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Aroundtown Q1 Performance: Losses Prompted by Rental Income Decline, but Full-Year Outlook Remains Optimistic

Published by
Matthew Martins
  • Real estate investor Aroundtown (ETR:AT1) reported a net loss of €21.6 million in Q1, primarily due to lower rental income from portfolio sales and negative valuation effects.
  • Net rental income for Aroundtown declined by 3.8% to €297.2 million, with property sales accounting for the decrease.
  • Despite the challenges, Aroundtown remains confident and reaffirms its guidance for the full year, projecting an operating profit between €300 million and €330 million for 2023.

Real estate investor Aroundtown (ETR:AT1) encountered a financial setback in the first quarter of the year due to a decrease in rental income from portfolio sales and negative valuation effects. Despite these challenges, the company maintains its confidence in the market and reaffirms its guidance for the full year. With the real estate industry grappling with rising costs and declining property values, innovative solutions are needed to restore investor confidence and overcome the current difficulties.

Losses and Declining Rental Income Impact Aroundtown’s Q1 Performance

Aroundtown, a prominent real estate investor, reported a net loss of €21.6 million ($23.1 million) for the first quarter of the year, in stark contrast to the profit of €124.5 million in the same period the previous year. The losses primarily resulted from lower rental income due to portfolio sales and negative valuation effects. Negative valuation effects amounted to minus €133 million, compared to a positive €81 million in the previous year.

During this period, Aroundtown witnessed a decline of 3.8% in net rental income, which amounted to €297.2 million. This decrease was primarily driven by the sale of properties, with Aroundtown successfully completing sales worth €460 million in the first quarter. Consequently, Funds From Operations 1 (FFO 1), an essential measure of operating profitability in the real estate industry, decreased by 5% to €85.6 million.

Confidence Amidst Challenges: Aroundtown Reaffirms Full-Year Guidance

Despite the challenging start to the year, Aroundtown maintains its positive outlook and reiterates its guidance for the full year. The company projects an operating profit between €300 million and €330 million for 2023, with an FFO 1 per share of €0.27 to €0.30.

This guidance demonstrates Aroundtown’s resilience and its commitment to overcoming obstacles in the real estate market. By focusing on innovative strategies and adapting to evolving conditions, the company aims to restore growth and investor confidence in the coming months.

Real Estate Sector Navigates Pressures and Seeks Solutions

The real estate industry faces multiple challenges, including the rising costs of external financing, higher capital expenses, declining property values, and the allure of fixed-income securities. These factors have created uncertainty and unsettled real estate investors.

In response to the current difficulties, real estate companies, including Aroundtown, are actively seeking creative solutions to counteract the pressures and regain investor confidence. By implementing innovative strategies and adapting to changing market conditions, these companies aim to navigate the challenging environment successfully.

Baader Bank Maintains “Add” Assessment, Emphasizes Long-Term Potential

Following the release of Aroundtown’s quarterly figures, Baader Bank has maintained its “Add” assessment of the company, with a price target of €1.15. Analyst Andre Remke acknowledges the declining trend in operating results, which is expected to persist in the upcoming quarters. However, Remke emphasizes the long-term potential and recognizes the company’s solid stock of cash and cash equivalents, which amount to €3 billion.

Aroundtown’s first-quarter performance was marked by a loss attributed to lower rental income from portfolio sales and negative valuation effects. Nevertheless, the company remains steadfast in its outlook and reaffirms its guidance for the full year. The real estate industry, facing numerous challenges, must rely on creative solutions to alleviate pressure and regain investor confidence. By adapting to the changing landscape, Aroundtown aims to emerge stronger and restore growth in the coming months.

Matthew Martins

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Published by
Matthew Martins

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