Vonovia Profit Jumps as Acquisitions Bolster Rental Income

Vonovia SE, the Germany property company making a hostile takeover offer for a smaller competitor, said nine-month profit more than doubled and raised its full-year forecast as acquisitions caused its rental income to surge.

Funds from operations excluding sales, a measure of a real estate company’s ability to generate cash, rose to 432 million euros ($476 million) from 205 million euros a year earlier, Vonovia said in a statement Tuesday. FFO per share rose more slowly, by 14 percent to 93 cents, as the company paid for acquisitions by issuing stock.

Vonovia said FFO will be as much as 600 million euros in 2015, compared with a previous forecast of up to 580 million euros. Vonovia, the biggest owner of German residential properties, bought competitors Gagfah SA and Suedewo Group in the past year. Last month it offered to pay almost 10 billion euros for Deutsche Wohnen AG, the industry’s No. 2 company.

Vonovia, formerly Deutsche Annington Immobilien SE, became the first residential landlord to enter a benchmark European stock index when it joined the DAX in September. Low interest rates and a rising stock price have enabled Vonovia to finance acquisitions cheaply, helping it to double the number of properties the company owns in the past three years.

Vonovia repeated its forecast that FFO in 2016 will be between 690 million euros and 710 million.

Acquiring Deutsche Wohnen would increase Vonovia’s apartments from 370,000 to 514,000 and make it Europe’s second-largest property company after Unibail-Rodamco SE by market value. Deutsche Wohnen has rejected the offer as too low and said that advertised cost savings are unrealistic.

’Final Offer’

"We are confident the offer we’ve made is very attractive for all participants,"
Vonovia Chief Executive Officer Officer Rolf Buch said on a call with reporters. Buch said he’s confident the promised cost savings can be achieved.

"This is our best and final offer," he said.

Rental income in the first nine months rose 78 percent to 1 billion euros, while the vacancy rate fell to 3.4 percent from 3.6 percent.

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