Allreal creates value

  • Good 2012 half-year results
  • Stable real estate earnings
  • Continued growth of completed project volume
  • Sound financing provides opportunities

Overall performance for the first six months of 2012 grew by 16% to CHF 483.1 million. Growth of both rental income and completed project volume contributed to an improved result compared to the comparable period the previous year.

Net profit including revaluation gains amounted to CHF 64.4 million. The result is slightly below that of the previous year due on the one hand to the good operating result and on the other to a one-time effect in financing expenses and a higher value assessment resulting from construction progress in the six investment properties under construction.

Due to the increased number of employees required to cope with the growing project volume, personnel expenses rose significantly compared to the previous year. Consequently, operating net profit for the first half of 2012 of CHF 49.9 million was 6% below that reported for the comparison period.

The good result substantiates Allreal’s competitiveness based on the proven business model. In an increasingly demanding economic environment, the company stood its ground exceedingly well thanks to the combination of a stable-income real estate portfolio with the activities of a general contractor. On the Real Estate side, the result is characterised by growing pressure on yields and a slow rise in vacancy rates while on the Projects & Development side, pressure on margins is continuing in a lively construction and investment environment.

In the period under review, Allreal expanded both its geographic reach and product range as a result of acquiring the Cham-based Hammer Retex Group on 4 April 2012 with retroactive effect from 1 January 2012. The companies subsumed in the Hammer Retex Group with a total staff of about 50 provide a wide range of real-estate services with a focus on Central Switzerland. The services include, especially, general contracting, property management, rental of residential and commercial space and the sale of real estate. The acquisition of the company, which is firmly rooted in the region, accentuates the growth pursued by Allreal and, moreover, creates additional synergies.

The Allreal share closed at CHF 138.20 on the cut-off date, or 1.2% above the year-end price on 31 December 2011. As a result of the positive price development as well as a profit distribution of CHF 5.50 per share as decided by the 2012 annual meeting of shareholders and the subscription rights issued within the parameters of the capital increase, overall performance is reported at a respectable 7.1%.

The capital increase successfully implemented in May 2012 resulted in an inflow of capital of net CHF 265 million. The funds were devoted to repaying short-term debt, and they allow the company to finance own projects.

Real Estate division

The only change in the portfolio of income-producing real estate in the period under review refers to the sale with effect from 30 March 2012 of a commercial building ready for refurbishment and with a usable surface area of about 2,000 square meters located in Muttenz, Basel. On the cut-off date, the portfolio of income-producing real estate included 45 commercial and 19 residential properties at an average market value per property of CHF 39.4 million.

Following the addition of an apartment building under construction in the Richti-Areal complex in Wallisellen, the portfolio of investment real estate under construction on the cut-off date comprised 4 residential buildings, 1 commercial building and 1 building designated for mixed usage.

The valuation of investment properties carried out by an external real estate appraiser resulted in an appreciation by CHF 19.0 million, corresponding to 0.6% of the portfolio’s entire value, with CHF –1.3 million relating to the income-producing portfolio and CHF 20.3 million to the portfolio of investment real estate under construction.

Compared to the cut-off date the previous year, the portfolio changes and valuation differences overall resulted in a 3.2% increase in the value of the portfolios of income-producing real estate and real estate under construction. The value of Allreal’s entire portfolio as at 30 June 2012 amounted to CHF 3.05 billion. The share of income-producing real estate amounted to CHF 2.53 billion and that of investment real estate under construction to CHF 522 million.

Rental income for the first half of 2012 grew by 2.9% to CHF 71.8 million compared to the comparable period the previous year. Two properties affecting net income made a first-time contribution to the gratifying development.

Net yield reported in the first six months of 2012 for the rental of income-producing real estate amounted to 4.9%, a respectable result compared to the overall market and despite an emerging decrease in demand for office space.

At 4.9%, the vacancy rate on the cut-off date was low. Owing to notice given by the main tenant of a commercial building on Brandschenkestrasse in Zurich with effect from March 2012, the vacancy rate for the entire 2012 financial year will reach about 5%.

Value-maintaining measures for income-producing real estate in the period under review and ongoing operating and maintenance expenses amounted to a total of CHF 9.7 million, corresponding to a long-term average of 13.5% of total rental income.

