Deutsche Wohnen AG (DWNI), Germany’s second-largest residential landlord by market value, said first-quarter funds from operations rose 68 percent after the company acquired thousands of apartments and charged higher rents.
FFO excluding divestments, a measure of a property company’s ability to generate cash, climbed to 30.9 million euros ($40 million) from 18.4 million euros a year earlier, Deutsche Wohnen said in a statement today. The Berlin-based landlord repeated its forecast that FFO for the whole of this year will be 100 million euros.
German residential landlords are taking advantage of rising stock prices by raising money from shareholders to finance acquisitions at favorable terms. The company bought about 32,000 apartments in 2012, the most in its history, and in April agreed to buy an additional 6,900 apartments in Berlin from Blackstone Group LP. (BX)
“We believe in Berlin,” Chief Executive Officer Michael Zahn said in the statement. The German capital “is a dynamic market with a lot of potential for us.”
Profit from Deutsche Wohnen’s main business of renting apartments rose 61 percent to 70.9 million euros.
Deutsche Wohnen rose 4.6 percent in Frankfurt trading, the most since March 14, to 15.01 euros. The shares have gained about 30 percent in the past 12 months, while the FTSE/EPRA NAREIT index of German property stocks has climbed 20 percent.
The company’s net income rose 82 percent to 26.2 million euros in the first quarter from 14.4 million a year earlier, largely due to higher rental profit from apartments that were added in 2012.
About 54 percent of Deutsche Wohnen’s apartments are in Berlin and the company plans to continue buying homes in the city, Zahn said on a conference call with analysts.
Initial public offerings this year are increasing competition for shareholder equity, making it more likely that listed companies will merge, he said.
LEG Immobilien AG (LEG), formerly owned by Goldman Sachs Group Inc., raised 1.3 billion euros in February, making the deal Germany’s largest property IPO. Deutsche Annington Immobilien AG, owned by Terra Firma Capital Partners Ltd., is planning to sell shares for the first time by the end of June.
“The landscape is becoming more crowded and competitive,” Zahn said. The MDAX stock index for medium-sized companies has four members that are residential landlords and at least two more are expected to join by the end of the year. That’s “not really effective,” Zahn said.
If Deutsche Wohnen identifies a merger opportunity that offers cost savings and fits with its strategy, “this could be a situation we think about,” he said. There’s no indication that such an opportunity exists at present, he added.
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