., the overall occupancy rate amounts to 98.1% like-for-like. Our lowest vacancy rates, we still realized in Münster with 1.0% and Gütersloh and Westphalia with an even lower 0.9%, all on a like-for-like basis. The vacancy rate in the stable markets was down by 10 basis points to 3.4%. Even in the higher-yielding markets, we could reduce the vacancy rate by 20 basis points year-on-year. The organizational measures implemented in these markets further improve operational efficiency and are now clearly taking effect. For the portfolio as a whole, we still expect a further slight decrease of the vacancy rate as at year-end 2020. This guidance, however, is subject to unforeseeable consequences of the corona crisis.Let us now move to Slide #10, showing that the like-for-like rent per square meter for the overall portfolio at the end of March stood at EUR 5.88 or at EUR 6.25 for the free-financed units. Let me add a bit more color to this. The following examples are on a like-for-like basis. In our high-growth markets, Monheim was once again the top performing city with a rent increase of 7.0% year-on-year to an average rent of EUR 7.29 per square meter end month. Monheim is the most important location for our investment program. We are the largest property owner in the city with around 3,300 units. 30 kilometers further south, in Cologne, the average rent growth was plus 5.3%, i.e., average rent rose to EUR 7.06 per square meter.In the stable markets, Wuppertal and Solingen, which are located 30 kilometers east of Düsseldorf, were the best-performing cities of the stable markets with rent growth of 4.5% or 4.7%, respectively. This once again underlines the momentum in the commuter belt areas. In Dortmund, our largest single-location rents grew by 4.1% to EUR 5.42. In the purple markets, we saw the strongest growth in Duisburg with an increase of 2.3% and in Recklinghausen with 2.6%.On the following Slide #11, you'll find more details on the investments. Overall, the investments into our portfolio increased by more than 45% to EUR 73 million. On a square meter basis, we spent EUR 8.25, the bulk of which was for modernization measures. At the same time, we continued our strategy of value-enhancing investments in relettings. The increase of those spendings in combination with relatively low maintenance expenditure resulted into a capitalization ratio of 74.6%.Recognizing and living up to our obligation to contribute to a carbon-neutral industry by 2050, we continue to modernize 3% of our portfolio per year to improve the energy efficiency of our assets. This is and clearly stays one of the ESG targets we have set ourselves.At the same time, we are clearly aware of our responsibility towards our customers and we, therefore, carefully balance potential rent increases from modernization, adoption to climate change and the affordability for our tenants. All this is part of our strategy.With this, I hand back to Lars for more insights into the financials.

