Spain’s Colonial swings to $1.1 billion loss as property values drop By Reuters

By Matteo Allievi and Jakub Olesiuk

(Reuters) – Spanish real estate group Inmobiliaria Colonial on Thursday reported a net loss of 1.02 billion euros ($1.10 billion) for the full year 2023, brought about by a 9% drop in the value of its assets due to higher interest rates.

The company had made a net profit of 8 million euros in 2022.

Real estate companies such as Colonial and its peer Merlin Properties earn profit on the rental of their assets and have to include in their results the impact of an updated valuation of their properties conducted every six months.

“The depreciation of Colonial’s assets was below the average of other European real estate companies, which was between 15% and 25%,” CEO Pere Vinolas told reporters.

Central banks’ tightening monetary policy to fight inflation has weighed heavily on the sector, hampering real estate investments, Vinolas said.

The ECB has kept interest rates at a record high since September and has been consistently pushing back on rate cut talk, arguing that wage growth is still too fast-paced to start unwinding restrictive policies.

“The real estate sector is awaiting further clarification on the path of monetary policy, but inflation expectations are more focused than a year ago, so the building blocks for real estate investment to normalise are already on the table,” Vinolas added.

The group reported a 7% year-on-year rise in its 2023 operating performance to 172 million euros.

Colonial also posted earnings per share (EPS) of 0.32 euros, above its guidance of 0.31 euros. It expected EPS to remain stable this year, conditioned by the evolution of its divestment policy.

The company carried out 723 million euros in divestments in 2023, and forecasts additional asset sales of around 500 million euros this year to shrink its net debt.

Colonial shares on blue-chip index were down 23%year-to-date.

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