Gagfah starts disposal programme, plans dividend resumption
It may be just a question of perception, but it certainly feels as if there are fresh winds blowing through listed German residential investor Gagfah AG since the arrival last spring of Thomas Zinnöcker as CEO from Berlin’s GSW Immobilien AG. In any event, investors seem to have rediscovered their faith in the Essen-based company after the previous troubled years which were overshadowed by lawsuits, accusations of insider trading, and negative publicity associated with the treatment of tenants under the old – now largely replaced – regime.
Major shareholder, the US private equity group Fortress, has also been steadily decreasing its stake in the business, which seems to be coinciding with the group’s return to favour. Gagfah owns and manages about 145,000 residential units throughout Germany.
Gagfah recently published its provisional full-year figures for 2013, and clarified its goals for 2014. The group plans to increase its operating results (FFO) by 35% this year and 10% the year after in preparation of a return to a dividend payout of €0.20-0.25 in early 2015. There will be no dividend payout this year, due mainly to the nearly €200m extra costs incurred in pushing through the company’s €4bn refinancing package last year – at a new average financing cost of 3.1% p.a. on loans now mainly due in 2017-2019. (The company reckons the overall saving on the refinancing to be over €40m).The company last paid a dividend in the fourth quarter of 2010.
Zinnöcker commented on the year just past in a statement accompanying the results: “2013 was a very good year for GAGFAH and its stakeholders. We have successfully laid the groundwork for an improved operational performance and for strong FFO growth this year, and we are very confident about our targets for 2014 and beyond.” The results show FFO of €0.60 per share, while rental growth was above 1% and the average vacancy rate held at under 4.5%.
Gagfah is now focused on shedding apartment units in non-core geographic areas, such as Saarland and Saxony-Anhalt, where it manages small amounts of apartments but nonetheless needs to maintain a strong administrative presence. All in all 17,000 apartments are scheduled for disposal, including 4,200 in North Rhine-Westfalia, 3,300 in Lower Saxony, and 2,200 in Schleswig-Holstein. These regions, outside Gagfah’s core regions of Dresden, Leipzig and the eastern part of the country, have had a vacancy rate of up to 8.5% at average rents of €4.92 per sqm/month, and Gagfah will be looking to sell off the holdings as portfolio deals.
The rest of Gagfah’s holdings have an average vacancy rate of 3.5%, and generate rents of €5.26 per sqm. The company plans to pump in €70m this year for upgrade and maintenance, lowering the overall vacancy rate to below 4%, and which should be reflected in an improved NAV.