As new and possibly again aggressive interest rate hikes are a foregone conclusion, Europe’s largest real estate companies are preparing to sell most of their portfolios to pay off their debt. Among them are the biggest names in the sector, Vonovia SE, Land Securities Group and Unibail-Rodamco-Westfield, who have unveiled their plans to lighten their portfolio. But it turns out they’ve picked perhaps the worst possible time, as alarmingly high inflation and aggressive interest rate hikes are scaring away potential buyers and hampering deals. According to Bloomberg estimates, real estate worth at least 23 billion euros is up for sale. The actual amount is likely to be much higher as this estimate does not include companies that did not report specific assets for sale. As boom years in the property market seem to be giving way to a period of falling prices, potential buyers are wary of a period when prices could fall by the double digits and property maintenance costs rise. duty. The result is a kind of stagnant market. “The investment market is completely frozen,” said Thierry Bonmoulin, chief executive of the Adler real estate group, after the company announced a debt restructuring following the cancellation of several sales. And characteristically added that “customers are afraid to catch a knife falling in the air.”

Large real estate companies are facing rising borrowing costs, which is starting to take a toll on asset prices. After all, rising interest rates have affected share prices as investors worry that their debt levels will rise as real estate values ​​fall. This year, the Adler Group managed to sell two of its major investments before interest rate hikes began to be felt. The company has since put up for sale two other major placements, as well as its larger construction projects and a stake in Brack Capital Properties NV, but has yet to find buyers.

Large companies are facing an increase in the cost of borrowing, which is starting to affect asset prices.

Even the largest European real estate companies are struggling. Vonovia has announced since August that it plans to sell at least 13 billion euros worth of assets in an attempt to reduce the level of debt that worries investors. In recent years, Vonovia and its registered peers have accounted for about 40% of property sales in Germany. Today they all just want to sell. A number of real estate companies, including Land Securities and Unibail-Rodamco Westfield (URW), have been launching and successfully promoting advanced sales programs for many years. LandSec, following the rebranding of Land Securities, has managed to complete at least half of the €4.63 billion asset sale plan announced in 2020. In addition, since last year, URW has announced plans to sell €4 billion worth of real estate and closed deals. worth about 3.2 billion euros. Meanwhile, in September, LandSec sold the building with the London office of Deutsche Bank after lengthy negotiations, which resulted in a reduction in the original price. Speaking to The Times a few days ago, company chief executive Mark Allan suggested that even that deal could have fallen through had it not closed just days before former prime minister Liz Truss announced her plans for a series of tax the benefits that led to the now well-known massive volatility in the market.

And real estate company SBB announced that it will sell part of the educational buildings in its portfolio to Brookfield for $983 million. Thus, it will reduce its debt from 46.8% of its capital to 42.4%, while with the corresponding agreement, the sale of SBB now exceeds $2 billion. Roundtown SA is also in the process of reducing its debt, which is about 40% of its value. During the year, the company has already sold real estate for 1.1 billion euros, and last year concluded deals for the sale of 2.3 billion euros.