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

Thank you, Volker.At first, please have a look at the chart showing the financial highlights on Slide 13. The numbers once again demonstrate that LEG's margin expansion story is well on track with further noticeable improvements across all P&L lines. Our net cold rent increased by 4.9% to EUR 153.5 million. This is driven by our rent increases as well as by the new unit added to the portfolio last year. The adjusted net rental and lease income as well as the EBITDA rose by 6.5% and with this even stronger than the net cold rent. Hence, our adjusted EBITDA margin improved by 110 basis points year-on-year to 74.1%. This is in line with our margin target of around 74%. Our FFO I grew strongly by almost 11% to EUR 94 million, which puts us well on track for our financial year guidance.On Slide 14, we present the calculation of the NAV. The NAV increased by 1.1% to EUR 106.55. This reflects mainly the profit contribution from Q1. We expect revaluation gains to add to the NAV in the second quarter. In general, we expect a positive development for the first half of this year. In these times of economic uncertainty, we feel it is unreasonable to communicate a precise number. However, based on our activity in the market and our ongoing discussion with our evaluator, we expect, as of today, revaluation gains for the first half of 2020 at around last year's level where we recognized a valuation uplift of around 5%. This clearly assumes that we experienced no material effect from corona until the end of the first half of this year. We will certainly provide you with a precise number at our Q2 financials presentation in August. By then, we know more about the impact of COVID-19 on the society and on the economy.On Slide 15, we have, as usual, put together the key valuation metrics broken down by market. I would like to reiterate that we feel very comfortable with our asset profile. Our assets still offer an attractive gross yield of 5.1% in a negative interest rate environment. The gross value per square meter amounts to EUR 1,356 at the end of March, which translates into an in-place rent multiple of 19.7x. This compares well against the market multiple of 17.5x.Coming to our financing structure on Slide 16. We are very proud of our strong financial position. We continue to have a low LTV with 38%, with an average maturity of 8.1 years at an average interest cost of 1.46%. At the peak of the crisis, when debt markets turned out to be illiquid and dislocated, we even managed to place EUR 250 million of secured and unsecured financings for a maturity of 10 years at an attractive yield of 1.2%. This proves our strong standing among market participants and our ability to proactively tap markets. We signed the agreements in March and April, expecting the funding in Q2. Therefore, those funds are not yet reflected in our Q1 numbers.As already mentioned, we are about to increase our RCFs from EUR 200 million at the end of March to around EUR 350 million to EUR 400 million in Q2. This provides us with sufficient flexibility to deal with potential market turmoil and to take advantage of rising growth opportunities.Otherwise, our financial profile remains long-term-geared. As of today, we have no maturities until 2023.Let me shortly summarize our achievements and key takeaways from our 10-point program, which you can see on Slide 18. We disclosed our initiative in mid-March to protect tenants and employees with a clear ambition to help and manage the implications of the crisis together. Clearly, our decision to suspend rent increases was one of the biggest driver for that program. However, it was more than that, and we are happy to help also with a bunch of smaller measures.Since the introduction of our 10-point paper, we have done the following: We offered a 20% discount on the net cold rent for new lettings for system-relevant professionals. We are proud that we could give 78 corona heroes, people with jobs like nurses, cashiers or firefighters, a new home. We displayed 30,000 lists to organize neighborhood self-help, e.g. to organize shopping support for our elderly tenants. We distributed boxes with toys and playing material in our premises for the children of our tenants and boxes with sweets to local hospitals to support the medical staff. For our employees, we bought protection gear and allowed fully flexible working hours as well as far-reaching home office solutions. Additionally, we offered a reduction of the weekly working time by up to 5 hours for employees with kids to cope better with the burden of home office and homeschooling at the same time.Before we turn to your questions, let me just reiterate our guidance on Slide 19. As mentioned earlier, the COVID-19 crisis will have an effect on our like-for-like rental growth. It will come in lower than our original target of around 2.8%. The reduction comes from the temporary suspension of the rent increases according to the Mietspiegel and the postponement of net -- not yet started modernization measures. Due to the remaining uncertainties, we cannot give you a precise number for the full year already today.Similar to the like-for-like rental growth, we also will see effects on the vacancy as well as on the investments. We will provide you with a clearer guidance in this respect together with our Q2 results when we all will have, hopefully, more clarity. However, we think we are in good shape and well positioned to navigate successfully through the crisis.Despite this qualitative softening, we feel comfortable to confirm our guidance of EUR 370 million to EUR 380 million for the FFO I as well as the 74% EBITDA margin target. Certainly, this is based on the strong Q1 results we are happy to present today. Additionally, on a weekly basis, we observed an improvement of all operational indicators like new lettings. At the same time, we noticed that transaction markets are picking up and we are receiving new interesting offers. Therefore, we also confirm our ambition to acquire around 7,000 units this year.We remain fully committed to all aspects of ESG and set ourselves targets along our ESG agenda. We continue to modernize 3% of our portfolio [ pattern ] to improve the energy efficiency of our assets. We are also working on the new ESG standards like TCFD and SASB in order to allow for a better insight into our ESG framework and reporting.With this, I conclude our presentation. Volker and I will certainly be very happy to take your questions.

[Frank Kopfinger, Head of Investor Relations]

Thanks, Lars. And with this, we begin the Q&A session. Back to you, Stuart.

[Operator]

[Operator Instructions] The first question is from the line of Thomas Neuhold from Kepler Cheuvreux.

