The number two listed apartment rental company in Germany was recently taken over by the number one, Vonovia.
Frankfurt The takeover target of the industry leader Vonovia, the Berlin real estate group Deutsche Wohnen, earned only minimally more operationally in the first nine months of 2021. The result from the operating business, the Funds From Operations (FFO I), as the most important key figure for the industry is called, rose by 0.4 percent compared to the previous year to 422 million euros.
However, looking at this number, Vonovia boss Rolf Buch shouldn’t have any concerns that he has bought a company with no growth prospects: The operating profit was achieved by managing fewer apartments.
The stocks of real estate companies would have to “increase qualitatively, not quantitatively,” emphasized Deutsche Wohnen boss Michael Zahn in a conference call on Friday. The portfolio has been cleaned up and thousands of apartments have been sold, including to the State of Berlin.
And in fact, the net asset value of the Berlin company’s real estate rose overall – expressed in the industry’s standard NTA per share – by 2.7 percent to 53.32 euros compared to the end of 2020.
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The fair value of the portfolio – not taking into account the residential and care facilities – now amounts to 27.6 billion euros, after 26.2 billion at the end of 2020. The reason for this is the ongoing real estate boom in Germany, which keeps the prices for apartments in is increasing, especially in the federal capital Berlin.
New real estate giant emerges
Deutsche Wohnen recently had around 158,000 units in its portfolio, including around 155,000 apartments and 3,000 commercial properties. The merger with Vonovia is now creating a new real estate giant in Europe with more than half a million residential units.
The takeover is progressing after initial difficulties: at the end of the acceptance period for Vonovia SE’s takeover offer, almost 88 percent of Deutsche Wohnen’s investors transferred their shares to Vonovia. The merger of the two real estate groups officially took effect on November 2nd.
In the course of this, Deutsche Wohnen boss Zahn will move into the Vonovia Group’s executive board as deputy CEO and Deutsche Wohnen CFO Philip Grosse.
But for now the two groups will continue to work as usual. Deutsche Wohnen has now confirmed the forecast: For 2021, management continues to expect an operating result (FFO I) at the previous year’s level of around 544 million euros.
The FFO corresponds to the net profit, adjusted for depreciation on real estate assets, from normal business activities, i.e. primarily from the rental business. Profits from the sale of real estate are not included in the calculation of the FFO.
Deutsche Wohnen had also promised its tenants not to increase the rent during the corona pandemic. The fact that rental income now showed a plus of 1.2 percent can therefore only be attributed to higher rents for new rentals, it was emphasized.
Serenity over the expropriation debate in Berlin
As far as the heated expropriation debate in Berlin – Deutsche Wohnen’s most important market – is concerned, the management was calm: From conversations it seems that the Berlin government wants to have lawyers carefully examine the situation and therefore not a decision in the next twelve Months.
The initiative “Expropriate Deutsche Wohnen & Co.” had won a vote in September on the question of whether large housing groups in Berlin with more than 3,000 existing apartments should be socialized. 56.4 percent of those eligible to vote had voted in favor, 39 percent against.
However, the Senate is not obliged to draft a corresponding law. If the wishes of the proponents of expropriation were implemented, this would have far-reaching consequences not only for Deutsche Wohnen.
More: After being thrown out of the Dax: The unusual ups and downs in the Deutsche Wohnen share