Devaluation pushes Peach Property into the red in the first half of 2023
The real estate company has recorded a write-down of almost EUR 100 million. Smaller sales are being examined in order to strengthen the capital structure.
Peach Property Group, which focuses on affordable rental apartments in Germany, increased its rental income in the first half of 2023. However, Peach had to record a non-cash impairment loss of EUR 98 million and slipped into the red as a result: The operating result amounted to EUR -70.2 million (previous year: EUR 101.0 million) and earnings before taxes (EBT) to EUR -92.1 million (previous year: EUR 61.2 million)
Peach holds a total portfolio of 27,500 residential and 500 commercial units, from which the company generates rental income of EUR 59.8 million (+3.6% on a like-for-like basis). The vacancy rate was 7.2%. Operating income (FFO I) amounted to EUR 9.5 million, an increase of EUR 9%.
Partial sales are being examined
Peach is focused on adapting the company's capital structure to the interest rate turnaround. The equity ratio was 40.1% as at June 30 (end of 2022: 39.6%). At 55.0%, the leverage ratio (LTV) was slightly higher than at the end of 2022 (54.7%). According to Peach, the company is "actively working on refinancing its liabilities". In mid-August 2023, a further secured financing of EUR 33 million was concluded and no substantial liabilities are due for refinancing until 2025.
In order to strengthen the capital structure, sales of smaller parts of the portfolio are being examined: "Should opportunities arise to sell real estate portfolios outside of our core portfolio locations, we will carefully examine these against the backdrop of efficient asset management and the optimization of our capital structure," says Reto Garzetti, Executive Chairman of the Board of Directors.
Management Board confirms forecast
Peach anticipates a positive operating performance for the year as a whole. With its focus on affordable housing, the company believes it is well positioned. If the market environment remains unchanged, Peach expects to achieve the targets set at the beginning of the year: Rental income would be between EUR 121 million and EUR 123 million, with FFO I at the lower end of the range of EUR 21 million to EUR 23 million.
