Goldman Sachs cuts Aroundtown outlook as higher debt costs squeeze earnings

Goldman Sachs downgraded Aroundtown to sell from neutral and cut its 12-month price target about 28%, to €1.30 from €1.80; shares fell more than 3% on Monday. The bank expects refinancing of about €5.6 billion of debt maturing in 2026–28 at 5.5%, versus current rates of 1.4%–1.8%, and forecasts financing costs rising about 18% annually in 2025–28 while core EBITDA grows roughly 2.4%. It projects EPS declining about 3% annually and estimates loan-to-value could reach 48%, above the board’s 45% guidance, or about 63% including hybrids.

Analysis

The key risk is a feedback loop, not simply higher interest expense: refinancing at higher coupons weakens coverage, while wider property yields reduce collateral values and can constrain refinancing or force asset sales. Disposals may protect liquidity and reported leverage but sacrifice rental earnings, potentially leaving the equity with less debt and a smaller cash-flow base. That makes AT1 a leveraged claim on both funding conditions and office leasing, rather than a straightforward bet on European property values.

The 78% discount to estimated NTA is not a reliable valuation floor if those estimates remain exposed to yield increases; however, the downgrade and a below-consensus EPS view may already be partly reflected after the share decline. The counterweight is liquidity and the possibility that lower rates or selective disposals ease near-term pressure. Verify the maturity ladder, unrestricted cash, hedging, covenant definitions, and actual disposal pricing before treating the liquidity balance as protection.

Over the next 1–3 months, watch rate expectations, asset-sale announcements, and leasing/vacancy updates for evidence of relief or deterioration. Over 6–18 months, refinancing terms and office lease renewals should determine whether financing-cost growth outpaces operating cash-flow growth. A sustained decline in funding costs, improving office occupancy, or disposals that reduce leverage without material earnings erosion would weaken the bearish case.

Key Decisions for Investors

• Avoid buying AT1 solely on its asset discount. For a bearish expression, consider a small, defined-risk short or put spread, sized for the possibility that rate relief triggers a sharp rebound; the thesis is falsified by improving coverage and refinancing at materially lower costs than the broker’s assumptions.
• Prefer waiting for the next refinancing, disposal, or operating update before adding exposure. Confirm whether cash is unrestricted and sufficient against scheduled maturities, and track covenant headroom; do not infer a liquidity shortfall from the article alone.
• Monitor German and broader European commercial-property peers for refinancing-spread and valuation spillovers, but avoid a peer pair trade until relative leverage, office exposure, and debt maturities are checked. AT1’s office concentration makes broad real-estate hedges imperfect.
• No evident direct trade in GS: the downgrade is an analytical catalyst for AT1, not by itself a material earnings signal for Goldman Sachs.