German residential landlord Deutsche Wohnen SE plans to spend up to €1.8 billion on mergers and acquisitions in 2018, Chairman and CEO Michael Zahn said during a 2017 full-year earnings call.
"In terms of M&A, we do see opportunities," Zahn said, according to a transcript. Deutsche Wohnen intends to expand its nursing and assisted living segment, Zahn added, with potential acquisitions in that area gathering pace.
The company has identified potential small bolt-on acquisitions in the company's core-plus regions, particularly in Dresden and Leipzig, that are still attractive in a market where prices have risen significantly in the last year, said Zahn. "Hopefully as in 2017, in 2018 we will be able to deploy a good chunk of that implied financial capacity for M&A," he said.
Deutsche Wohnen is retaining a loan-to-value target range for 2018 of 35% to 40%, which implies "fairly significant M&A firepower of €1.8 billion," CFO Philip Grosse said. "Based on that, I do not see a risk of any dilutive equity measures," he added.
The listed residential sector in Germany has undergone a wave of consolidation in recent years, driven by the country's largest listed property company Vonovia SE, which bought rival GAGFAH SA for €3.9 billion in 2014 and conwert Immobilien Invest SE for €1.8 billion in 2017. The company is in the process of buying Austria-based landlord and developer BUWOG AG for €5.2 billion.
Grosse announced guidance for funds from operations I for fiscal year 2018 of €470 million, an increase of around 9% to €1.34 per share, not including acquisitions and disposals, he said. The company will continue with an unchanged dividend policy ratio of 65%, which should correspond to a dividend of 86 cents per share based on today's share capital, said Grosse.