Profits up at Deutsche Wohnen, new investment of €680m in nursing homes
The shortage of affordable housing in Germany, particularly in the bigger cities, has helped to push up profits at Deutsche Wohnen, the country’s second-biggest listed residential property company.
The key metric FFO1 at the MDAX-listed company was up 12.5% in the first half to €248.5m. The company is targeting €470m for the full-year, which would represent a rise of nearly 9% over 2017. The company manages more than 160,000 apartments and commercial units across the country, mainly in the bigger cities, where the rents are higher. About a quarter of the stock is in Berlin, where rents have been rising the most rapidly in the last few years.
Deutsche Wohnen said it had invested about €100m in modernization over the six months, nearly a third more than last year, as part of its plan to invest €1.2bn by 2022 in property upgrading. Rents rose in the period by 6% to €387m.
In common with listed rivals Vonovia and LEG Immobilien, who are countering the shortage of housing by building their own new apartments, Deutsche Wohnen is also building its own new stock but is also betting heavily on the growing number of elderly people needing managed care facilities.
Earlier this month it bought a further 30 nursing homes for a combined total of €680m, adding a further 4,700 care places to its existing portfolio of more than 12,000 places. Thirteen of the nursing facilities are situated in the Hamburg city area and were acquired from US investor Oaktree. In that transaction Deutsche Wohnen was advised by Terranus, which carried out business and technical due diligence on all 13 homes and examined their cost-effectiveness. To manage the facilities, Deutsche Wohnen also bought a minority interest in Pflegen & Wohnen Hamburg GmbH.
The other 17 facilities are located across the country and are fully let to well-known operators under long leases.
The €680m investment corresponds to a return based on the expected EBITDA after completion of the integration of around 5%, the company said.
Deutsche Wohnen’s CEO Michael Zahn commented, “We are consistently pursuing our growth strategy in the Nursing and Assisted Living segment through the planned acquisitions of nursing facilities with above-average qualities and locations. With over 12,000 care places we are one of the largest owners of nursing properties in Germany and will therefore benefit greatly from the positive macro trends in the nursing market.”