Vonovia to pause on acquisitions after M&A spree

Berlin

VONOVIA will take a break from acquisitions, its chief executive said, after Germany's biggest residential property company on Friday raised its outlook for a second time in less than four months.

Since going public in 2013 Vonovia has grown by swallowing up smaller rivals, and has expanded outside its home market, snapping up Austria's Conwert and Buwog, and in May, reaching a US$1.1 billion deal for Sweden's Victoria Park.

Chief executive Rolf Buch said the company was monitoring the French market, but had no current plans to expand beyond its borders and would focus on making sure its business model worked in Austria and Sweden.

"The whole topic of internationalisation is a long-term topic that will continue well beyond my time in office," Mr Buch told reporters.

Around 90 per cent of Vonovia's roughly 400,000 flats are in Germany, and 10 per cent in Austria and Sweden.

Asked about further deals within Germany, Mr Buch said steep price rises in many German cities meant properties were inflated.

"We are not forced to buy at excessive prices and if the prices are excessive then we won't buy for a while," he said.

Demand for German real estate has risen in recent years, with investors seeking safe havens. An influx of people to big cities has further increased demand for housing and pushed up rents.

Average property prices in Berlin shot up by 20.5 per cent in 2017 and have increased by 120 per cent since 2004, according to property consultancy Knight Frank.

Vonovia said the value of its property grew by 1.4 billion euros (S$2.2 billion) in the first half and said it expects the value of its real estate to increase further due to the dynamic development of the German housing market.

Shares in Vonovia, which have gained more than 25 per cent over the past year, fell 1.9 per cent in early trading. Germany's blue-chip DAX index was seen falling by 0.6 per cent.

The company raised its guidance for 2018 core profit (funds from operations 1) to 1.05-1.07 billion euros from 1.03-1.05 billion.

This includes an approximately 20 million euro contribution from Victoria Park and 30 million in income from the integration of Austria's Buwog which it bought for 5.2 billion euros at the end of 2017.

Vonovia said core profit rose by 11.5 percent in the first six months of the year to 510.3 million euros, excluding Buwog and Victoria Park. REUTERS