Vonovia raises profit guidance after forecast-beating first quarter

BERLIN (Reuters) - Vonovia, Germany's biggest residential property company, raised its full-year profit guidance on Tuesday as it reported a forecast-beating 20 percent rise in first-quarter earnings, boosted by acquisitions in Sweden and Austria.

Since going public in 2013, Vonovia has grown by swallowing up smaller rivals, and has expanded outside its home market, snapping up Austria's Conwert and Buwog, and last year buying Sweden's Victoria Park for $1.1 billion.

Vonovia, which owns around 395,000 properties in Germany, Sweden and Austria, said it now expected 2019 funds from operations to increase to between 1.17 billion and 1.22 billion euros (999.46 million - 1.04 billion pounds) compared to its previous guidance for a rise to between 1.14 billion and 1.19 billion euros.

The company reported operating profit after interest and taxes of 303.6 million euros versus 253 million euros a year earlier and ahead of the average forecast for 281 million euros in a Reuters poll of analysts.

The rise in profit came even as it increased investments in maintenance and modernisation to 339.7 million euros in the quarter, up 54 percent year-on-year, as it steps up the construction of new homes.

Affordable housing has become a hot political topic in Germany as a failure to build enough flats to keep pace with an influx of people to big cities has pushed up house prices and rents in recent years.

Vonovia has faced a backlash from tenants who say rents have risen sharply following modernisation projects.

Last month, thousands of Berlin residents took to the streets to vent their anger over surging rents and demand the expropriation of more than 200,000 apartments owned by big landlords, which they blame for changing the character of the city.

Vonovia rejected claims that almost two-fifths of rental income went to shareholders, saying all surpluses from German rental income are invested into modernising its existing properties or building new ones.

(Reporting by Caroline Copley; Editing by Thomas Seythal and Shreejay Sinha)