May 15 (Bloomberg) -- Gagfah SA, the second-biggest owner of German homes, said profit from its main business of renting apartments declined 2.5 percent in the first quarter after it sold units to help pay debt.
Profit from the leasing of investment properties fell to 91.5 million euros ($118 million) from 93.8 million euros a year earlier, the Luxembourg-based company said in a statement today.
Gagfah, controlled by Fortress Investment Group LLC, in the past 12 months has been focused on refinancing 3.4 billion euros of debt that comes due this year. The company has been selling apartments to help raise cash and said today it’s close to repaying its final large loan of about 2 billion euros.
Gagfah owned about 144,000 apartments at the end of the first quarter compared with about 148,000 a year earlier.
Funds from operations excluding sales, a measure of a property company’s ability to generate cash, fell 0.8 percent to 23.6 million euros in the first quarter.
Deutsche Annington Immobilien AG, which owns about 186,000 apartments, is Germany’s largest residential landlord.
Thomas Zinnoecker, who took over as Gagfah’s chief executive officer last month, said on a conference call with analysts that he’s reviewing Gagfah’s homes to identify those that may require more investment or may need to be sold.
“If you have a portfolio in more than 300 locations, there’s room for optimization,” he said.
The company plans to spend more on maintaining and modernizing apartments to increase their value, he said. Gagfah said it will spend as much as 13 euros a square meter in 2013, compared with 11 euros in 2012. That amount is likely to grow in the coming years, he said.
“We see a lot of improvement potential from investing more money in the right places,” Zinnoecker said.
Gagfah may issue new shares to finance the additional spending and to reduce its debt, he said. Zinnoecker said he hasn’t decided whether Gagfah should resume dividend payments. The payments stopped in 2011, according to data compiled by Bloomberg.
“Dividends are something we have in our focus,” he said.
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