GSW Chief Boosts Acquisition Plan on Berlin Home Boom Hopes
German landlord GSW Immobilien AG (GIB) plans to take advantage of Berlin’s booming housing market by purchasing as many as 7,000 apartments this year, Chief Executive Officer Bernd Kottmann said in an interview.
GSW, the biggest publicly traded owner of Berlin homes, said last month it had funds to buy 4,000 apartments.
“Last year, we bought 7,000 apartments and I’d be happy if we bought portfolios on a similar scale this year,” Kottmann, who became CEO on April 16, said by phone. “The boom in Berlin has just begun.”
GSW has most of its apartments in the German capital, where rents rose 7 percent in the past 12 months, according to data compiled by online broker ImmobilienScout 24. While there are no plans for a capital increase, the company would consider one to raise funds for acquisitions, the CEO said.
Kottmann replaced Thomas Zinnoecker amid complaints by investors that the supervisory board didn’t conduct an adequate search to fill the position.
On May 15, shareholder PGGM NV called for the resignations of Kottmann and GSW Supervisory Board Chairman Eckart John von Freyend, who oversaw the appointment. The Dutch pension fund and owner of about 3 percent of GSW criticized the pair for their track record at IVG Immobilien AG (IVG), a German real estate company that reported a net loss of about 452 million euros ($588 million) for 2008 under their management.
“The supervisory board has clearly described that a transparent, extensive and legally sound search process with numerous candidates took place,” Kottmann said. “The board also showed that there is no personal or financial relationship between Eckart John von Freyend and myself that would create a conflict of interest.”
GSW plans to fight PGGM’s proposals, Freyend said by telephone on May 15.
Kottmann worked at IVG from 1997 to 2009, first as chief operating officer and then as chief financial officer starting in 2007. The company has lost about 98 percent of its market value since 2008 and is in talks to restructure more than 3 billion euros of debt.
“I worked at IVG very successfully for 10 years, and I won’t have my track record reduced to the two years that I was CFO during the worst financial crisis in history,” Kottmann said. “I find that quite unfair.”
German financial watchdog Bafin is investigating whether GSW reported the possible CEO change early enough, a spokeswoman said by telephone on May 17. Kottmann said Bafin hasn’t contacted the company and GSW will fully cooperate with the investigation if asked.
Kottmann said he plans to focus on expanding GSW’s portfolio, first in Berlin and then beyond, if the opportunity arises. The company will definitely surpass 100,000 apartments in the medium- to long-term, he said.
“We own just 3 percent of the apartments in Berlin, but in other big cities the largest landlords have a much higher market share,” he said.
GSW has considered expanding outside of Berlin in the past, and may buy a residential-property company in another city where rents are rising if its biggest market slows, he said. Those cities include Hamburg, Cologne, Munich and Dresden, where GSW considered buying 38,000 apartments from rival Gagfah SA (GFJ) last year. An expansion is not yet in sight.
“We believe we can continue to grow significantly in Berlin,” he said. “Our focus on Berlin is absolutely right.”
GSW may also grow by building apartment blocks, Kottmann said. The company, which hasn’t constructed homes for about 20 years, will make a decision this year, he said.
German publicly traded property companies are likely to seek mergers in the coming years because there are currently too many competing for the same property portfolios and investor funds. That won’t happen immediately, though, because shares are expensive, he said. The EPRA FTSE/NAREIT of German property stocks has gained about 45 percent in the past three years.
As a result, German residential property stocks such as GSW, Deutsche Wohnen AG (DWN) and LEG Immobilien AG (LEG) trade at or above the value of their assets, making a takeover unprofitable, Kottmann said.
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