Yesterday, UBM released another uninspiring set of quarterly results as the real estate transaction market continues to be in a complete standstill as volumes in Europe decreased another 16% qoq. Still, positive news came from several building permits that were granted during the quarter.

Q3 sales declined 15% yoy to € 25m following the ongoing transaction market standstill as we saw no relevant sales of fully consolidated projects. More significant contributions came from a couple of residential and office projects in Poland.

After additional negative valuation effects, mainly stemming from a shopping center project in Poland as well as negative operating leverage, Q3 EBITDA came in at a negative € 13.0m (vs € 3.3m in Q3’22). However, following the preliminary building permit for the Timber Factory project in Munich (Baubergerstraße) the purchase price for the second half of the JV partner’s share in the project became due. This mainly drove the positive financial result of € 27.8m in Q3 which led to a Q3 EBT of € 14.1m, thus almost halving the H1 EBT (€ -17.4m at 9M vs € -31.6m after H1).

Visibility remains low, as CEO Winkler stated that at least H1’24 will likely show no substantial recovery of the market. While this is seen to push a large number of developers towards the brink of bankruptcy, UBM remains well prepared for what appears to be a perfect storm for the company. With c. € 160m cash at hand (incl € 91m bond repayment in Q4) and de facto no refinancing event until Q4’25, UBM has a major advantage over most of its peers and might even allow to snap some lucky-buys, which is however not the #1 priority at the moment.

Once the market is starting to regain traction, UBM should be in the pole position thanks to its superior product offering. Mind you, that the requirements of the EU taxonomy, which also affects real estate AIFs, will continue to increase. Hence, demand for sustainable properties (72% of UBM’s pipeline is timber construction) should grow further.  

Despite the lackluster operating performance YTD, which is in our view entirely due to market headwinds, the mid-term prospects of UBM remain fully intact, given the compelling product offering of the company. Remains a BUY with an unchanged PT of € 31.00 based on DDM.