German Landlord GSW May Expand Beyond Berlin, CFO Says

GSW Immobilien AG, Germany’s fourth-largest landlord by market value, may expand beyond its main market of Berlin if a suitable group of housing assets comes up for sale.

“We’re open to going outside Berlin, but we don’t see any opportunities at the moment,” Chief Financial Officer Andreas Segal said today in a telephone interview. “The market would have to be similar to Berlin in terms of demographic and economic growth.”

GSW owns about 60,000 homes, mostly in the German capital, where the population is growing and rents are rising. The number of households in Berlin grew 13 percent to almost 2 million in the 10 years through 2011, according to the latest Berlin census. Rents gained about 8 percent in 2012 and 26 percent in the past five years, according to online broker ImmobilienScout 24.

GSW’s Berlin focus has helped the stock outperform the FTSE EPRA NAREIT Index of German property stocks. GSW shares climbed 27 percent in the past 12 months, while the index gained 21 percent.

Acquisition Strategy

GSW, which added 7,000 apartments in 2012, plans to buy at least 1,500 more this year, Segal said. The company has enough funds to buy 2,000 units, and may raise additional capital through a convertible bond or a share sale.

“We scan the market continuously, and there’s a pretty good deal pipeline,” he said. “Whether we raise more money depends on the opportunities in the market.”

In order to expand beyond Berlin, GSW would have to find a large number of units tightly clustered in one region to increase efficiency, Segal said.

GSW considered bidding for Gagfah SA’s Woba portfolio of 38,000 apartments in Dresden last year and decided against it, he said. Gagfah, controlled by Fortress Investment Group LLC, last month abandoned a plan to sell its homes valued at about 1.8 billion euros after getting a loan to pay back debt.

GSW reported full-year earnings today.

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