Troubled commercial property group Branicks believes it is well on the way to repaying its capital markets liabilities. The next step is to repay the promissory notes due in the summer. After the Frankfurt-based company repaid 15 million euros in the first quarter, 278 million euros remain. Most of this was rescheduled in March 2024. The creditors accepted a maturity extension until the end of June 2025.

Branicks had implemented this restructuring via pre-insolvency proceedings under the Stabilisation and Restructuring Framework of Companies Act (StaRUG). CEO Sonja Wärntges intends to cover the repayments from available cash, asset sales, and cash inflows from operating activities.

The next big repayment will come in September 2026, when a 400 million euro bond matures. In addition, a further 144 million euros promissory note loan is due next year. According to Wärntges, the Branicks subsidiary VIB Vermögen has bought back 14 million euros of the bond. This means that a volume of 386 million euro is still outstanding. The CEO assumes that at least part of this debt can be repaid via new capital markets financing. „We will discuss this with the banks,“ says Wärntges, who is also responsible for finance, in an interview with Börsen-Zeitung.

The recovery in the price of the bond shows that investor confidence has increased. However, at around 60%, the price is still far below the nominal value. Wärntges is expressly sticking to the goal announced last year of being able to return to the capital markets in 2026. However, this presupposes a drastic reduction in debt in the current year.

The CEO believes that no major upset is to be expected in the refinancing of bank debt. She assumes that these loans will be extended. A first block was extended in January, meaning that 72 million euros still need to be refinanced in 2025. The lenders are around 20 German banks. Branicks is in constant dialogue with them, assures Wärntges. They pay „completely normal market interest rates“, there is „no Branicks premium“.

The company boss believes that the effects of the planned debt-financed spending programmes for armaments and infrastructure on her own company, and the commercial property sector, are not that significant. But property companies will also have to pay more interest if the federal government has to pay higher interest on its bonds.

„The reduction in liabilities is on schedule,“ says Wärntges. Branicks paid off the last instalment of the bridge loan for the VIB takeover at the beginning of the fourth quarter of 2024. Wärntges wants to reduce the leverage ratio (LTV) to below 50% of the market value of the assets by the end of 2025 or the beginning of 2026 – depending on the closing of the sales. The target is considered ambitious, as the LTV was still 61% at the end of 2024. Compared to the previous year's reporting date (60.1%), it has even risen slightly despite the sale of own properties for 558 million euros. The leverage ratio relevant to the bond was 57.8% at the end of last year. The terms of the bond stipulate an LTV of less than 60%, so the room for manoeuvre appears manageable.

The former DIC Asset is planning to sell between 500 million euros and 600 million euros from its portfolio in 2025. This would halve the so-called Commercial Portfolio, which totalled 2.8 billion euros at the end of last year, compared to the peak value of 4.45 billion euros in 2022. In addition to disposals, impairments of 6% in the past year and 6.8% in 2023 are also responsible for this. Gross rental income will also fall along with the proprietary portfolio. According to the guidance, this will reach 125 million to 135 million euros in the current year, after 168.9 million euros in 2024.

The devaluations are mainly attributable to the subsidiary VIB, which specialises in logistics properties and which Branicks acquired at the peak of the cycle. The values assumed in the purchase price are not realisable today, Wärntges admits. The company has already largely disposed of its retail properties. The focus of the company's portfolio is therefore on offices (49%) and logistics (34%).

„We are working on maintaining the value of the portfolio,“ says Wärntges, referring to investments in the sustainability of the buildings, and revitalisations. She assumes that portfolio valuations will no longer be a major issue in 2025. This is because lettings are going very well. On the other hand, the vacancy rate of 7.4% is significantly higher than a year ago (5.3%).

Wärntges expects the market environment to continue to recover and transaction activity to increase in 2025: „The markets are moving in the right direction," she says. Companies are prepared to pay high rents for offices, for example in Frankfurt. International investors are finding Germany interesting again, while domestic investors are still mainly occupied with their existing properties.

Real estate transactions also play an important role for Branicks. Fee income in the institutional business, the second segment alongside the proprietary portfolio, depends not least on the level of buying and selling commissions. Wärntges assumes that transaction-related income and income generated from modernisations could reach between 10 million euros and 20 million euros in the current year, after 6.5 million euros in 2024. Branicks estimates sales from third-party portfolios at 100 million euros to 200 million euros in 2025 and acquisitions at 100 million euros to 200 million euros. Total property management fees are expected to reach 50 million to 60 million euros. In the institutional business, Branicks is managing assets of 8.8 billion euros, compared to 9.6 billion euros at the end of 2023.