Rent cover: Deutsche Wohnen is reorienting itself

Deutsche Wohnen is reorienting itself

The real estate group Deutsche Wohnen is driving the construction of new apartments with energy. The company has agreed with Munich project developer Isaria Wohnbau, a holding company owned by financial investor Lone Star, to acquire a platform for project developments and major real estate projects, the MDax Group said in Berlin. The purchase should be completed this year.

The purchase price is 600 million euros, said a spokesman. The package comprises a total of 2700 residential and commercial units. Half of the projects are located in Munich, the rest in large cities such as Hamburg, Stuttgart and Frankfurt.

Share grows

This is not good news for Berlin, because so far Deutsche Wohnen has been mainly active in the capital. According to the company, the around 2,500 new apartments planned before the rental cover was approved are to be built. Deutsche Wohnen plans to invest a total of over three billion euros in the construction of new residential, nursing and office properties.

The company's stock rose six percent in early trading. This means that the shares have now made up for more than half of the price slump that resulted from the general stock market crash.

"The lack of affordable living space in our cities is a social challenge," said CEO Michael Zahn. Up to 400,000 apartments would have to be built in German cities every year. "With Isaria, we have won an excellent project developer and are now implementing projects across Germany that perfectly match our focus on metropolitan regions and quality, sustainable construction," he said.

Dividend increases less

The large German apartment rental companies are experiencing growing political pressure due to steadily rising rents. Only recently, the Bundestag extended and tightened the rent brake by five years in view of the persistent housing shortage. In future, tenants can retrospectively reclaim overpaid rent for up to two and a half years.

Berlin goes much further with the rental cover. The Senate will initially freeze rents for 1.5 million apartments that were built before 2014 over the next five years and define upper limits depending on the equipment, location and year of construction. The red-red-green state government wants to slow the recent sharp rise in rents. This particularly affects real estate groups such as Deutsche Wohnen and Ado Properties, which mainly own real estate in Berlin.

In the current year, Deutsche Wohnen is therefore planning to generate an operating profit of around 540 million euros, roughly on the level of the previous year. In 2019, the operating profit had increased by almost twelve percent to 538 million euros, mainly thanks to higher rents.

The management wants to increase the dividend for 2019 from 87 to 90 cents per share and thus not as much as planned based on the previously planned payout ratio. The adjustment serves to finance an aid fund in the amount of 30 million euros, with which the company wants to help its tenants in the course of the Corona crisis in cases of hardship.

Deutsche Wohnen rents around 161,000 apartments and commercial units nationwide, the majority of which are in Berlin. The portfolio also includes nursing homes.

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