Spain's Colonial says property value falls not over as posts loss

By Matteo Allievi and Jakub Olesiuk

(Reuters) -Spain's Inmobiliaria Colonial swung to a net attributable loss of 299 million euros ($320 million) for the first nine months of the year on Thursday, hit by a drop in the value of its assets.

The Barcelona-based real estate group had reported a profit of 398 million euros in the same period a year earlier.

Colonial Chief Executive Pere Vinolas said in a call with journalists that the asset revaluation process, which was weighing on property prices, was not over yet.

Tightening of monetary policy by central banks has put the real estate sector under pressure since the second half of last year, slowing down property investment.

With sovereign debt offering higher returns due to high interest rates, investors are demanding higher returns on real estate assets, driving down their values.

Nevertheless, Colonial reported a 8% rise in operating profit to 129 million euros from January to September compared to a year ago as lease contracts were adjusted upwards due to high inflation and occupancy levels increased.

As a result, Colonial lifted its full-year earnings per share forecast to 0.31 euros from a previous 0.28-0.30 range.

Vinolas said that European real estate investment companies such as Colonial and Merlin Properties have to include the impact of an updated valuation of their properties.

Colonial's third-quarter results did not include an updated valuation of its assets, which is calculated every six months and dropped 3% at the end of the second quarter from the previous reading, resulting in a loss.

The nine-month results take into account the assets valuation decrease until the end of June.

Colonial's net debt fell to 5.12 billion euros at the end of September, from 5.36 billion euros one year ago, following divestments of around 574 million euros.

Shares in Colonial are down 5.3% year-to-date.

($1 = 0.9337 euros)

(Reporting by Matteo Allievi and Jakub Olesiuk; Editing by David Evans and Alexander Smith)