Buwog, the German-Austrian residential property group, saw recurring funds from operations (FFO) rise 14% to €85.4 mln in the first nine months of the 2016/17 fiscal year as a €277 mln fair-value adjustment boosted gross rental yield to 5.2%.
As a result, EBITDA (earnings before interest, tax, depreciation and appreciation) rose 7% to €128.9 mln over the period.
'At the end of the first nine months, we are on target to meet our goals for the current financial year and can reconfirm our forecast for recurring FFO of at least €108 mln in 2016/17,' Buwog's CEO Daniel Riedl said at the earnings presentation.
The company's strategic positioning within three business areas – asset management, property sales and development – has proven to be a reliable success model, despite an increasingly challenging market environment, he added. 'That will allow us to work profitably, and also strengthen this profitability in the future. Buwog's activities in both the investment and project development areas also allow us to expand in times of substantially higher property prices by developing projects for our own portfolio, instead of buying at high prices on the market.'
The positive revaluation of the Austrian and German portfolios reflected high yield compression as well as rising market rents in core locations on the German market. The fair value of the standing investments has risen by 7.6% since the end of the 2015/16 financial year to €4 bn.
In view of the rising property prices, Buwog is working to make its standing investment portfolio less dependent on property acquisitions and has increased the construction of rental apartments for its own portfolio. Current plans call for the construction of 3,900 rental apartments for Buwog's portfolio in the core locations of Berlin, Hamburg and Vienna (pictured Universumstrasse). The purchase of additional land parcels is expected to increase this cluster to 5,000 rental apartments for the standing investment portfolio.
