Vonovia SE, the giant German residential landlord that owns around 355,000 apartments, will purchase its first assets in France as soon as the opportunity arises after successful exploratory meetings with French state-landlord CDC Habitat, CEO Rolf Buch said during a 2017 earnings call.
The pair announced a partnership in October 2017 to "explore joint growth and investment opportunities" and areas for future cooperation. CDC Habitat, formerly known as Société Nationale Immobilière until January, manages more than 350,000 housing units across France.
After meetings between the companies' management teams from November until January, Vonovia is familiar enough with the French market to begin making acquisitions there, Buch said.
"We are now in a situation where we can participate in every [opportunity] that is coming to the [French] market," said Buch, adding that Vonovia's French acquisition model is now as good as its German model. "We are ready for opportunities and we will evaluate every time an opportunity is coming," he said.
Vonovia would prefer to make acquisitions alongside CDC Habitat, Buch said, as this would give Vonovia "much better support [from] the French government." CDC Habitat is a subsidiary of Caisse Dépôts et Consignations, the investment arm of the French government. However, Vonovia is also in a position to make acquisitions independently, Buch said.
The meetings with CDC Habitat have enabled Vonovia to calculate "every single portfolio that is or would be available in France" and allowed the German company to assess the financial viability of operating in the French market, the CEO said.
"We know now for sure that with our model [and] how we operate, we could extract significantly more [funds from operations] than the incumbent players in France can do so, including [CDC Habitat]," Buch said.
Asked what the criteria might be for Vonovia's acquisition of a residential portfolio in France, Buch said finding a large concentration of assets in a particular area would be more of a priority than a minimum level of investment.
Beyond the almost 190,000 social housing units that CDC Habitat manages, the company also handles "first-level social" and intermediate housing units. Vonovia is "legally allowed" to acquire intermediate housing in France, Buch said, "which might be interesting, but this is a question of available portfolios," he added. The company is not permitted to distribute a dividend from social housing units, said Buch, which makes it unattractive. However, the French government is working on legislation that may change these rules, he said.
Vonovia reported a 21% year-over-year increase in 2017 funds from operations 1, with its board intending to propose an increased dividend at its annual general meeting.
The company said FFO 1 for the full year came in at €1.90 per share, compared to the S&P Capital IQ consensus FFO estimate of €1.82 per share and reflecting a gain of 16.6% from €1.63 in 2016.
The company said it expects FFO 1 for 2018 to range between €960 million and €980 million, affirming its previous guidance. Vonovia is earmarking up to €1.4 billion for new construction and portfolio improvements.
Vonovia's board plans to propose a dividend of €1.32 per share at its May 9 annual general meeting, up from the 2016 dividend of €1.12 per share. First-quarter reporting on May 7 will be the first estimate on FFO contribution from the pending acquisition of Austrian residential landlord BUWOG AG.
The company recently announced that its CFO and chairman will step down at the conclusion of its annual general meeting. Their replacements have been named.
