Strong 2016 Half-year Result

  • Convincing real-estate operating result
  • Continued and sustained reduction of vacancy rate
  • Gratifying Projects and Development result thanks to earnings from sales and consistent profitability in third-party business
  • Confirmation of expectations for entire 2016 financial year

Allreal very successfully held its own in an increasingly demanding market environment. Net profit including revaluation effect for the first half year in 2016 amounted to CHF 69.8  million, or 3.9% above the comparable result the previous year (1st half 2015: CHF 67.2 million). The gratifying result is characterised by good real-estate earnings in the Real Estate division on the one hand, and by earnings from the sale of development real estate and pleasing earnings from third-party business in the Projects & Development division on the other.

Valuation of the properties held in investment real estate resulted in a value increase comparable to that of the previous year of CHF 10.3 million in total. Adjusted for the positive value correction, net profit of CHF 61.4 million was reported slightly above the very good result of the comparable period the previous year of CHF 59.1 million.

In the first six months of the year, revenue derived from the rental and management of properties and from the activity as a general contractor represents a total performance of CHF 348.9 million. As expected, this amount is 11.8% below that of the comparable period the previous year (1st half 2015: CHF 395.5 million). The decline is due mainly to the reduced project volume handled by the Projects & Development division.

On the cut-off date, Allreal employed a total of 308 employees (31.12.2015: 337 employees) in Basel, Bern, Cham and Zurich. The lower number of employees reflects the company’s consistent focus on projects with calculable risks and a sound profit potential and the ensuing lower project volume.

Real Estate division

Owing to the sale of yield-producing properties in the second half of 2015 and in the period under review, rental income declined slightly by 2.3% to CHF 86.5 million when compared to the comparable period the previous year (1st half 2015: CHF 88.5 million). Compared to the second half of 2015, rental income in the period under review grew as a result of the lower vacancy rate and despite the reduced inventory of yield-producing properties.

Thanks to numerous achievements concerning initial letting and re-letting of both residential and commercial real estate, the cumulative vacancy rate declined by 1.4 percentage points to 6.2% of target rental income (1st half 2015: 7.6%). Owing to positive negotiations with various prospective tenants, Allreal expects the vacancy rate to continue to decline in the second half of 2016. This is based, not least, on a rental agreement signed after the cut-off date concerning the office building on Lilienthal Boulevard 2–8 in Opfikon ZH comprising 13,400 square metres of useful space. As a result, the building is fully let.

Real-estate expenses for the first half of 2016 amounted to CHF 11.5 million which, in terms of total rental income, represents an expense rate of 13.3% (1st half 2015: CHF 15.9 million/18.0%). The value is therefore clearly below the standard range of 15% to 17% but is expected to approach the 15% level in the second half of 2016.

The reduced loss in revenue connected with the decreasing vacancy rate and the lower real-estate expenses resulted in a net yield of 4.3%.

In the period under review, Hammer Retex recorded sales of CHF 2.2 million (1st half 2015: CHF 3.2 million) by means of management, maintenance and marketing of real estate. The decline is primarily due to the higher share of work for the group.

Operating profit excluding revaluation gains of CHF 77.0 million reported by the Real Estate division for the first half of 2016 is 12.8% below that of the comparable period the previous year (1st half 2015: CHF 88.3 million) which was characterised by extraordinary sales profits.

The portfolio of yield-producing properties experienced one addition and four divestments in the first half of 2016.

The addition concerns a residential and commercial building from Allreal’s own development and realisation located on Schiffbaustrasse in Zurich-West; at the time of completion in June 2016, all apartments and a considerable share of the commercial space in the building were let.

In the period under review, three commercial properties in Zurich and Dietlikon with total floor space of 15,000 square metres were sold to an institutional investor and an office building in Zurich Aussersihl. The profit resulting from the sale amounts to CHF 5.6 million (1st half 2015: CHF 18.4 million) or 6.0% above the total book value of the four divested buildings.

The portfolio of yield-producing properties as at 30 June 2016 comprised 20 residential and 39 commercial buildings.

Following the addition of a planned commercial building in Bülach ZH and the divestment of a residential and commercial building in Zurich-West – both by means of reclassification – the portfolio of investment real estate under construction comprised two projects representing a total market value on the cut-off date of CHF 45.8 million, an estimated investment volume of CHF 111.0 million and annual target rental income of CHF 6.7 million.

The valuation of the investment properties by an external estimator as at 30 June 2016 resulted in a positive total value adjustment before tax of CHF 10.3 million (1st half 2015: CHF 10.5 million). Of this amount, CHF 3.8 million applied to yield-producing properties and CHF 6.5 million to investment real estate under construction.

The total value of the portfolio including divestments and reclassifications effected in the period under review and the positive value adjustments as at the cut-off date amounted to CHF 3.42 billion (1st half 2015: CHF 3.53 billion).

The Real Estate division’s share in the group’s net operating result was 70.8% (1st half 2015: 94.2%).

Projects & Development division

Earnings generated by the Projects & Development division in the first half of 2016 from the development and realisation for third parties, sale of development real estate and capitalised performance of own projects amounted to CHF 49.8 million (1st half 2015: CHF 36.1 million).

