Living Stone: Hamm as the Real Test of the Value-Add Strategy

The main article already established that Living Stone’s operating engine works, and that the public-layer question is really about how much of that value can move up to the parent company. This follow-up isolates one sub-portfolio only: the Hamm trio. If there is one place where the company’s value-add strategy should be judged without commercial noise, without office exposure, and without the wider funding story, it is here.

This is also a relatively clean test case. LS Hamm B.V. was acquired in a share deal in January 2024, so 2025 is the first full year that really tests what happened after the initial acquisition phase. The three assets are fully residential, with total lettable area of 21,385 square meters, 143 parking spaces, and combined fair value of EUR 34.98 million at end-2025.

Four numbers frame the issue immediately:

• Current annual rental income for the portfolio stands at EUR 1,749,549, while market rent is estimated at only EUR 1,840,362.
• Temporary vacancy for the whole portfolio is just 2.97%, so this is no longer a story about half-empty buildings waiting to be stabilized.
• Across the three assets, rents in leases signed during 2025 were EUR 8.0 to EUR 8.25 per square meter per month, versus current average rents of EUR 6.62 to EUR 7.0.
• Even so, the 2025 revaluation result across the trio added up to only EUR 200 thousand.

That is the core point. Hamm has already proved that Living Stone can execute operational value-add. The open question is how much of that uplift is still outside the valuation, and how much has already been pulled into the end-2025 base, leaving the next leg slower, more operational, and less dramatic.

The rent gap is real, but it is no longer a whole-book gap

At first glance, it is easy to look at the leasing numbers and conclude that a large amount of upside still sits here. Rheinsberger is running at average rent of EUR 6.8 per square meter, Allensteiner at EUR 7.0, and Merschstr. at EUR 6.62, while leases signed in 2025 came in at EUR 8.0 to EUR 8.25. That spread is real, and it shows that the company can achieve materially higher rents when units turn over.

But that is not the same question as how much value is still left to be recognized. At end-2025, the gap between current portfolio income and market rent is only EUR 90,813. At portfolio level, the next phase therefore looks far less like “another 20% on the whole base” and far more like a gradual process of capturing rent upside inside a book that is already largely stabilized.

That chart shows why Hamm is such a useful test for the value-add strategy. The spread exists in all three assets, but it no longer sits on vacant or obviously distressed properties. Allensteiner is already at 100% occupancy, Rheinsberger at 96%, and even Merschstr. still at 95%. From here, most of the value will not come from filling vacancy. It will come from gradually converting older leases into higher-rent leases.

Taken together, the three assets do show exactly what the company wants investors to see: it can renew leases at materially higher rents. But the same numbers also show why 2026 and 2027 are now execution years, not discovery years. Merschstr. in particular, where the rent gap is widest but occupancy is slightly lower than the other two assets, still requires real operating delivery rather than just a clean narrative.

The valuation already demands execution, not just a story

If 2024 was the year of acquisition and initial set-up, then 2025 should already have started to show how much of that move can filter into value. Here the message is sharper than it first appears. End-period fair value for the three assets rose to EUR 34.98 million, but the year’s individual revaluation results were modest: negative EUR 160 thousand for Rheinsberger, positive EUR 117 thousand for Allensteiner, and positive EUR 243 thousand for Merschstr.

The aggregate number matters here: just EUR 200 thousand across a portfolio worth almost EUR 35 million. That does not mean there is no further value. It does mean the book is no longer waiting for an easy step-up simply because new leases are signed at higher rents. A meaningful part of the credit for asset quality is already embedded in the end-2025 valuation.

That becomes even clearer in the two assets where the income-approach assumptions are disclosed in detail. In Rheinsberger, the valuation uses representative NOI of EUR 539 thousand, while actual 2025 NOI was EUR 512 thousand. In Allensteiner, representative NOI is EUR 530 thousand versus actual 2025 NOI of EUR 492 thousand.

That is an important nuance. The valuer is not marking the whole book to the rent seen in newly signed leases alone. In Rheinsberger, the representative rent assumption is EUR 6.8 per square meter, essentially the same as the current average rent, and in Allensteiner it is EUR 7.0 versus EUR 7.0 in the actual 2025 number. At the same time, in both cases the representative NOI already sits above the NOI reported for 2025. In other words, the valuation is not assuming EUR 8.25 across the whole stock, but neither is it anchored only to the current-year NOI outcome. Part of the next improvement is already inside the valuation base.

That changes the right question. The issue is no longer whether a spread exists between new and old leases. The numbers already answer that clearly. The real issue is how quickly that spread can flow into repeatable NOI, and how much of it will be absorbed on the way by cost, by property investment, or simply by the time needed to recycle the existing lease base.

The sensitivity tables also remind readers that this upside is not free. In Rheinsberger, a 0.5% rise in the capitalization rate would cut value by EUR 1.207 million. In Allensteiner, the same move would cut EUR 1.039 million. So after the 2025 revaluation step, further value creation depends less on appraisal momentum and more on proving, again and again, that updated rents are turning into stable NOI.

Even in the best sub-portfolio, the upside remains disciplined

Another easy mistake would be to look at Hamm and see “free value” that can simply be pulled upward. The disclosed structure shows that this is not the case. The three assets are financed through two non-recourse loans at LS Hamm B.V., and at end-2025 the company was in compliance both with the covenant requiring at least EUR 1.6 million of annual net rental income and with the annual CAPEX commitment of EUR 295.2 thousand.

That matters for more than funding optics. It means that even the best portfolio in the group is not a pool of unrestricted value. For the upside to become real value, it first has to run through maintenance, capital expenditure, and a continuing test of net rental stability. The parking layer shows how granular the remaining opportunity already is: 126 of 143 parking spaces are let, and the gap between actual parking income and market parking rent is only EUR 8,595 per year.

The implication is straightforward. Hamm is no longer a story about assets that do not work. It is also not a story about assets the valuer has somehow not seen yet. It is a story about a good residential portfolio, almost full, with real rental spreads, but with a valuation base that already requires continued operating proof if it is to move materially higher.

What Hamm really proves now

Hamm does give Living Stone a genuine proof point. The three assets are residential, occupancy is high, new leases are signed above the in-place base, and almost EUR 35 million of value on a package acquired only in January 2024 means the acquisition did not turn into a problem asset story. As evidence that the value-add model can work, this matters.

But Hamm also raises the bar. If even this anchor portfolio now shows only about EUR 90.8 thousand between current income and market rent at portfolio level, and if the net revaluation step for 2025 came to only EUR 200 thousand, then the next phase of value creation will not come from a broad “value-add platform” slogan. It will come only if the company keeps lifting rents in practice, keeps occupancy tight, and turns those gains into annual NOI that can justify higher value even without another valuation tailwind.

That is exactly why Hamm is the real test of the strategy. It no longer has to prove that the company can acquire, stabilize, and re-lease a residential package. It has already done that. It now has to prove that after acquisition and stabilization, Living Stone can keep creating value in a measured, repeatable way. In 2025 the answer is yes, but with an important qualifier: the easier part of the move is already behind it.