Debts force Ghelamco to sell buildings

Ghelamco, the real estate company of the Gheysens business family, must sell additional real estate in the next 18 months to reduce its debts and improve its solvency.

‘As a significant part of the property portfolio is reaching the end of its development cycle, the group is currently faced with a temporarily limited cash and liquidity position.’ This alarming message is contained in the annual report that Ghelamco, one of the largest real estate developers in the country, published last weekend.

The group announced its annual results last week. It recorded a net loss of 32 million euros in 2023, largely due to a write-down after a lost lawsuit over the Eurostadium in Brussels. But in the second half of the year the company made a profit. Ghelamco saw its net financial debt rise to 1.34 billion euros, but has significant equity of more than 1 billion euros.

However, several elements in the annual report point to financial difficulties. Due to the combination of high debts and rising interest rates, Ghelamco saw its financial costs rise sharply. This year, 895 million euros in short-term debts will expire, of which, according to Ghelamco, 350 million euros has been covered. “This may cast substantial doubt on the group’s ability to continue as a going concern,” it said.

Ghelamco wants to release sufficient liquidity to meet all financial obligations. The company therefore identified ‘a broad group of assets that are eligible for sale over the next 18 months’.

Although Ghelamco also purchased some land in 2023, the company has recently sold a lot of real estate – despite difficult market conditions and the absence of major investors.

In less than a year, 320 million euros worth of buildings and land were sold. For example, owner Paul Gheysens is largely withdrawing from the French ski village of Courchevel. After selling the Chalet 1850 for 15 million euros this summer, Gheysens signed a 62 million euro sales deal for the Pomme de Pin hotel in February. Ghelamco subsequently implemented a value increase of 26 million euros last year.

In Belgium, Ghelamco concluded sales deals for three buildings that will be completed this year: the Nexus data center in Zellik (55 million euros) and the Antwerp office buildings Nova One (41 million euros) and Copernicus (36 million euros). In Poland, Ghelamco’s core country, the listed real estate group Archicom took over several projects.

In February, Gheysens signed a deal for the sale of the finished Craft office project in Katowice, on which Ghelamco took a 20 million euro write-down last year. All these sales should enable Ghelamco to reduce its significant debt ratio of 59 percent in the coming months.

If the planned sales program falls short, Ghelamco says it will take ‘alternative measures’. “This situation indicates the existence of a material uncertainty regarding the group’s ability to continue operations,” the group said. Ghelamco is not planning any expenditure or sudden purchases with an immediate cash outflow over the next 18 months.

In addition, Ghelamco is committed to the refinancing and extension of old debts. For example, last year the company issued 178 million euros in new bonds in Poland, largely to repay current bonds before their maturity date. Ghelamco also took out more expensive (subordinated) loans from lenders other than traditional banks. For example, the annual report mentions a short-term loan of 10 million euros that Ghelamco took out from a third party for ‘certain specific Polish projects’ at an interest rate of no less than 15 percent.

In the United Kingdom, the margin on interest is 13 percent for mezzanine loans, a form of financing between credit and venture capital that Ghelamco partly used for the London project The Arc.

Ghelamco emphasizes in the annual report that it made no defaults last year and did not breach any covenants. To keep it that way, the group mainly wants to keep an eye on its solvency ratio (ratio of equity to total assets), which is close to the set threshold of 40 percent. It is therefore crucial that Ghelamco continues to succeed in selling real estate.

Owner Gheysens does not find the annual report alarming. “Few companies have such a portfolio of ‘high standard’ projects in which there is a lot of interest today,” he says in a response. ‘Given the level of finishing and the strong rental, we can now valorise it.’