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Deutsche Wohnen AG delivers good operating performance in H1 2009 - preliminary results

Press release: Deutsche Wohnen AG delivers good operating performance in H1 2009 - preliminary results

Frankfurt and Berlin, July 20, 2009: Deutsche Wohnen AG is emerging significantly stronger from its integration and restructuring process. The business model of Deutsche Wohnen has once again proven resilient: Deutsche Wohnen’s preliminary H1 2009 results are convincing, considering the very difficult market environment.

Operating performance highlights:

  • Rents: The average rent across Deutsche Wohnen’s entire portfolio increased by 1.2% to €5.15 per square meter since December 31, 2008. This was mainly attributable to new rental contracts within its unrestricted residential portfolio (which constitutes 80% of the overall portfolio). During H1 2009 a total of 2,300 new contracts were agreed at an average rent of €6.16 per square meter. This figure is approximately 18.5% above Deutsche Wohnen’s current average unrestricted portfolio rent. Index-related rent adjustments based on the most recent local rent surveys in Berlin and Frankfurt will only show positive effects during H2 2009. The vacancy rate across the entire portfolio was reduced by 10% to 5.3%. Within Deutsche Wohnen’s core portfolio, the vacancy rate also was again reduced significantly, by 15% to 3.3%. 
  • Single asset privatisations: Within its single asset privatisation program, Deutsche Wohnen was able to notarise a total of 403 sales contracts in H1 2009, equivalent to a sales volume of €33.4 million. With these sales Deutsche Wohnen achieved 73% of its annual 2009 sales target in H1 alone. Sales margins continue to be on average 34% above the respective fair values of the properties. Of the 403 notarised sales contracts, 190 are reflected in the H1 2009 preliminary financial results. 
  • Maintenance: Maintenance costs for the ongoing operation and letting of the properties in our residential portfolio have decreased by 15% compared with H1 2008. Savings in lettings are mainly responsible for this positive development and were driven by lower vacancy rates in H1 2009
  • Personnel costs: Personnel costs have decreased by 23% to €10.5 million versus the first half of 2008. An estimated savings potential of approximately €10 million on an annual basis (versus 2007) is expected to be realized by 2009 year end. 
  • Restructuring cost: Deutsche Wohnen incurred extraordinary expenses totalling €5.4 million during H1 2009 (compared with €16.8 million in H1 2008). Personnel reductions accounted for €3.4 million of these expenses. The remainder of these extraordinary expenses were attributable to other factors, including the migration to SAP and to a single systems provider. The finalisation of headcount reductions in May 2009 and the implementation of a new IT system in August 2009 mark the substantial completion of the integration and restructuring process. 
  • Interest payments: Current interest expenses vis-à-vis lending banks have decreased by 12% compared with H1 2008, due to substantial redemptions made in 2008.

Improved operating results since the acquisition of the GEHAG group have contributed significantly to the stabilisation of Deutsche Wohnen and has substantially strengthened its business model.

According to Michael Zahn, “These positive developments indicate that the residential real estate segment has been relatively resilient and recession-proof during the ongoing economic crisis. Based on our proven business model combining operations in the residential real estate segment with an efficient corporate structure, we are cautiously optimistic for the future.”

Deutsche Wohnen will publish its full interim financial statements on August 27, 2009. These financial statements will also be made available on the company’s website:

The selected preliminary financial results presented in the table above (which do not include the results of the recent sales of certain properties or the results from Katharinenhof) are an indication of positive developments in the business of Deutsche Wohnen. Of particular note are the substantial reductions in administrative costs due to the integration and restructuring process, as well as the decrease in interest expenses due to redemptions made in 2008. With these positive developments, Deutsche Wohnen is currently in a position to cover its interest expenses with the net proceeds of its rental business, after deducting applicable administrative expenses.

Deutsche Wohnen AG is Germany’s second largest publicly listed residential real estate company. It was founded in 1999 and is headquartered in Frankfurt. The company (with a total of 26.4 million shares) is listed in the SDAX segment of the Frankfurt Stock Exchange and also is a constituent of the MSCI and EPRA indices.