Vonovia 2015 Profit Doubles on Acquisitions, New Revenues

  • Cash from Failed Deutsche Wohnen Bid to Pay off Debt
  • Income Jumps From `Extensions' Services Such as Cable TV

Vonovia SE, the German property company that last month failed in an attempt to buy its largest competitor, said full-year profit more than doubled after it added properties and tapped new revenue sources.

Funds from operations excluding sales, a measure of a real estate company’s ability to generate cash, rose to 608 million euros ($660 million) from 286.6 million euros a year earlier, Vonovia said in a statement on Thursday. FFO per share rose by 30 percent to 1.30 euros as the company paid for acquisitions by issuing stock.

"We had a very successful year in 2015 and we’re entering 2016 with a great deal of optimism," Vonovia Chief Executive Officer Rolf Buch said on a call with reporters.

On Nov. 3, Vonovia said its 2015 funds from operations, excluding property sales, would be between 590 million euros and 600 million euros. The company on Thursday confirmed its expectation that FFO in 2016 will be between 690 million euros and 710 million euros, with the dividend once again amounting to about 70 percent of that.

Beyond Acquisitions

Vonovia, after a string of deals that helped it double in size since 2013, last month failed to secure enough support to buy Deutsche Wohnen AG. While low interest rates and a rising stock price have enabled Vonovia to finance acquisitions cheaply, the company plans to place an increasing emphasis on selling tenants services beyond just homes, Buch told reporters last month.

Rental income in 2015 rose 79 percent to 1.41 billion euros, while the vacancy rate fell to 2.7 percent from 3.4 percent.

Vonovia will spend most of the 3 billion euros it raised for the Deutsche Wohnen acquisition to pay off debt, the company said in a presentation on its website. About 1.2 billion euros will be used to repay existing secured loans, 700 million euros to refinance a bond expiring in July, and another 700 million to pay off other debt. About 400 million euros have been spent on Deutsche Wohnen shares, it said. Advisory costs and other expenses related to the deal amounted to about 19 million euros, Buch said on the call.

The company for the first time released numbers for a business strategy it describes as "extensions," which includes the sale of cable television connections to tenants and insurance services to other landlords.

"Thanks to our most recent acquisitions, we expect to have direct access to around 1 million customers," the company said in the statement. "We can offer these customers services that are closely related to and/or influence the rental business."

Adjusted earnings before interest, taxes, depreciation and amortization from extensions rose 59 percent to 37.6 million euros, last year the company said. That compares with Ebitda from its rental business of 924.8 million euros.

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