Aroundtown shares rise after maintaining guidance, posting stable Q1 results

Aroundtown shares increased over 2% after the real estate group reported flat recurring first-quarter funds from operations of €76.3 million, reaffirming its full-year guidance of €280 million to €310 million. Rental income rose 3% on a like-for-like basis, with residential assets performing strongest, up 4.5%; the company revalued 15% of its portfolio, resulting in a 0.8% like-for-like increase in asset values. Despite positive operational improvements and a rise in EPRA net tangible assets per share, Jefferies noted that higher perpetual note costs offset gains, while Morgan Stanley highlighted the shares trade at a 64% discount to NAV.

Analysis

Aroundtown (AT1) shares increased by over 2% after the company reaffirmed its full-year guidance and reported flat first-quarter 2025 recurring funds from operations (FFO) at €76.3 million, or €0.07 per share, unchanged year-over-year. This Q1 performance aligns with the confirmed full-year FFO guidance of €280 million to €310 million, though Morgan Stanley highlighted that the midpoint implies a 7% decline from 2024 levels. Operationally, Aroundtown saw a 3% like-for-like increase in rental income, with residential assets leading at a 4.5% rise and the overall vacancy rate improving by 90 basis points to 7.5%. Net rental income grew 0.6% to €295 million, and adjusted EBITDA rose 1.5% to €251.1 million. Jefferies described the results as "virtually stable," noting that higher perpetual note costs offset operational gains. The company revalued 15% of its portfolio, resulting in a 0.8% like-for-like increase in asset values, and EPRA net tangible asset (NTA) per share increased 3% quarter-over-quarter to €7.63; Morgan Stanley pointed out this places the shares at a 64% discount to NAV. Aroundtown closed €149 million in disposals at an 18x rent multiple (5.6% yield), near book value according to Barclays, consistent with yields achieved in 2024. Despite these disposals, leverage remains a key focus: the reported loan-to-value (LTV) ratio decreased by 1 percentage point to 41%, while the EPRA LTV, which includes hybrids as debt, declined to 59%. Net debt to EBITDA improved slightly to 10.5x, and interest coverage rose to 4.3x, with the average cost of debt stable at 2%.

Key Decisions for Investors

• Investors should weigh the stable Q1 FFO and positive operational metrics, such as increased rental income and reduced vacancy, against the reaffirmed full-year guidance which implies a potential YoY FFO decline and the ongoing impact of higher perpetual note costs.
• The significant 64% discount to EPRA NTA per share presents a potential value opportunity, but this must be considered in light of the high leverage (EPRA LTV at 59%) and the challenges within the office property segment, which constitutes 38% of gross asset value.
• Closely monitor the progress and pricing of asset disposals, further reductions in vendor loan exposure, and any shifts in financing costs or refinancing strategies, as these will be critical for deleveraging and influencing the company's financial risk profile and stock performance.