[Thomas Neuhold, Head of Research of Austria]

I only have 2. The first one is on the voluntarily and temporary suspension of rent increases. We have seen unemployment rates shooting up quite strongly in Germany recently. How strong is currently the political pressure to not increase rents as long as the crisis lasts? And do you think there is a risk that the German government could think about implementing a law forbidding rent increases as long as the crisis lasts? That's the first question.

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

Good morning, Thomas, and thank you for your question. And so currently, there is no political pressure in the way that we receive on a regular basis, politicians, by phone, asking us just suspend renters -- rent further. But we just thought ourselves to be obligated in this very crisis to help people which were forced to stay in their flats, and you know the size -- average size of our flat is 64 square meters. Very often, we are renting out to families. So therefore, we did not want to increase additional pressure on those families.We have suspended it for the time being. You might know that in Germany, the number of measures is now being reduced. You can already feel a bit of more freedom in the society. People are allowed to leave their flats, go for a walk, et cetera, so which is very helpful. And we will certainly very closely observe the situation, but there is no political pressure for persistent rent suspension. So therefore, our assumption is that we will be able to resume and restart rent increases, most probably in H2 already.

[Thomas Neuhold, Head of Research of Austria]

Okay. Understood. And my second question is on acquisitions. You mentioned you put acquisitions on hold, yet you still target the acquisition of roughly 7,000 units. I was just wondering what needs to happen before you start again, doing or looking for acquisitions? And can you also maybe elaborate on the potential acquisition pipeline? Is it still in place? Or do we have to build it after putting everything on hold in March?

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

Yes. Thanks a lot for your question, Thomas. So with regard to acquisitions, I think we had a very healthy pipeline before the crisis. We spoke about the 1,200 units which we were about to sign before the crisis but pulled back because there was just too much uncertainty in the market.We have seen that over the last 2 weeks, there is a strong pickup in the acquisition market, so much more offers and quite substantial offers of new portfolios in the market. So the one or the other seller has rethought its portfolio setup. It brings new material to the market. I mean it's probably it will just take us a few more weeks to really sort out what we want to do, but the current pipeline feels very strong.So it's in different stages of the due diligence phase. We are talking currently about 15,000 units. So if we talk about that we put our acquisitions on hold, this does not mean that we stopped to look into portfolios. We have still done the work possible in the current restrictions, meaning that we did technical due diligence as far as possible, et cetera, just to prepare ourselves for a situation where markets are reopening.Currently, the markets are reopening. It's already restarting. And we are quite confident that we are going to have first portfolios to be acquired already in June and July. And therefore, we are very confident to also stick to our target of 7,000 units for this year.

[Operator]

Next question is from the line of Christopher Fremantle from Morgan Stanley.

[Christopher Richard Fremantle, Executive Director]

I just wanted to ask a question around the valuation guidance. I appreciate this is only for the first half and it excludes the corona impact. Can I just ask, have we seen any transactional evidence since the corona crisis began? Is there anything you can share about what your valuers are telling you about the potential impact of the crisis on values? Or if you have any other views about the potential impact, your own views internally about that value impact and valuation impact going forward? That would be very helpful, please.

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

Thanks a lot, Chris, for your question. Certainly, very happy to give you as much insight as we currently have. And as you know, we are in constant contact with our evaluators from CBRE. So from them, we can hear that there is enough transaction evidence also during the crisis that we are feeling very comfortable to say that we are expecting a valuation increase for H1 in line with what we've seen in the first half last year.It is quite difficult because we are -- there are still some weeks to go until the end of the second quarter. So therefore, we do not want to come up with a precise number. So it's still with uncertainties attached to it, but the evaluators are giving us quite a lot of comfort that due to the fact that we always are having a certain time lag between recognition of transaction multiples and those being included in our books as part of our valuation, that there is still substantial headroom, which we are going to see then in the first half valuation.At the same time, our activities in the market show that there is new material coming to the market. The asking price are in line with what we've seen precrisis and it remains to be seen whether we are going to see lower pricing going forward because there is, at the same time, quite a strong demand of a lot of market participants, not only strategic buyers, but also pension funds, which are in a negative interest rate scenario, certainly are looking for interest-bearing assets. Residential, and I think we've pointed this out during the call, is one of the most stable asset classes. And therefore, we also expect a lot of additional pension as well as insurance money flowing into the sector. And this will also contribute to a stabilization of prices going forward.

