Conwert increases focus on German residential market

The Vienna-listed conwert Immobilien said earlier this month that it plans to invest more this year in German residential real estate, part of a strategy shift to focus more on buying and renovating apartment blocks. The company said that it may spend as much as €200 million on residential property in German cities this year, while stepping up its programme to dispose of commercial properties, as well as eastern European assets valued at €127 million, over the next twenty-four months.

“The regrouping of our portfolio is going to continue,” CEO Johannes Meran said at a news conference. That means selling commercial real estate and reinvesting the proceeds in higher-yielding residential properties, mainly in Germany, he said.

It bought a 60% majority stake in Hamburg’s KWG Kommunale Wohnen last year, seeking to better position itself as a manager of residential real estate. The stake has now risen to 75.7% in March, with conwert having paid an average purchase price of close to the €6.00 share price, at a discount to stated NAV of 40%. The average purchase price so far worked out at a price of €620 per sqm for the 9,700 apartment units in KWG’s holdings, which are mainly focused in North Rhine-Westphalia, Saxony, Lower Saxony, Thuringia, and Berlin.

Around 60% of the company’s €2.9bn portfolio is in Germany, a proportion that’s set to rise to 80% within the next two years, Meran said. The goal is to become a sustainable dividend-paying company on the basis of stable rental income. With the KWG assets, conwert has now increased its German portfolio by 66% to 24,500 units, while KWG’s CEO Stavros Efrimidis has moved over to run the conwert operations in Germany.

However, shareholders dumped conwert stock after the company posted a net loss of €167.8m for 2012 after taking write-downs of more than €117m on goodwill and other intangible assets. The company said there will be no 2012 dividend, apart from a one-off dividend of 15 cents a share related to last year’s capital decrease. However, it expects to return with a dividend of at least €0.20 a share for 2013. Overall, conwert holds property assets valued at €2.7bn, in markets including Austria, Luxembourg, Hungary, Slovakia, Czech Republic, and the Ukraine, as well as Germany.