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The Company
GAGFAH S.A. is a joint stock corporation organized under the laws of the Grand Duchy of Luxembourg qualifying as a securitization company under the Luxembourg Securitization Law of March 22, 2004. The core business of our operating subsidiaries is the ownership and management of a geographically diversified and well-maintained residential property portfolio located throughout Germany. With a portfolio of more than 165,000 apartments, we are the largest German listed residential property company.
We own a geographically diversified and well-maintained residential property portfolio, comprising more than 165,000 apartments and totaling over ten million square meters with significant concentrations only in Dresden and Berlin. Our apartments have undergone substantial renovations over the last years, and we believe our portfolio is among the highest quality multi-family portfolios in Germany. Approximately 23,000 units are publicly subsidized rent-restricted apartments. The majority of our buildings were built between 1950 and 1979. Our portfolio is characterized by a stable tenant base with an average tenant tenure of more than eleven years and a fluctuation rate of 11.8 %, which represents about 20,000 relettings per year. Our occupancy level is more than 95 %. In addition to our residential apartment portfolio, we own approximately 2,000 commercial units, primarily retail stores located on the ground floor of our residential apartment buildings, and approximately 35,000 parking spaces, which typically belong to our residential apartment buildings.
Competitive Strengths
We believe that the combination of our size, geographic diversity across Germany and scale of operations makes us a strong player in the residential real estate market in Germany. Our most significant competitive strengths are:
Efficient Operating Platform
Our nationwide presence and the size of our business provides us with cost efficiencies with respect to our corporate functions and purchasing goods and services. However, we constantly optimize general and administrative expenses, and our aim is to continue to reduce our management cost per unit. We believe that we are among the most efficient property managers in Germany.
In-depth Local Market Knowledge and Focus on German Residential Real Estate
We have developed an in-depth knowledge of regional residential markets which enables us to efficiently manage, evaluate and acquire portfolios in all key markets throughout Germany. Our assets are directly managed through a streamlined operational network with 37 (December 31, 2009) customer centers in the four regions Southwest, East, North and Berlin. Our significant nationwide market presence through our properties located in more than 350 towns and cities across Germany gives us a competitive advantage over smaller or less diversified property companies.
Continue to Increase Returns from Current Portfolio
We plan to continue to increase returns from our current portfolio while maintaining tenant stability and improving tenants' quality of accommodation. We intend to keep our occupancy at a high level and to increase rents to market levels to the extent permitted by German law and existing rent restrictions over time. As of December 31, 2009, our overall vacancy rate for our core residential portfolio was 4.9 %, in line with our target. Our target occupancy is at 95%. The rental growth rate for 2009 was 1.3 % (on a same-store basis).
Increase Profitability through Operating Efficiencies
We intend to continue to increase our profitability by reducing our SG&A expenses through higher operating efficiencies and by optimizing our cost of reletting vacant units. Our management cost per unit (which includes general and administrative expenses and personnel costs and excludes repairs and maintenance expenses) was € 391 in 2009. We intend to continue to improve our operating efficiencies and as a result reduce our SG&A expenses and our cost to manage. We have also optimized our cost of reletting vacant units while maintaining our assets in good condition. On the one hand, we are now doing more of the regular and smaller repair and maintenance work through our cost-efficient in-house staff. On the other hand, we are using a nationwide operating external service provider for the more complex refurbishment projects, which require different qualifications.
Realize value through asset sales
In 2009, we sold or contracted to sell a total of 11,306 units for € 519.9 million. The net proceeds from sales can be used to optimize our capital structure, for example by repaying or repurchasing debt, paying dividends or repurchasing shares.
Optimize our capital structure
Our properties are financed in 11 separate, ring-fenced, non-recourse facilities with a weighted average interest rate of less than 4 %. Over 90 % of the Company's debt will mature in 2013 and beyond.
Data from FY 2009 and Dec.31, 2009, respectively.