Peach Property: Deep red figures despite "best operating result"
According to preliminary figures, the company closed the year with a pre-tax loss of EUR 230 million, but reported operating growth.
Peach Property Group AG, which focuses on investments in affordable rental apartments in B-cities in Germany, has reported "the best operating result since the company was founded" for the 2023 financial year according to preliminary, unaudited figures. The real estate company, which is headquartered in Zurich, announced that it had achieved operating income (FFO I) of probably well over EUR 22 million by optimizing its operating processes and through a previously initiated cost-cutting programme. Rental income in the 2023 financial year increased to around EUR 121 million, with target rent rising by 3.7% on a like-for-like basis. Operating profitability increased by around 18% year-on-year in the reporting period despite higher interest expenses. The operating margin based on EBITDA adjusted for the valuation result and other non-cash items is now over 54% (previous year: 50.9 %), "which means that the margin increase forecast for 2025 has already been partially realized".
However, the operating successes are offset by lower property values. At EUR 2.4 billion at the end of 2023, the total market value of the existing portfolio had fallen by more than 8% compared to the end of the previous year, resulting in a year-on-year increase in the loan-to-value ratio of around 3 percentage points to just under 58%. According to preliminary figures, the pre-tax loss amounts to EUR 230 million - which the company attributes to the "challenging environment" - interest rate turnaround, high inflation rates, massive increases in building material prices and a shortage of skilled workers.
Sales planned
In 2024, the management intends to improve the company's earnings and financial position with various measures. In the reporting period, Peach Property made savings on major refurbishment projects, which led to an increase in the vacancy rate of residential units from 6.9% at the end of the previous year to 7.4% at the end of 2023. In the coming financial year, the aim is to reduce vacancy again "through targeted investments in the portfolio and efficiency improvements in the refurbishment and re-letting processes" and gradually raise the rent level in large parts of the portfolio to the average market rent in each case.
Peach Property Group expects its operating business to develop positively in the 2024 financial year, not least due to the noticeable decline in new construction activity in Germany, the expected sustained excess demand and the accelerated rise in market rents. With its focus on affordable housing, the company believes it is well positioned in this environment. Peach intends to focus on refinancing the financing maturing in 2025 and the EUR 300 million bond maturing in November 2025 in the current financial year, the management announces. In this context, sales of parts of the portfolio are being examined in order to improve the capital structure and generate liquidity for the upcoming refinancing. (bw)
