Vonovia Lifts Forecast Again as Landlord Benefits From Purchases

Vonovia Acquisition Benefits Surpass Expectations

Vonovia SE, Germany’s biggest residential landlord, raised its full-year earnings forecast for a second time, citing efficiency created by a string of acquisitions.

Funds from operations excluding sales, a measure of a real estate company’s ability to generate cash, will be as much as 760 million euros ($848 million) this year, compared with a previous forecast of as much as 740 million euros, Vonovia said in a statement on Tuesday. The Bochum-based company also said FFO in the first half rose 44 percent to 387.8 million euros.

“The improvements in efficiency and synergies resulting from the acquisitions are proving to be greater than originally anticipated,” Chief Executive Officer Rolf Buch said in the statement.

Vonovia has doubled the number of homes it owns since its initial public offering three years ago, funding purchases with low-cost debt and share sales. The company slowed acquisitions after it failed in a bid to acquire its biggest rival, Deutsche Wohnen AG, in February. Instead, it’s trying to boost profit by constructing apartments on top of buildings it already owns, and by selling add-on services such as television subscriptions.

Rental income in the first half gained about 23 percent to 774.7 million euros. FFO per share climbed 17 percent to 83 cents, rising more slowly than the total because the company issued shares to pay for acquisitions.

FFO per share in 2016 will be 1.59 euros to 1.63 euros, which would be a 24 percent increase from a year earlier, the company said.

German landlords are boosting profits as housing shortages in the country’s biggest cities lift rents and home values. Stock investors, who are seeking to benefit from a rising market, have been lapping up shares issued by Vonovia and its peers, allowing them to fund acquisitions.

Vonovia, which changed its name last year from Deutsche Annington, owns about 340,000 apartments across Germany, mostly rented to low- and middle-income earners.

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