Bloomberg News

Deutsche Annington Profit Rises on Debt-Financing Cost Cuts (1)

April 30, 2014

Deutsche Annington Immobilien SE (ANN), Germany’s largest publicly traded owner of homes, said first-quarter profit rose 26 percent after the company reduced its financing costs.

Funds from operations excluding divestments, a measure of a property company’s ability to generate cash, climbed to 61.9 million euros ($85 million) from 49.3 million euros a year earlier, the Bochum-based company said in a statement today. The company repeated that its full-year FFO will be between 250 million euros and 265 million euros.

“We’ve expanded our market leadership position and everything is going according to plan,” Chief Executive Officer Rolf Buch said on a conference call with reporters.

Borrowing costs declined in the quarter after Deutsche Annington refinanced its GRAND commercial mortgage-backed security last year. The company owns 215,000 apartments in Berlin, Cologne and other large cities, including 41,000 units it agreed to buy in February.

Interest payments on Deutsche Annington’s debt fell to 58.4 million euros from 70.7 million euros a year earlier.

Net income fell in the first quarter to 36.9 million euros, or 16 cents a share, from 385 million euros, or 1.93 euros, a year earlier, Deutsche Annington said. The drop resulted from transaction costs of about 100 million euros for recent acquisitions and from a one-time valuation gain in 2013 tied to the company’s initial public offering, Buch said.

Acquisition Pace

German publicly traded landlords are buying apartments to take advantage of favorable financing conditions. Investors bought 15.8 billion euros of homes in 2013, the most since 2005, according to data compiled by Chicago-based broker Jones Lang LaSalle (JLL:US) Inc.

To help finance its most recent acquisitions, Deutsche Annington in April sold a 700 million-euro hybrid bond with a yield of 4.675 percent, and in March issued shares valued at about 300 million euros. In addition, the company plans to issue a corporate bond of about 500 million euros by October, Buch said today.

“We took care of the equity part of the financing first -- that’s important for the rating agencies who view that positively -- and we’ll do the debt measures when the payments are due in October,” he said.

While Deutsche Annington may make further acquisitions, it’s unlikely the company will buy large listed competitors such as LEG Immobilien AG (LEG) or Gagfah SA, Buch said.

’’Buying entire companies is very complex and carries higher risks,’’ said Buch. “That means you need significantly higher synergies and I don’t see those at the moment.”

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

To contact the editors responsible for this story: Andrew Blackman at ablackman@bloomberg.net Andrew Blackman, Ross Larsen


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