Gains resulting from the sale of development real estate of CHF 22.1 million – of which a share of more than 80% relates to the ownership transfer of 90 units in the Guggach residential project in Zurich Unterstrass – represent a significant contribution toward the earnings result reported 38% above the comparable value the previous year.

Earnings of CHF 24.4 million generated by the Realisation department – development and realisation for third parties – remained at the previous year’s level representing a pleasingly stable gross margin of 11.3% (1st half 2015: 11.6%).

Profits of CHF 24.3 million reported by the Projects & Development division accrued in the first half of 2016 (1st half 2015: CHF 6.0 million) from the sale of development real estate and lower operating expenses resulted in distinctly higher earnings before interest and taxes (EBIT) compared to the previous year.

Allreal is currently planning the realisation of a site in Bülach-Nord measuring over 55,000 square metres to be used mainly for residential purposes comprising about 420 rental and 70 condominium units in the medium price range plus office and commercial space.

The investment volume of the project developed by Allreal itself amounts to over CHF 306 million. In the period under review, Project Development transferred the first of eight sub-projects to the Realisation department. The residential complex for Allreal’s own portfolio to be completed by 2018 includes four blocks comprising a total of 76 rental apartments. A large share of the remaining project is to be sold to a certain investor who has already been determined.

In the period under review, the development property on Kirschblütenweg in Basel was brought to the construction stage and transferred to the Realisation department. The 12 residential units ready for occupation in 2018 have already been sold.

The project volume completed by the Realisation department in the first half of 2016 amounted to CHF 260.2 million (1st half 2015: 303.8 million). The lower amount compared to the comparable period the previous year reflects Allreal‘s consistent focus on the realisation of projects with calculable risks and sound profit potential.

The share of the project volume handled for third parties amounted to CHF 215.5 million, that of development projects designated for the sale to third parties to CHF 17.8 million, and that of own projects for Allreal’s own portfolio to CHF 26.9 million (1st half 2015: CHF 224 million/CHF 36 million/CHF 44 million).

Of the entire project volume, 69.2% represents new construction projects and 30.8% refurbishment and conversion projects (1st half 2015: 76.4% / 23.6%). Secured order backlog on the cut-off date amounted to CHF 714 million which will guarantee utilisation of existing capacity for a period of over 12 months.

With 49 units sold, the sale of development real estate was gratifying. Profit of CHF 22.1 million accrued in the period under review was derived to a large degree from the Guggach project in Zurich Unterstrass. The projects Kirschblütenweg in Basel, Pfruendmatt in Mettmenstetten and Cholplatz in Bülach contributed to the good result. Following the sale of the last condominium in the Holengasse project in Meilen, 38 units in 6 projects were available on the cut-off date, 14 of the units ready for occupation.

In the first half of 2016, the Project & Development division’s share in the Group’s net operating result represented 29.2% (1st half 2015: 5.8%).

Advantageous financing despite negative interest rates

Owing to the immense inflow of funds resulting from the sale of development real estate and yield-producing real estate, financial debt as at the cut-off date decreased by CHF 170 million to 1.61 billion (31.12.2015: CHF 1.78 billion).

In the period under review, a 2.50% debenture loan of CHF 150 million was redeemed by a 0.625% debenture loan for the same amount to be released in 2024. Negative interest rates applying to interest swaps resulted in slightly higher financial expenses for the period under review. The average interest rate for debt on the cut-off date was 2.14% at an average time to maturity of 61 months (31.12.2015: 2.15% / 52 months).

Freely available lines of credit as at 30 June 2016 amounted to CHF 643 million with a debt capacity of CHF 1.4 billion. The company thus enjoys advantageous financing and is in a position to take efficient advantage of opportunities as they arise.

As at 30 June 2016, Allreal’s equity ratio amounted to 49.8% and net gearing to 80.4% (31.12.2015: 48.2% / 88.0%). Return on equity excluding revaluation gains grew by 0.2 percentage points to 6.6% in the period under review.


For more than a decade the real-estate market has experienced continuous growth. Insecurity concerning the further course of the economy and the development of the legal and political parameters connected with an over-supply of residential and commercial space apparent in certain regions will inevitably lead to an increasingly demanding market environment.

Thanks to the combination of a stable-income real-estate portfolio with the activity of a general contractor, this development can be connected with opportunities for Allreal. Consequently, the company looks to the future optimistically and with confidence.

Allreal recognises potential especially in the development and realisation of residential and commercial properties for our own portfolio and for profitable sale to third parties. Own projects already started on or far advanced in development allow for portfolio growth possible in the coming years of more than 200 million francs in total.

Parallel to the stronger focus on project development and its dynamisation, Allreal aims to consistently implement measures to continue reducing the vacancy rate and to increase efficiency while securing quality and profitability.

The company expects business in the second half of 2016 to continue developing at a constant rate and, therefore, it anticipates operating net profit for the entire 2016 financial year to compare to that of the previous year.

The Board of Directors and Group Management wish to take this opportunity to thank our shareholders for their trust and all staff members for their commitment. These two conditions are indispensable for both the strong 2016 half-year results and the optimistic assessment of future prospects.


Bruno Bettoni


Roger Herzog
Chief Executive Officer


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