[Operator]

Next question is from the line of [ Jack Pen ] from Kempen.

[Unknown Analyst]

Also 2 questions from my side. If I look at Slide 5 of your presentation, you highlighted the impact on your like-for-like guidance from the Mietspiegel suspension was only 20 basis points. And you also indicated earlier that you expect to resume rent increases maybe already 2H. So then thinking about the other headwinds to your guidance on the postponement of modernization measures, do you also expect that to resume soon, especially given the minimal impact of corona year-to-date? And should we then also view this impact of CapEx postponement also likely, let's say, a fairly modest amount of basis points? All leading to the kind of the final question, does that mean that in any case, your like-for-like will be close to between 2% and 2.5%? Is that a fair assumption?

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

Thank you, [ Jack ], for your question. Yes, I think that's a fair assumption. So it is quite difficult to give you also there a precise number. So -- and with regards to the Mietspiegel increases, exactly as you pointed out, we made the assumption of restarting those in H2. So therefore, we can give you a precise number.With regard to the modernization measures, it depends very much on the time when we restart and, certainly, when we finalize the modernization work because only then we will be able to increase rents. And the later we start, the lower the probability that we are going to finalize this work within 2020, but it might be then moved forward into 2021. So also those rent increases are then not gone, but will just be realized a year later. So that's the uncertainty which still persists.Some of the modernization measures, which are just -- been done in the interior of the buildings is something which is quite difficult still under the current regulation and the restrictions being put in place in Germany, [ Jack ]. So therefore, this might be something which just postpones some of the works, but certainly, we're observing the situation very closely and we try to just fulfill our modernization measures as much as possible. So we are really looking at it on a regular basis, meaning from week-to-week, in order to resume work as quickly as possible.

[Unknown Analyst]

Okay. And then my second question would be, if you could maybe expand a bit about thinking about LEG and the industry in general, seeing that corona has limited short-term impact, what do you think is the long-term impact of corona on your business and perhaps on the industry as a whole? And then maybe also earlier you referred in the call, does it increase charges from perhaps something like a nationwide Mietendeckel?

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

Yes. Thanks a lot for the second question, [ Jack ]. So long-term impact, so from my perspective, I think everyone in the industry, so including all our competitors, publicly listed, mutuals or those being owned by states or cities, I think we all have tried to do as much as possible for our tenants. So there have been plenty of initiatives, not only by ourselves, but by most of the companies around. And I think this has reduced this difference and some of it was really artificial difference and criticism between tenants and their landlords. So this has really had a strong positive impact. And we, especially at LEG because we started the wave and all the initiatives in the German market, we received tremendous positive feedback and -- by our tenants. So a lot of letters never seen before neither by Volker as our COO, but people really being very happy about the measures which we have put in place.At the same time, it was also not going without political consciousness. So a lot of politicians also have said that LEG is outstanding with regards to its commitment, but this is also holding true for a lot of other companies in other parts of Germany. And therefore, I think this is something which is going to help the relationship between tenants and landlords and it's also, therefore, helping the political discussion, which we had before on the Mietendeckel, for example, in Berlin. This, once again, from our perspective, is really limited to Berlin. We do not see it in any of the other German states we are active in. You know that we are active now in North Rhine-Westphalia, in Hesse, in Rhineland-Palatinate as well as Lower Saxony and Bremen, but all of those states and the Westphalia sponsors there have said and made very clear that the Mietendeckel was not part of their thinking about a regulatory regime for the rent market.So therefore, in a nutshell, from a long-term perspective, we think the crisis helped us a lot and the right things and measures have been put in place by ourselves, but also by our competitors so that we are very confident that we also can now very much prove that claims being made by the one or the other politician from the very left side of the spectrum saying that publicly listed companies are not living up to their promises with regards to their tenants, that this is just not true.

