BOCHUM (dpa-AFX) - Germany's largest real estate group Vonovia benefited last year primarily from the acquisition of Deutsche Wohnen and higher rental income. Sales and operating profit increased significantly. Nevertheless, the company intends to cut its dividend significantly. Management will propose a dividend of 85 cents per share at the Annual General Meeting, the company announced on Thursday after the close of the stock exchange. A year earlier, the Group had paid out 1.66 euros. Analysts had on average expected a dividend of 1.32 euros.

"We continue to expect a stable development on the earnings side," said company CEO Rolf Buch. However, he said, the company had to strike a balance between two different sets of expectations from its owners. One group of shareholders wants dividend continuity, while another demands special capital discipline. Both are equally important, he said. "We are convinced that our proposal is appropriate," he added. In principle, however, the Management Board and Supervisory Board would stick to the dividend policy with a payout ratio of around 70 percent of FFO after minority interests.

At present, rising interest rates and inflation are massively complicating the environment for the heavily credit-financed real estate sector. As a result, competitors TAG Immobilien, Grand City Properties and LEG Immobilien have all cut their 2022 dividends to investors.

"The consequences of this terrible war in Europe have led central banks around the world to raise interest rates at an unprecedented rate," Buch explained. He added that this has also had an impact on some of the company's key performance indicators. The company remains cautious about the current year.

Demand for apartments will continue to rise in 2023, but the market environment remains challenging, Buch said. In the current year, segment revenues are expected to rise to between 6.40 billion and 7.20 billion euros. For earnings before interest, taxes, depreciation and amortization (Ebitda), management is targeting 2.60 to 2.85 billion euros and for operating profit (FFO) 1.75 to 1.95 billion euros.

2022 operating profit (FFO) increased by a fifth year-on-year to 2.04 billion euros, mainly thanks to the acquisition of Deutsche Wohnen. Rents rose to an average of 7.49 euros per square meter at the end of December - 2.2 percent more than a year earlier. Modernized apartments were the main contributors to the increase. Landlords can pass on some of the costs of energy-related renovations, such as thermal insulation and the replacement of old heating systems and windows, to the rent.

Last year, sales climbed by almost a fifth to 6.26 billion euros. Below the line, Vonovia reported a loss of 669 million euros, compared with a profit of a good 2.4 billion euros a year earlier. Buch attributed the loss to write-downs on the real estate portfolio, the development business and the care subsidiary totaling just under 1.3 billion euros./mne/jha/