TAG Immobilien Rental Income Doubles on DKB Acquisition

TAG Immobilien AG (TEG) said second-quarter rental income doubled after the German real estate company integrated the 25,000 homes it acquired from Bayerische Landesbank in March.

Net rental income rose to 41.2 million euros ($51 million) from 20.1 million euros a year earlier, the Hamburg-based company said in a statement today. Funds from operations, a measure of a company’s ability to generate cash, amounted to 10.8 million euros.

TAG’s March acquisition of DKB Immobilien AG, owner of homes valued at about 1.1 billion euros, increased the company’s portfolio to about 57,000 homes. Most of the additional properties are in eastern Germany, where average rents are lower than in the rest of the country.

“Many important indicators such as costs, rent increases are already moving in the right direction,” TAG said in its second-quarter report.

TAG was up 15 cents, or 1.9 percent, at 8 euros at the 5:30 p.m. close in Frankfurt. The shares have climbed 34 percent in the past 12 months, raising the company’s market value to 791 million euros. The 50-member SDAX Performance Index for small companies has gained about 12 percent.

Rental Growth

TAG owns homes in cities such as Berlin and Hamburg and is benefiting from rental growth in large urban areas as young Germans move to places where jobs are easier to find. The company plans to add more residential properties while shrinking its commercial real estate business. It expects to sell as many as five commercial properties by the end of the year, Chief Executive Officer Rolf Elgeti said on a conference call today.

TAG reiterated its guidance for the full year, predicting FFO excluding sales of 40 million euros.

While TAG plans to increase the size of its residential portfolio, it may sell some homes for opportunistic reasons, Elgeti said.

“The market is reasonably hot,” he said. “We constantly get contacted with unsolicited bids. Sometimes they’re so high we just can’t refuse.”

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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