public developers may not pay dividends to shareholders

The serious surge in demand for housing observed in the summer and autumn of this year against the backdrop of a weakening ruble may be replaced by a drop in sales as early as 2024, including due to the cancellation of the preferential mortgage program. The construction industry will also be negatively affected by the rise in costs of bridge loans and project financing. As a result, the National Rating Agency (NRA) predicts that public developers are unlikely to be able to pay dividends to their shareholders.

The uncertain situation with sales of new buildings, as well as a significant increase in the cost of project financing and corporate debt in the context of tightening monetary policy, will seriously affect the construction industry. This conclusion is contained in the NRA report, which Kommersant has read.

Developers’ corporate debt continues to grow. According to the Central Bank’s calculations, in the second quarter of 2023, the volume of project financing for housing construction increased by 9% compared to the first quarter, to RUB 5.4 trillion. This happened against the backdrop of the active launch of new projects on the market. By October 2023, the volume of housing under construction, according to the Nash.Dom.RF information system, increased by 6% year-on-year, to 106 million square meters. m.

According to the Central Bank, in April-June 2023, the average rate on project financing was 4.86%. Its cost will increase by another 2-3 percentage points, including due to an increase in the key rate, adds Deputy Financial Director of the Granel Group of Companies Yuri Chernoivanov.

So far, the financial situation of developers supports high demand for apartments in new buildings. In Moscow alone, according to the capital’s Rosreestr, in January-September 2023, almost 114 thousand transactions were registered on the primary housing market, which is 20% more year-on-year. However, maintaining a high key rate in the first half of 2024 while simultaneously ending the preferential mortgage program will significantly increase the risks of falling demand for housing, warns Vasily Tanurkov, director of the ACRA corporate ratings group.

For these reasons, at the end of 2023, public development companies, including PIK Group, Samolet, Ingrad and Etalon, are unlikely to decide to pay dividends to shareholders and may return to this issue only at the end of 2024, predicts the Director of Credit NRA ratings Irina Lapko. According to her, an exception may be the LSR group, which has been regularly paying annual dividends since 2011. PIK Group and Samolet declined to comment. LSR, Ingrad and Etalon did not respond to Kommersant’s request.

At the same time, the revenue of almost all public development companies is growing. Thus, for PIK Group in January-June 2023, this figure increased by 40% compared to the first half of 2021, to 264.9 billion rubles, but net profit decreased by 60%, to 27.9 billion rubles. The developer did not publish financial indicators for 2022. Etalon’s revenue turned out to be comparable year-on-year – 32.8 billion rubles, net loss decreased from 11.7 billion rubles. up to 2.1 billion rubles.

In the first half of the year, Samolet Group generated revenue of 101.4 billion rubles, which is 53% more year-on-year, and net profit increased by 73% year-on-year, to 9.2 billion rubles. The revenue of the LSR group turned out to be 14% more year-on-year – 74.8 billion rubles, however, the net profit of the developer decreased by 3.7 times, to 1.7 billion rubles. Ingrad, on the contrary, reduced revenue by 14% year-on-year, to 32 billion rubles, and increased net profit five times, to 2 billion rubles.

Despite the growth in revenue, at the end of 2022, PIK Group, Samolet, Ingrad and Etalon did not pay dividends. The exception was LSR Group of Companies, which allocated 8 billion rubles to pay dividends for 2022.

With the current key rate of 15%, there can be no talk of any bridge financing or affordable loans for developers, says Nikoliers partner Vladimir Sergunin. If companies want to develop, it would be more logical for them to use funds not to pay dividends, but to purchase new sites for further development, he adds.

Against this background, in 2023, most developers will reduce dividend payments or abandon them altogether until the key rate is normalized, agrees the head of the ERZ.RF portal, Kirill Kholopik. Although, argues Dmitry Sergienko, senior director for corporate ratings at Expert RA, even in a difficult macroeconomic situation, public developers have the resources to pay dividends.

Daria Andrianova