(AOF) – Argan is among the biggest declines in the SRD market (-3.15% to 76.90 euros) after the publication of its annual results last night. The recurring net income of the property specialist in warehouses was up by 6%, at 118.9 million euros, as of December 31, 2022, representing 72% of rental income. Net income group share amounted to 95.1 million euros. Invest Securities believes that the new strategic plan of the property “prudent and relevant”, “will include disposals and a more selective examination of possible projects”, which “will weigh significantly on growth”.
In an economic cycle where recourse to debt is very costly, Argan “decided to bet on a self-financing policy, which will enable the group to do without debt”: the company is aiming for a net debt to EBITDA ratio by 2030 of 7.
Argan will repay the depreciable loans, for an amount of 100 million euros per year. The absence of new loans coupled with repayments allows it to count on an LTV target (equivalent to the debt ratio for the sector) by 2030 of between 25% and 35%, at a capitalization rate of respectively 4.5 % and 6%. At the end of 2022, gross financial debt stood at 1.98 billion euros, net debt at 1.8 billion.
Argan’s new developments will be funded by the sale of older warehouses, a ‘value-creating’ policy as it ‘will allow assets to be sold at a low capitalization rate’. These assets will be replaced by new assets, developed at higher rates of return.
The valuation of the portfolio delivered at 3.94 billion euros results in a capitalization rate of 4.45% excluding duties, slightly up from the rate of 4.3% excluding duties on December 31, 2021.
The average occupancy rate of the portfolio was 99% at the end of 2022, stable compared to the end of December 2021, and it returned to a level of 100% at the start of 2023.
The NTA NAV (continuation revalued net asset value) stood at 92.9 euros per share at December 31, 2022, up 1% over one year.
“Rental income growth will be strong in 2023 with an increase of 10% to 182 million euros,” the company said of its outlook. This growth is the result of indexation (+4% on average on our leases), the full year effect of investments made in 2022 and investments in 2023, as well as the return to a 100% occupancy rate.
Argan warns, however, that growth in rental income will be moderate thereafter. This is explained by the fact that the developments will be financed with disposals of mature assets. However, the group anticipates annual growth in rental income of 2%, due to indexation and the higher yield from developments compared to disposals.
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A demand crisis
According to data from the Federation of Property Developers (FPI), the figures for the third quarter of 2022 continue to be alarming. Sales of new collective housing fell by 12.4% over one year, to 19,006 units. Over the first nine months of 2022, the decline reached 10.2%, to 72,670 units.
Reservations are also plummeting due to the collapse of bulk sales to social landlords and institutional investors. As interest rates rise, institutional investors renegotiate or halt operations. First-time buyers are penalized by the rise in rates and the tightening of the Pinel system puts off some private investors.
Due to the sharp rise in construction costs, the REIT estimates that one out of six authorized operations is ultimately not carried out for economic reasons.
Faced with this, prices are still rising: the sale prices of new collective housing increased by 5.9% throughout France in the third quarter of 2022. Ile-de-France is an exception, with a drop of 0, 9%.