Vonovia almost doubled earnings in 2015 with peer buyouts

German residential giant Vonovia more than doubled its earnings in 2015 following its rebranding and merger with sector peer Gagfah.

Funds from operations excluding sales (FFO) rose by 112% to €608 mln, beating the third-quarter estimate of €590-€600 mln, the company said in a statement on Thursday.

FFO per share rose by 30% to €1.30 per share, while EPRA NAV increased by the same margin to around €30.

The strong performance was underpinned by solid factors such as a fall in the vacancy rate to 2.7% and a reduction in the LTV level to 47%, as well as the acquisition of Gagfah in a €3.9 bn deal and Südewo.

The company acquired the Südewo Group’s 20,000 residential units for €1.9 bn.

The combination of Deutsche Annington and Gafgah under the new name Vonovia created Germany’s largest residential landlord with 370,000 residential units. The company’s real estate portfolio is now valued at €24.2 bn, almost double its size of €12.8 bn the previous year.

Vonovia said it expected its FFO to increase to €690-€710 mln in 2016 and planned to invest up to €830 mln in modernisation and maintenance in the course of the year.

Chief executive Rolf Buch said: ‘We can look back on an eventful year. Following the merger with Gagfah, we continued on the path to success under our new name, Vonovia. We not only achieved a significant increase in earnings, but also once again made marked improvements to the quality of our apartments.’

Vonovia failed earlier this year in a bid to take over its largest rival Deutsche Wohnen in a deal that would have created a colossus with 514,000 apartments and a market capitalisation of €20 bn. The proposed €14 bn merger was cleared by Germany’s competition authority, but Vonovia failed to acquire 50% of Deutsche Wohnen’s shares by the February deadline.

'As you know, the offer we made to the shareholders of Deutsche Wohnen did not result in a sufficient number of tendered shares to allow us to implement our strategy,’ said Buch. ‘Our excellent figures show that, even without extra additions to our portfolio, our strategy will generate significant value increases thanks to its holistic approach to tenants and the living environment in general.’