MERLIN PROPERTIES SOCIMI, S.A. 
"We don't know if the 'repricing' of assets is already over, because we are still in an uncertain cycle phase, but we think that the important adjustment in the value of assets was the one that took place in 2023," CEO Pere Viñolas told the press.
Real estate companies such as Colonial and its Spanish competitor Merlin Properties make profits from renting out their assets and are obliged to include in their results the impact of an updated valuation of their properties every six months.
Without the updated valuation of its assets, Colonial's first-quarter net profit doubled to €54.5 million ($58.81 million), supported by inflation-linked rental income and high occupancy rates.
The company only updates the valuation of its assets twice a year. At the end of 2023, its asset valuations were 9% lower than a year earlier, Colonial said in February.
The real estate sector has been under pressure since the end of 2022, as volatile markets and tightening financial conditions have dampened real estate investment.
The European Central Bank is expected to cut interest rates in June after keeping them at record highs since last September, which should make real estate investments more attractive.
"In the first half of this year the valuation of assets may continue to fall slightly, but as interest rates fall we expect by the end of the year a stable or slightly above valuation," said Renta 4 analyst Javier Diaz.
Colonial's portfolio, which includes buildings in Spain and France, rose 6% year-on-year in comparable rental income, as leases were adjusted upwards due to high inflation.
Occupancy in the group's leased buildings averaged 97%, with the Paris properties at full capacity.
Colonial shares have fallen more than 10% year-to-date through Monday's close.
(1 U.S. dollar = 0.9256 euros)
(Reporting by Matteo Allievi; editing by David Latona, Jason Neely and Susan Fenton; Spanish editing by Javi West Larrañaga)
