GSW Shares to Rise More Slowly Next Year, Chief Executive Says

GSW Immobilien AG shares will probably rise more slowly next year after posting one of the best performances by a mid-cap German company in 2012, Chief Executive Officer Thomas Zinnoecker said.

GSW, Germany’s third-largest residential landlord by market value, has gained 71 percent since first selling shares to the public in April 2011, including 49 percent this year. Like other German companies, GSW has attracted investors seeking a safe place to put their money as economies in countries that use the euro such as Greece, Ireland, Portugal and Spain contract.

“We can’t keep growing at 50 percent a year,” Zinnoecker, 51, said in an interview at GSW’s headquarters in central Berlin. “For real estate shares, the growth isn’t limitless when they start trading at a premium to net asset value.”

GSW owns 60,000 apartments, mainly in Berlin, and is benefiting from rising rents as the population in the German capital increases. The company is this year’s 10th-best performer in the German DAX Mid-Cap Index, which has risen 31 percent. GSW’s market value is 1.64 billion euros ($2.2 billion).

The company’s net asset value is 27.95 euros per share, according to data compiled by the company, compared with the stock price of about 32 euros.

Analysts expect the shares to trade at 29 euros to 35 euros in 12 months, according to data compiled by Bloomberg. There are five recommendations to buy the stock, five to hold and none to sell.

‘Sensible’ Deals

GSW has about 250 million euros available to make acquisitions next year if “sensible” opportunities arise, Zinnoecker said. That could buy 3,000 to 4,000 apartments, he said.

“If we find something that fits, we’ll go for it,” he said. “But we’re under no pressure.”

GSW can also increase its capital to make additional purchases, he said. The company has bought 7,000 apartments this year.

The number of households in Berlin rose 13 percent to almost 2 million in the 10 years through 2011, according to the latest Berlin census.

The property investor may raise its guidance for the 2012 dividend, Zinnoecker said. Last month, GSW said its dividend for 2012 will equal about 65 percent of its funds from operations. That would amount to between 79 cents and 83 cents a share, based on the company’s FFO forecast of 61 million euros to 64 million euros.

The company wants to at least match the previous year’s payout, the CEO said. That was 90 cents a share.

‘Satisfied Shareholders’

“We want to keep our shareholders satisfied when it comes to dividends,” he said. “It’s just an idea; Nothing’s been decided,” he said.

The dividend will be set at a supervisory board meeting in March. Most analysts expect a payout of 90 cents per share, according to data compiled by Bloomberg.

GSW plans to remain independent despite speculation that a merger with Deutsche Wohnen AG, Germany’s largest residential landlord by market value, would be beneficial, Zinnoecker said. Such a deal would reduce costs and increase the amount of shares being traded, JPMorgan Cazenove said in a Nov. 21 note to investors.

“For a friendly merger, we’d have to see where the benefit is for our shareholders, and at the moment we don’t see it,” he said.

Manuela Damianakis, a spokeswoman for Deutsche Wohnen, declined to comment.

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