IVG shares hit historic low

Shares in German commercial property group IVG have continued to slide over the summer, plummeting more than 50% in July and August alone and hitting a historic low of EUR 2.45 per share on August 31. On Friday 2 September, the share closed at EUR 2.58. Back in May, IVG's stock was trading roughly at par with net asset value of EUR 6.

The downward trend started in June and accelerated significantly in August on the back of disappointing second-quarter results and higher-than-expected costs reported on the company's flagship project, The Squaire. The Bonn-based firm unveiled EUR 74 mln in budget overruns on its office development project at Frankfurt airport due to 'a wave of invoices coming in from subcontractors' on completion of the major section of the project.

'Usually we work with a channel contractor,' Chief Executive Gerhard Niesslein commented at the presentation of the company's first-half earnings. 'In this case, we inherited a different situation because the channel contractor, which was hired five years ago, walked away from the site, [...] and in order to be able to finish The Squaire, we had to sign on contracts, which are basically billed on an hourly basis.'

Niesslein, who in November will cede his position to CFO Wolfgang Schäfers, sees a maximum cost of a further EUR 30 mln on the Squaire. The EUR 800 mln development project provides roughly 140,000 m² of office accommodation right on top of the ICE high-speed train station at Frankfurt International Airport. The complex is 97% owned by IVG and 3% held by Fraport.

In contrast to IVG, Unibail-Rodamco - the largest listed real estate company in Europe, has been trading at around an 11% premium to NAV in recent months.

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