Higher Interest Rates Take Toll on European Real-Estate Valuations -- At a Glance

By Adria Calatayud

Real-estate companies across Europe have reported sizable earnings hits as higher interest rates left a mark on the valuations of their properties. Swiss Prime Site on Thursday became the latest company to book a loss from a devaluation of its property portfolio following an assessment by external experts.

Here is a list of European real-estate companies that reported property devaluations in their second-quarter and first-half results released in recent weeks:

-- Swiss Prime Site reported a fall in net profit for the first half to 215.5 million Swiss francs ($245.5 million) from CHF267.4 million in the same period last year, hit by a devaluation of its property portfolio that outweighed a gain from the sale of its Wincasa real-estate services business. Notably higher interest rates led to a loss of CHF98.8 million from a property-portfolio revaluation by an external appraiser, the Swiss company said.

-- Germany's Vonovia slid to a net loss of 1.96 billion euros ($2.13 billion) for the second quarter compared with a profit of EUR1.69 billion in the same period last year, after it booked a charge of EUR2.77 billion from fair-value adjustments of investment properties. "While it is too early to make a call on the second half, we are seeing some encouraging first signs in part of the market that could bring some stabilization in the second half of the year," Chief Executive Rolf Buch said during an earnings call.

-- Unibail-Rodamco-Westfield reported a swing to a net loss of EUR537.8 million for the first half from a profit of EUR601.0 million. The Paris-based company said a revaluation of its portfolio resulted in a fall in the gross market value of its assets as of June 30 to EUR51.03 billion from EUR52.2 billion at Dec. 31. The valuation of Unibail-Rodamco-Westfield's assets in the second half will be key to its credit metrics and financial performance, which in turn will determine whether URW reinstates dividend payments next year as intended, Chief Financial Officer Fabrice Mouchel said during an earnings call.

-- LEG Immobilien said it lost a net EUR1.13 billion in the second quarter compared with a profit of EUR904.7 million after it revalued its residential portfolio in light of what it called a significantly more challenging interest-rate environment. The revaluation resulted in a 7.4% decline in the German company's asset value as of June 30, it said. Uncertainty on the prospects for interest rates and limited transaction evidence mean the company company can't provide an outlook for the property valuation in the second half, CFO Kathrin Koehling said during an earnings call.

-- Smaller peers like Grand City Properties and TAG Immobilien swung to net losses for the second quarter due to devaluations of their respective portfolios. Meanwhile, PSP Swiss Property reported a sharply reduced second-quarter net profit mainly due to property-revaluation losses. The Swiss company said the valuation of properties must now cope with market uncertainties arising from an interest-rate environment that hasn't been seen in the last ten years.

Write to Adria Calatayud at [e-mail]

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August 24, 2023 07:29 ET (11:29 GMT)

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