[Operator]

[Operator Instructions] Next question is from the line of Kai Klose from Berenberg.

[Kai Malte Klose, Analyst]

I've got 3 quick questions, if I may. The first one is on Page 8 of the Q1 report. We had an increase in staff costs by about EUR 1.6 million to EUR 17.7 million. Is this a level which is broadly stable to be expected for the coming quarters? Or do you expect any further increase in staff costs or maybe a reduction in staff costs as you're looking into the cost side?Second question would be on the letting activities. Could you maybe indicate what was the average rental uplift on new lettings in Q1? Of course, I know that Q1 was a lower volume, but it may have a bit of an indication what is the rental -- went uplift on new lettings?And the last question would be on the taxes. So you mentioned that you had quite a lower tax rate in Q1. Is it -- why was this? And is this lower tax rate also to be expected to maintain for the full year?

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

Yes. Thanks a lot for your questions, Kai. I will try to give you an answer for #1 and #3 and Volker then will follow up with an answer on your second question.So with regard to staff costs, we did very intentionally invest more into staff, and already last year, you were able to see it over the last quarters as well. And that's very much driven by the fact that we have hired additional craftsmen into our organization, especially for those services which have been difficult to source externally. That's the major driver for it. At the same time, we also thought to be well advised to get into closer contact with our tenants. So also there, at the one or the other operations in customer-facing functions, especially those taking care of demands from tenants, we have invested. So that's a level we feel currently comfortable with. Going forward, as you heard, as one of the precautionary measures, we put on hold external hirings. So therefore, that's a level also going forward, which will persist.With regard to the tax rate, the tax rate is on a level which we also feel comfortable at around 1% to confirm for the full year. There has been a few changes done last year. You might remember that we've bought a minority share for our company which is providing energy services. That's now included in a tax group, that's reducing partly the tax rate. We've also been able to include another company and apply a reduction with regard to trade taxes. So all this is adding up then to this lower tax rate, which we also expect for the full year.

[Volker Wiegel, COO & Member of Management Board]

And on the reletting rent question, about 1/4 of our rent growth was attributed to relettings. So 0.9% out of the 2.8% was caused by reletting, above the previous range.

[Operator]

[Operator Instructions] The next question is from the line of Dr. Georg Kanders from Bankhaus Lampe.

[Georg Kanders, Investment Analyst]

I just want to ask here also as with the -- in combination with the tax rate, you also had a positive contribution from minorities. And you mentioned that you have bought out minorities in 2 companies. Will minorities also now virtually disappear in the FFO calculation?

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

At least, this was the impact. I'd give you -- I'm referring to the FFO bridge, which we are showing on Page 24, the minority change was exactly that we bought out Energie as our partner in the energy services company. And therefore, the profit contribution now goes with us and not with the partner anymore, and that was the driver for the change there.

[Georg Kanders, Investment Analyst]

And this is now also for the whole year, we can expect that there are no more minorities anymore. Is this true?

[Lars Von Lackum, CFO, CEO & Chairman of the Management Board]

Yes. So we certainly do still have minorities. So for example, with the craftsmen organization, that's the joint venture we are holding together with B&O, which is quite a big provider for craftsmen services in Germany. So there will still be minorities, but -- and the change you were referring to was exactly the change from this acquisition of the minority share of the energy service providing company, ESP.

[Operator]

There are no further questions at this time. And I would like to hand back to Frank Kopfinger for closing comments. Please go ahead.

[Frank Kopfinger, Head of Investor Relations]

Yes. Thanks, Stuart, and thanks for your participation and your questions. And as always, should you have further questions, then please do not hesitate and give us a call or write us an email. Otherwise, please note that our next scheduled reporting event is the 7th of August when we report our Q2 results.And with this, we close the call, and we wish you all the best and hope to see you soon. Thank you and take care.