Varia US Properties with resilient results in H1 2026 despite market headwinds

Manuel Leuthold, Chairman of the Board of Directors of Varia US Properties AG, commented: “Varia US Properties delivered resilient results in the first half of 2026 despite continued market headwinds, including increased like-for-like property net operating income and consistent likefor-like rental income. Following the reporting period, the Company also achieved a significant strategic milestone. In mid-August, Varia US agreed to recapitalize 13 of the 17 properties in our multifamily portfolio through two newly formed joint ventures with affiliates of our new partner Brookfield.”

“The Brookfield partnership represents a transformational milestone for Varia US. Beyond strengthening the balance sheet, it significantly enhances the Company’s ability to pursue growth opportunities, improves financial flexibility and aligns Varia US with one of the world's leading real estate investors. This transaction unlocks meaningful value for shareholders and marks a transformational milestone for Varia US. By partnering with Brookfield, we will significantly enhance our access to capital, improve the quality of our portfolio and create a strong foundation for long-term growth”, Manuel Leuthold added.

During the first half of 2026, the U.S. multifamily market continued to progress beyond the most challenging phase of the recent supply cycle. Although competitive conditions remain in markets with substantial lease up inventory, national absorption exceeded new deliveries in Q2 2026 while development activity remained constrained, improving the long-term outlook for apartment fundamentals.

However, the structural case for multifamily housing also remains compelling: Elevated home prices and mortgage rates continue to make renting substantially more affordable than purchasing in many U.S. markets, supporting apartment demand and resident retention.

Financial highlights

Varia US Properties furthered its strategic priorities during the second quarter of 2026 with the sale of two properties comprising 496 units (average vintage: 1984). Together with the three dispositions completed during the first quarter, these transactions reduced the portfolio’s exposure to older assets with greater capital requirements and generated proceeds that were used to further strengthen the Company’s financial position. Most notably, Varia US repaid the remaining CHF 5.5 million short-term loan, as previously anticipated, and concluded Q2 2026 with no corporate level debt.

For the six months ending June 30, 2026, total income was USD 44.1 Mio. compared to USD 65.9 Mio. in the comparative period. The decrease primarily reflected lower rental income following the disposition of five properties during the first half of 2026, together with a USD 5.2 Mio. net loss from the revaluation of investment properties (first half of 2025: USD 6.4 Mio. net gain). However, on a like-for-like basis, rental income remained stable at USD 37.6 Mio., demonstrating the resilience of the retained portfolio despite downward pressure on rents in certain markets and upward expense pressures from inflation.

Total operating expenses decreased by 7.1% to USD 37.5 Mio. for the six months ended June 30, 2026 (six months ended June 30, 2025: USD 40.3 Mio.). Lower real estate operating expenses, on-site workforce costs, as well as repairs and maintenance expenses due to the smaller portfolio size more than offset higher transaction costs associated with the increased number of dispositions.

Total finance costs decreased to USD 20.4 Mio. for the first half of 2026 from USD 27.7 Mio. in the comparative period, primarily due to a significant reduction in foreign currency exchange losses following the repayment of the CHF denominated bond in 2025. This was partially offset by an increase in interest expense due to higher prepayment penalties incurred during the first half of 2026. In connection with the five dispositions in the first half of 2026, the Company paid off higher interest rate debt, thereby reducing the blended interest rate on property mortgages from 4.4% as of December 31, 2025 to 4.3% as of June 30, 2026.

Overall, Varia US reported a net loss of USD 9.9 Mio. for the six months ended June 30, 2026 (six months ended June 30, 2025: net loss of USD 2.8 Mio.). Additionally, normalized Funds From Operations (FFO) decreased from USD 4.8 Mio. in the first half of 2025 to USD 3.2 Mio. in the first half of 2026. These decreases are expected to be temporary and will increase as the portfolio grows in future periods.

Portfolio development

Following the five property sales, the portfolio value decreased to USD 891.6 Mio., while the like-for-like portfolio value remained broadly stable compared to December 2025.

Monthly rent per unit on a like-for-like basis increased to USD 1,318 as of June 2026 from USD 1,308 as of December 2025.

Physical Occupancy was approximately 92.1% at the end of June 2026, compared with approximately 93.2% at December 2025, reflecting the Company’s continued emphasis on balancing occupancy and rental rates as individual markets absorb recently delivered supply.

At the end of H1 2026, the portfolio consisted of 17 properties, totaling 5,273 units across eight U.S. states, reflecting a regionally balanced and diversified footprint in markets with attractive opportunities.

Outlook

Varia US has entered the second half of 2026 well positioned to pursue its next phase of growth. With the elimination of all corporate level debt, the Company can focus its attention and resources towards enhancing the performance and long-term growth profile of the portfolio. At the same time, Varia US and Stoneweg, the company’s external asset manager, will focus on successfully closing the joint venture partnership with Brookfield as planned in early Q4 2026.

The Company is evaluating future dispositions as part of a multi-year strategy to rotate out of selected older vintage assets. This process will be approached deliberately, considering property performance, capital requirements, market liquidity, and the ability to redeploy capital into opportunities that offer more attractive long term return potential.

Matthew Levy, Managing Director Americas of Stoneweg, the external asset manager of Varia US Properties, stated: “Operationally, Varia US plans to increase select value-add capital projects during the second half of the year to enhance the quality of the portfolio and prepare for future asset sales. These investments will be targeted toward improvements that maintain competitiveness and support future revenue growth, while the Company continues to prioritize asset preservation needs and disciplined cost management”.

“The Company will also continue to tailor its pricing strategy to each individual property and submarket, protecting occupancy where competition remains elevated while pursuing rent growth opportunities as conditions permit. While the pace of recovery is expected to vary by market, Varia US is encouraged by the improving operating environment and the opportunities it presents for future growth”, Matthew Levy added.