Stable business development in first half of 2015

  • Profitable sale of portfolio properties
  • Rewarding focus on projects with good profit potential
  • Secured freedom of action thanks to sound financing
  • Confirmation of expectations for the 2015 financial year

Net profit excluding revaluation gains achieved in real estate and general contracting in the first half of 2015 amounted to CHF 59.1 million, 6.7% above that of the previous year. One-time profits resulting from the sale of yield-producing real estate and the steady rise in rental income contributed to the gratifying development. This result, generated in an increasingly demanding market environment, substantiates both the company’s operating strength and its earning power.

In the period under review, the overall positive value adjustment of investment real estate resulted in net profit including revaluation gains of CHF 67.2 million, 3.1% above that reported the previous year.

In the first six months of 2015, revenue derived from the rental and management of properties and from completed project volume represents a total performance of CHF 395.5 million (1st half 2014: CHF 567.7 million). The 30.3% decline compared to the comparable period the previous year is due to the Project & Development division’s restriction to projects with a sound profit potential and the connected decline in project volume.

The company managed by CEO Roger Herzog since 1 May 2015 with branches in Basel, Bern, Cham, St. Gallen and Zurich engaged a total of 351 employees (31 December 2014: 376). By means of natural fluctuation, the number of full-time positions in the period under review declined by 5% to 330.

Real Estate division

Owing to the previous years’ growth in the portfolio of yield-producing properties, rental income in the first half of 2015 increased significantly by 18.6% to CHF 88.5 million (1st half 2014: CHF 74.6 million). Properties which in the first half of 2015 affected net income the first time for an entire reporting period have made a significant contribution to the vigorous growth. These properties include the residential complexes Eikenøtt in Gland VD and Favrehof in Wallisellen, Toni-Areal in Zurich-West, Richtiring office building in Wallisellen let to UPC Cablecom, and the commercial properties Lilienthal in Opfikon and Herostrasse in Zurich Altstetten.

The cumulative vacancy rate decreased in the period under review by 0.3 percentage points to 7.6% of target rental income. The reduction remained low despite successful re-letting and the sale of a mostly vacant commercial property in Zurich Oerlikon because the first-time rental of residential apartments in Zurich-West was slow, and the reduction of vacancies in several commercial properties in the Zurich metropolitan area has not been fully implemented. Owing to ongoing negotiations with several interested parties, Allreal expects the vacancy rate to probably decrease in the second half of 2015.

Real-estate expenses in the first half of 2015 amounted to CHF 15.9 million, or 18.0% of total rental income. The increase over the comparable period the previous year reflects mainly the implementation of structural measures made in view of successful re-letting and first-time letting. The largest share applied to renovation measures connected with the properties on 309 Hardstrasse (Escher-Wyss-Areal) and 22/24 Kalchbühlstrasse in Zurich Wollishofen.

Owing to higher real-estate expenses and the vacancy-related losses of income, net yield in the first half of 2015 decreased by 4.2% compared to the previous year.

Hammer Retex reported earnings for the first half of 2015 of CHF 3.2 million (1st half 2014: CHF 3.5 million). The company managed 40% of Allreal’s portfolio in terms of market value of the yield-producing properties.

Two yield-producing properties were sold in the period under review. The profit resulting from the sale of a residential property in Effretikon to a private investor and a commercial building in Zurich Oerlikon to the City of Zurich amounted to CHF 18.4 million, 26% above the balance sheet market value.

In the first half of 2015, no additions were recorded to the portfolio of yield-producing properties. On the cut-off date, the portfolio comprised 19 residential and 43 commercial properties at an average market value of CHF 55.5 million.

At the end of April, on Schiffbauplatz, a part of the Escher-Wyss-Areal, construction began on an office building with over 10 000 square metres of useful space at an investment volume of CHF 73 million. On 30 June 2015, the project from Allreal’s own development was transferred to the real estate under construction portfolio. Consequently, on the cut-off date, the portfolio comprised two projects with a total investment volume of CHF 96 million and a value of CHF 33.8 million.

The valuation of the 62 yield-producing properties and 2 investment properties under construction by an external estimator as at 30 June 2015 resulted in a positive total value adjustment of CHF 10.5 million. Of this amount, CHF 2.0 million apply to yield-producing properties and CHF 8.5 million to real estate under construction.

The value of the investment real estate portfolio on the cut-off date amounted to CHF 3.47 billion (31.12.2014: CHF 3.51 billion). The yield-producing properties represent a market value of CHF 3.44 billion and investment real estate under construction CHF 0.03 billion.

Operating result excluding revaluation gains (EBIT) reported by the Real Estate division for the period under review amounts to CHF 88.3 million (1st half 2014: CHF 62.4 million), and the share in the Group’s operating result was a high 94.2% (1st half 2014: 64.4%).

Projects & Development division

Profitability-raising measures introduced in the Realisation department resulted in 13% higher earnings from realisation in general contracting (third-party projects) amounting to CHF 26.0 million compared to the previous year. In contrast, earnings generated from the sale of development real estate amounted to only CHF 3.6 million. The significantly higher value of CHF 28.3 million reported the previous year was characterised by the gainful sale of a large development property in Wallisellen to an institutional investor. Consequently, earnings from general contracting in the first half of 2015 decreased by 42.7% to CHF 36.1 million (1st half 2014: 63.0 million).

