ALLIANZ’S chief executive officer Oliver Baete said now is the right moment to snap up properties at bargain prices as some troubled owners are forced into selling.
“Look at the fallout of some of the real estate tycoons – they have to now sell prime assets at huge discounts,” Baete said on Friday (Feb 23). “That is the time to buy, and not to sell.”
His comments come amid turmoil in real estate markets, especially for commercial properties such as office buildings and retail developments, as the rapid increases in interest rates mean owners face surging borrowing costs and plunging valuations. The ensuing credit crunch has compelled some to sell assets to service their debt.
One prominent example is the Signa group of companies founded by Austrian property tycoon Rene Benko, which has become one of Europe’s biggest real estate meltdowns since the global financial crisis. Some of Signa’s choicest assets have been put on the market as insolvency administrators race to pay off creditors.
“If you are an investor and you have to sell at the moment, you are in trouble,” Baete said, adding that Allianz is a potential buyer. “We remain very bullish on the sector for the long run,” he said.
The Munich-based company is one of Germany’s biggest property investors. Its real estate portfolio amounted to 58.4 billion euros (S$84.9 billion), according to its fourth-quarter earnings report released on Friday. This was down 6.2 per cent from 62.3 billion euros a year earlier as the German insurer revalued some holdings and sold others.
Allianz faces portfolio pressure in both its home market and the United States as prices and demand for commercial real estate decline sharply.
Investors are closely watching to what extent financial institutions, funds and other property owners are revising the values of their holdings or selling as the market declines.
The share of Allianz’s portfolio allocated to office buildings fell to 49 per cent from 52 per cent over the course of last year, dropping below 50 per cent for the first time in at least a decade. In 2013, it stood at 62 per cent.
At the same time, its portfolio allocation to Germany – which is going through its most severe real estate crisis in decades – edged down to 17 per cent, compared with 18 per cent in 2022 and 29 per cent in 2013.
Its allocation to the United States also dropped slightly.
As for Allianz’s Q4 results, net profit nearly doubled year on year. The company said that quarterly performance was helped by its life and health insurance business, especially in the US and Italy.
Net profit attributable to shareholders rose to 2.15 billion euros from 1.1 billion euros, but was just short of a 2.2 billion euro consensus forecast.
A strong fourth quarter helped the company to lift full-year net profit by 33 per cent to 8.5 billion euros.
Allianz posted a 2023 operating profit of 14.75 billion euros and said it was targeting between 13.8 billion and 15.8 billion euros this year.
