Deutsche Wohnen to raise €900m in new rights issue
Germany’s second-biggest residential housing company Deutsche Wohnen AG is preparing a new rights issue with which it expects to raise gross proceeds of €907m. Shareholders are being offered one new share for every seven they hold, at a price of €21.50 (the current traded price is about €22.15).
The proceeds are expected to be used to buy a further 6,500 residential units, mostly in the Marzahn district ofBerlin, Deutsche Wohnen said recently. The new portfolio generates an annual net rent roll of €25.6m, and currently has a vacancy rate of 2.6%. It is expected to make an annual EBITDA contribution of more than €20m. Buying it will require about €500m, and will bring the company’s residential holdings up to more than 155,000 units.
The company is trying to bring its overall leverage ratio down to below 45% from its current 50.4%, largely by turning over bank loans and possibly issuing new 10-year bonds, and needs to refinance €1.2bn of loans due in 2018 and 2019, while bringing its average interest rate down below 2%, as against the 3.4% being paid now. A further €0.3bn with likewise higher interest costs are to be repaid from the company’s cash holdings.
According to Deutsche Wohnen’s board member and finance director Andreas Segal, the plan is for further buying of residential portfolios in Berlin, which along with the Rhine-Main area around Frankfurt, represents the company’s major heartland, particularly after the acquisition of Berlin group GSW with its 60,000 units some years ago. “In addition, we see attractive op- portunities in the market to continue our growth strategy .. and will use a part of the proceeds from the capital increase for value enhancing growth. In addition, we will further optimise our capi- tal structure with the capital increase and envisaged refinancing, and at the same time strengthen our FFO and cash-flow profile from 2015 onwards.”
Deutsche Wohnen saw its FFO rise in the first quarter by 21% to €71m, and its EPRA net asset value rise to €18.83 per share, up from €18.61 the previous quarter, thanks to higher rental income and lower vacancies, along with selected disposals. Just last month the company allowed its €1.2bn takeover bid for Austrian rival conwert Immobilien to lapse at €11.50 offered per share, when insufficient conwert shareholders agreed to the bid price.