Despite lower operating expenses compared to the first half of 2014, the department’s operating result (EBIT) of CHF 6.0 million is reported significantly below that of the previous year (1st half 2014: CHF 31.6 million). Profits accrued in the second half of 2015 resulting from the sale of condominiums in the Guggach project will show a balancing effect on both EBIT and earnings from general contracting.

The Project Development department contributes significantly toward the department’s earnings and to the entire company by developing projects both for sale to third parties and for the own portfolio. Projects taken to the construction stage and transferred to the Realisation department include the commercial building on Schiffbauplatz in Zurich-West, a residential and commercial building designated for an investor in Romanshorn and a residential complex comprising 18 condominiums in Steinen.

Following the legally binding adoption of the Bülach Nord layout plan, Allreal exercised an option to acquire a segment of the Bülachguss site with effect from 1 July 2016. Based on the existing urban planning reference project for the site measuring 55 000 square metres and starting in the second half of 2016, Allreal plans to implement an urban development comprising 450 rental apartments and condominiums plus commercial and trade areas representing an investment volume of CHF 300 million. In addition, amongst others, the following projects were advanced: Kirschblütenweg in Basel, Bäuler-Areal in Rümlang, Neuwisen-Areal in Dielsdorf, Jungholz/Neunbrunnen-Areal in Zurich Oerlikon und Delta-Areal in Solothurn. Moreover, in the period under review the Project Development department won three investor and overall performance competitions.

The lower number of own projects implemented in the period under review and the consistent restriction to third-party projects representing predictable risks and sound profit expectations resulted in an expected 37.9% decline in completed projects to CHF 303.8 million.

Of the project volume processed in the first half of 2015, CHF 224 million applied to third-party projects, CHF 36 million to development projects for sale to third parties, and CHF 44 million to projects designated for Allreal’s own portfolio. The share of newly constructed buildings was 76.4% and that of refurbishment and conversion projects 23.6%. In terms of geographic distribution, Zurich represented 84.2%, Cham 8.4%, St. Gallen 3.2%, Basel 2.7% and Bern 1.5%. About 100 buildings on average were under construction in the period under review. The secured order backlog on the cut-off date amounted to CHF 895 million.

In addition to his function as Chief Executive Officer, Roger Herzog was appointed head of the Realisation department.

In the period under review, 20 condominiums from own development and realisation were sold for a total of CHF 31.9 million. Consequently, the result from the sale of development real estate is considerably lower than that reported the previous year, which was characterised by the sale of a residential and a commercial building (1st half 2014: 47 units/CHF 182.8 million). Transfers of ownership and occupation of the first of 197 apartments of the Guggach complex in Zurich Unterstrass are scheduled to start in November 2015. In this connection, substantial profits are expected from the sale of the apartments which will show a positive effect on the Project & Development division’s results.

Transfer of ownership of the last apartment in the Stockenstrasse project in Kilchberg ZH was carried out in the period under review. As a result, on the cut-off date, a total of 118 residential units in six projects, 36 of them ready for occupation, were for sale.

In the first half of 2015, the Projects & Development division’s share in the Group’s net operating result was 5.8% (1st half 2014: 35.6%).


Financial debt of CHF 1.75 billion as at 30 June 2015 remained unchanged to that on the cut-off date the previous year as the income resulting from the divestment of two yield-producing properties served as compensation for the profit distribution to shareholders of CHF 87.7 million.

Two debenture bonds totalling CHF 220 million issued in March 2015 permit both the financing of ongoing own projects and the acquisition of further properties and parcels of land. Interest on the bonds is 0.75% and 1.375% with a time to maturity of six years (CHF 120 million) and ten years (CHF 100 million), respectively.

Financial expenditure for interest rate swaps rose by CHF 2.4 million due to the introduction of negative interest rates in Switzerland in the period under review. Related to this was the rise in the average interest rate for debt by 0.41 percentage points to 2.34%. As at 30 June 2015, the average fixed interest period was 58 months (31.12.2014: 50 months).

With open credit lines at short call of CHF 673 million, debt capacity on the cut-off date amounted to approximately CHF 1.4 billion, providing Allreal with the necessary security and flexibility to finance ongoing business and take advantage of opportunities.

As at 30 June 2015, equity ratio amounted to 47.3% and net gearing to 90.4% (31.12.2014: 47.6%/87.9%). Return on equity excluding revaluation gains in the period under review increased by 0.4 percentage points to 6.4% compared to the previous year. As a result of the lower share price, market capitalisation fell by 6.2% to CHF 2 049.7 million (31.12.2014: CHF 2 185.5 million).


It has become increasingly demanding within the parameters of the current economic situation to bring down the vacancy rate as targeted, to consolidate the real estate portfolio which was expanded strongly in 2013 and 2014, and to improve the Project & Development division’s earning power. However, Allreal’s tried-and-tested combination of a stable-income real-estate portfolio with the activities of a general contractor connected with a broad range of services and the company’s financial power creates interesting possibilities to be taken advantage while carefully evaluating the related risks.

Allreal’s Board of Directors and Group Management expect business activity in the second half year of 2015 to remain stable. The company therefore anticipates operating net profit for the entire 2015 financial year to compare to at least that of the previous year.

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


Dr. Thomas Lustenberger


Roger Herzog
Chief Executive Officer

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