Annington takeover of Gagfah complete, prepares for new start
Listed German residential landlord Deutsche Annington has concluded its merger with rival housing investor Gagfah after securing the votes of 94% of the Gagfah voting shares. The new company will be renamed Vonovia SE from April this year, and will manage about 350,000 residential apartments, with a portfolio value of €21m housing nearly a million tenants.
The combination of the largest and the third-largest German residential companies has created the largest European residential property group, and the second-largest listed property company overall in continental Europe after Unibail-Rodamco. Annington and Gagfah reckon they can achieve cost efficiencies of €84m over the next two years through the merger.
Recent figures posted by Annington show that it boosted 2014 FFO by 28% to a record €287m after swallowing two of its earlier acquisitions, but befor the Gagfah bid. The two big buys were 11,400 units from DeWAG, mainly located in Hamburg, Frankfurt and Munich, and a 31,000-unit portfolio from Vitus Immobilien, largely located through North Rhine-Westphalia.
According to Deutsche Annington’s CEO Rolf Buch, who will also be the top man at the new enlarged firm with Gagfah’s boss Thomas Zinnöcker as his deputy, the target for 2015 on the Annington share of the business alone is for an increase in the FFO to €340-€360m while pushing up NAV by 4% to nearly €25.00 per share. It also plans further capex investment of more than €400m and is targeting rental growth of 2.6%-2.8% for rental income of €900m.
In 2014 Annington’s investment in modernisation and maintenance amounted to €346m, and over 10,000 of its apartments underwent energy efficiency improvements. The vacancy rate improved slightly to 3.4% from 3.5%, monthly in-place rent per sqm rose to €5.55 from €5.41. Rental income came to €789m, and asset value rose 28% to €6.6bn or €24.22 per share. The current Annington share price is about €32.00, having risen by more than 50% over the past year.
Meanwhile, Gagfah shareholders got a nasty little surprise this week when Deutsche Annington scuppered its plans to pay out its first dividend after a lengthy hiatus – certainly since the time nearly five years ago when majority owner US private equity group Fortress had the company firmly in its grasp, and Gagfah had one of the most generous dividend yields in the business. For 2014 the company had planned a full-year dividend payout of €0.35 per share as a parting gift to loyal shareholders, but this has now been cancelled by the new incoming regime.