Our PwC Real Estate Monitor provides you with a range of monthly derived Real Estate Capital Market KPIs. Our analyses are based on major listed German Real Estate Companies and provide you with sound insights into developments in the real estate industry.
With more than 20 percent of national income before the automotive and engineering industries, the real estate industry is one of the largest economic sectors in Germany. The dynamic business environment opens up new growth opportunities, but also brings with it new challenges and risks. Market participants must ensure that they anticipate developments in the markets at an early stage. Therefore, their success depends to a large extent on valid market information. PwC’s Real Estate Monitor provides monthly information on key capital market benchmarks that highlight current trends in the real estate industry.
FFO 1 multiple and Price/EPRA NTA ratio for Residential show a clear upward trend with +12.7% and +13.9% respectively on a YTD basis.
In August, the PwC Real Estate Indices for both holders of residential and commercial real estate portfolios has been comparatively stable and the negative trend of the last months has slowed down. The Residential Real Estate Index has fallen by -1.7% to 142 points in August. In contrast, the Commercial Real Estate Index has slightly increased by 0.4% to 242 points.
The weighted average cost of capital (WACC) for global and German real estate companies has, for the first time since December 2022, experienced a decline to 7.0% and 5.2%, respectively.
The slight recovery of residential property holders is also reflected in the analysed RE KPIs. Year-to-date, there is a noticeable positive performance of +12.7% (FFO 1 multiple) and +13.9% (Price/EPRA NTA), respectively.
Stock price data per company within the respective peer group is collected using the S&P Capital IQ Data Idem „IQ_ClosePrice_Adj“. Capital IQ defines the Close Price as: The closing price of the day, calculated once per day after the market close. Close prices are adjusted for stock splits, cash dividends, rights offerings, and spin-offs. The underlying peer groups are revised and adjusted once per year on 31 December. New players on the German real estate market are thus identified and included, while delisted companies are excluded.
“Reliable benchmarks are key for every investor in order to balance the information asymmetry in a real estate investment process.”
The Index shows the development of respective peer group (residential and commercial) companies’ stock prices on a monthly basis. Stock price data per company within the respective peer group is collected from S&P Capital IQ and reflects the closing price of the day after adjustment for stock splits.
The WACC is the rate of return required by investors (both debt and equity) taking into account the systematic risk characteristics inherent in the business. The derived WACC is an average value of a peer group of German listed real estate companies as well as its global counterpart.
The EBITDA Multiple is a financial indicator that relates the enterprise value of a company to its EBITDA. We have derived the EBITDA Multiple based on last twelve month available EBITDA and the capitalized value for each company within the peer group (residential and commercial).
In order to gain insight into the changes in value of 19 major players in the German real estate market, we have analysed the sector-specific Real Estate KPIs FFO 1 and EPRA NTA from the financial periods FY2021, FY2022 and TFQ2023, i.e. Q3 2022 to Q2 2023 (TFQ: Trailing Four Quarters). We have put the share prices as of the balance sheet dates 31 Dec 2021, 31 Dec 2022 and 31 Aug 2023 in relation to the above-mentioned key figures from the corresponding financial periods. The resulting average ratios by segment are shown in the figures below.
The table below shows the individual FFO 1 multiples and Price/EPRA NTA ratios of our peer group by segment. The key figures relate to the financial periods FY2021, FY2022 and TFQ2023 and the share prices as of 31 December 2021, 31 December 2022 and 31 August 2023.
Reading example: LEG was valued by the market at 9.3x of its FFO 1 as of 31 December 2022, whereas on 31 August 2023 it was valued at 10.5x of its FFO 1.
Compared to the end of 2022, Commercial's current valuation level (as of 31 August 2023) has decreased by -14.2% (FFO 1 multiple) and -11.8% (Price/EPRA NTA ratio). In the meantime, the current valuation level of Residential has increased by +12.7% (FFO 1 multiple) and by +13.9% (Price/EPRA NTA ratio).
The significant increase in the Price/EPRA NTA ratio for Residential compared to the previous month is the result of the update of the underlying EPRA NTAs from the H1 reports. It appears that a reduction in the EPRA NTAs has already been factored into stock prices by investors.
Disclaimer (important notice): This publication includes information obtained or derived from a variety of publicly available sources. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft does not give any representation or warranty of any kind (whether expressed or implied) as to the accuracy or completeness of this publication. This publication has been prepared solely for general informational. Nothing in this publication should be construed as individual advice. Before making any decision or taking any action, you should consult the sources or contacts listed here. The graphics may contain rounding differences.