The Real Estate division reported operating results excluding revaluation gains (EBIT ) of CHF 60.4 million (1st half-year 2011: CHF 58.8 million), corresponding to a 71.2% (1st half-year 2011: 69.9%) share of the Group’s EBIT.

Projects & Development division

The result of the Project & Development division (project development, realisation, acquisition and sale of real estate) amounted to CHF 53.2 million for the period under review, or 6% above that of the comparable period the previous year.

The operating result (EBIT ) for the first half of 2012 amounted to CHF 24.0 million. The 4.8% decline compared to the previous year is the direct result of the staff growth required to cope with the higher project volume and the connected rise in personnel expenses. Staff additions and the integration of the Hammer Retex Group resulted in a growth of full-time positions from 297 to 365.

Construction projects processed by the Project Development for third parties and for Allreal’s own account represent a consistently high potential order volume of about CHF 1 billion. The continued successful development of projects includes amongst others a significant site development for a third party in Adliswil and the development of a 55 000 square metre property in Bülach with a possible construction start in 2015.

Own projects intended for the sale of residential property in Erlenbach, Mönchaltorf and Zurich-Unterstrass and two projects constructed on the Escher-Wyss site in Zurich-West have reached the construction or the building application stage in the first six months of 2012.

In February 2012, Allreal concluded a long-term rental agreement with upc cablecom, a cable network provider, for the Richtiring commercial building developed by Allreal and under construction since May 2011. The representative building provides office space for some 1,400 employees. Thus, two years before completion of the Richti-Areal site, practically the entire office space has been let.

The project volume completed by the Realisation department in the period under review grew by 17.9% to CHF 409.9 million when compared to the comparable period the previous year.

Two large-scale projects under construction, Toni-Areal in Zurich-West and Richti-Areal in Wallisellen, represent a decisive contribution to the rising share of own projects, amounting to 42.5% of the entire project volume (1st half-year 2011: 40.8%).

The order backlog of about CHF 2 billion on the cut-off date remained practically unchanged compared to the previous year and to which the Hammer Retex Group contributed CHF 270 million. Utilisation of existing capacity is therefore guaranteed for a period of over two years.

The Acquisition/Sales department matched the previous year’s record result with total sales of 102 residential units (1st half-year 2011: 106 units). On the cut-off date, a total of 193 residential units were put up for sale in seven projects. A review of sales in the first six months of 2012 has shown that demand for residential property in the medium to upper price segment remains high, while the disposal of residential units in the highest price range is growing increasingly difficult.

The share of the group’s EBIT earned by the Projects & Development division, for which Bruno Bettoni took on responsibility again in mid-June 2012, is reported at 28.8% (1st half-year 2011: 30.1%).

Continuation of growth strategy thanks to sound financing

The continuing low level of interest rates and the funds contributed by the capital increase favour advantageous hedging of current financial liabilities. The average interest rate for financial liabilities at 30 June 2012 amounted to 2.38% for an average time to maturity of 55 months (31.12.2011: 2.30%/51 months).

The capital increase with a rights offer implemented in May 2012 resulted in a funds inflow of CHF 265 million. Until such time as the funds will be used to finance own projects or the acquisition of real estate, the additional liquidity will be employed to redeem short-term loans, thereby lowering the cost of financing. Thanks to the freely available credit line of over CHF 740 million on the cut-off date and a borrowing capacity of CHF 1.4 billion in total, Allreal is in a position to take advantage of short-term opportunities.

Allreal’s market capitalisation grew by 18.1% to CHF 2.2 billion compared to the cut-off date the previous year owing to additional shares issued within the parameters of the capital increase. The equity ratio is reported at 49.3% with a net gearing of 75.4% (31.12. 2011: 43.6%/98.7%).

Confident outlook

It is very difficult to assess the medium- to long-term effects of the current economic insecurities – especially those in the European Union – on economic activity in Switzerland. Based on the gratifying course of business in the period under review and the development expected for the second half of 2012, Allreal anticipates operating results for the entire financial year to be slightly below those of 2011.

Allreal remains confident even beyond the current financial year thanks to the continued portfolio expansion, a high number of promising projects, the high order backlog in the Projects & Development division and sound financing.

The Board of Directors and Group Management wish to take this opportunity to thank all staff members for their contribution to the good half-year results and our shareholders for their trust and support.


Dr. Thomas Lustenberger

Bruno Bettoni
Chief Executive Officer

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