Investing.com -- Goldman Sachs downgraded real estate company Aroundtown to "sell" from "neutral" and cut its 12-month price target by about 28% to €1.30 from €1.80, saying the company will face higher costs to refinance its debt, sending shares down over 3% on Monday.
Goldman Sachs expects Aroundtown to refinance about €5.6 billion of debt maturing in 2026-28 at 5.5%.
That debt currently carries an average cost of only about 1.4% to 1.8%. The company's average cost of debt was 2.4% at the end of the first half of 2026, and Goldman Sachs expects it to rise to about 4.5% by 2030.
The broker forecasts net financing costs to grow at about 18% a year over 2025-28, far faster than the roughly 2.4% growth it expects in recurring core earnings (EBITDA).
That drives its forecast of a decline in earnings per share of about 3% a year. It sees 2028 earnings per share of about €0.23, below €0.26 in 2025.
Goldman Sachs expects Aroundtown's interest cover ratio to fall to about 2.2 times by 2030 from 3.3 times, close to debt covenants of below 1.8 times.
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The broker also cut its net tangible asset estimates for the company by more than 40%. It now assumes property yields rise by about 100 basis points by 2028, up from 20 basis points previously.
Goldman Sachs said this would push the company's reported loan-to-value ratio to 48%, above the 45% guidance from its board, or about 63% including hybrids.
Offices make up about 34% of Aroundtown's portfolio value. Office vacancy rose about 60 basis points to 13.6% in the first half, and like-for-like office rental growth was 0.9%. About 27% of commercial leases expire in 2027-28.
Goldman Sachs forecasts a return on capital of 3.8% in 2027, against its estimated cost of capital of 6.2%.
The shares already trade at about a 78% discount to the bank's 2026 net tangible asset estimate. Goldman Sachs said they have traded at wider discounts before and that it sees more risk if funding costs rise further.
Lower interest rates or more disposals could ease concerns over leverage, it said, though disposals would also hurt earnings. Aroundtown held €3.9 billion of cash and liquid assets at the end of the first half.
Goldman Sachs' 2026 earnings-per-share estimate is 7% below the Visible Alpha consensus.
Original Article
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