Deutsche Wohnen Earnings Surge After Acquisition Spree

Deutsche Wohnen AG (DWNI), Germany’s second-largest residential landlord by market value, said first-half profit gained 85 percent as acquisitions lifted rental income. The company raised its 2013 earnings forecast.

Funds from operations excluding divestments, a measure of a property company’s ability to generate cash, rose to 60.6 million euros ($80.6 million) from 32.8 million euros a year earlier, Deutsche Wohnen said in a statement today. The Berlin-based company said it expects FFO of 110 million euros this year, up from an earlier forecast of 100 million euros.

Deutsche Wohnen bought about 32,000 apartments in 2012, the most in its history, and in the first half of this year added 10,700, according to the statement. The company now owns 91,000 homes in German cities including Berlin and Frankfurt.

“With these acquisitions we have strengthened our core and growth regions and can generate economies of scale through our operational platform,” Chief Executive Officer Michael Zahn said in the statement.

Deutsche Wohnen rose as much as 4.5 percent in Frankfurt trading, the biggest gain since May 14, and was up 2.4 percent at 14.17 euros at 12:08 p.m. The shares have climbed about 1.4 percent this year, extending last year’s 38 percent advance and increasing the company’s market value to 2.4 billion euros.

Net income increased to 50.2 million euros, or 31 cents a share, from 36.9 million euros, or 35 cents, a year earlier. Profit from Deutsche Wohnen’s main business of renting apartments rose to 139.3 million euros from 86.6 million euros.

Higher Rents

Deutsche Wohnen has been buying apartments to take advantage of rising German rents and its ability to raise capital on the stock market at favorable terms. The company raised its average rent to 5.81 euros per square meter from 5.67 euros a year ago, according to the statement.

Average rents for homes in Berlin, Deutsche Wohnen’s biggest market, rose 6.3 percent in the past two years, the city’s government said in a May report.

To finance its acquisitions, Deutsche Wohnen issued about 195 million euros of new shares in the first half.

Acquisition Pace

The company has as much as 150 million euros available to make further acquisitions, Chief Financial Officer Lars Wittan said on a conference call with analysts and reporters.

“We are quite optimistic we can achieve another 1,000” apartment acquisitions in 2013, CEO Zahn said on the call.

Zahn wouldn’t say whether Deutsche Wohnen plans to bid for GSW Immobilien AG (GIB), a German competitor that owns about 60,000 apartments in Berlin and which lost its chairman and its CEO in June following investor complaints.

“There has been a lot of talk about consolidation,” Zahn said. “We are selective on acquisitions and we have to be focused on integration, but indeed we closely monitor the market.”

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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