Deutsche Wohnen AG, Germany’s largest residential landlord by market value, raised its forecast for funds from operations by about 8 percent after adding apartments and collecting more rent.
FFO excluding sales, a measure of a property company’s ability to generate cash, will be at least 65 million euros ($83 million) this year, the Frankfurt-based company said in a statement today. That’s up from an August forecast of 60 million euros. Deutsche Wohnen reported a 31 percent increase in FFO excluding sales to 52.4 million in the first nine months.
Deutsche Wohnen owns 73,000 apartments in cities including Berlin and Frankfurt and is benefiting from growing demand for housing in large urban areas. The company in May agreed to buy Barclays Plc’s Baubecon portfolio of 23,500 homes in a deal valued at 1.24 billion euros.
“They performed a little better than expected on the rental income,” said Torsten Klingner, an analyst at Warburg Research with a buy rating on the stock. Profit from the main business of renting apartments increased 14 percent to 135.4 million euros.
Deutsche Wohnen rose 1.3 percent to 14.11 euros at the 5:30 p.m. close in Frankfurt, raising the company’s market value to 2.06 billion euros. The shares have gained 42 percent this year, while the FTSE/EPRA Nareit Germany index has climbed 29 percent.
FFO excluding sales for 2011 amounted to 47.5 million euros. Deutsche Wohnen increased the number of homes it owns by more than half in 2012. The property company will ask shareholders on Dec. 4 to approve a share sale that will raise money for more home purchases, according to an Oct. 24 statement.
Deutsche Wohnen has bid for 38,000 apartments in Dresden being sold by Gagfah SA, Chief Executive Officer Michael Zahn said in an interview on Oct. 9. The Dresden homes are valued at 1.8 billion euros, according to Gagfah.
Deutsche Wohnen’s market value could climb to 5 billion euros within four years, Zahn said.
Bayerische Landesbank’s 33,000 Bavarian homes valued at about 2 billion euros, also for sale, will probably be too expensive for Deutsche Wohnen, although the properties would fit well into its portfolio, Zahn said on a conference call with analysts today.
“Here we expect to see strong competition with a big impact on prices, so I don’t see Deutsche Wohnen in the driver’s seat for this deal,” he said.