Zug Estates continues its successful growth
- Net income excluding income from revaluation increases by 7.9% to CHF 13.0 million (first half 2016: CHF 12.1 million).
- Property income grows 5.4% year-on-year to CHF 20.8 million (first half 2016: CHF 19.7 million).
- Vacancy rate as at June 30, 2017, hits record low of 1.4% (June 30, 2016: 4.2%).
- Portfolio value rises to CHF 1.34 billion.
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| The Zug Estates Group can look back on a successful first half of 2017 in which it was able to make further progress on the development of the Suurstoffi site in Risch Rotkreuz. In the first half of 2017, the Zug Estates Group increased its property income by 5.4% year-on-year to CHF 20.8 million. Net income excluding revaluation was up by 7.9% to CHF 13.0 million. |
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In the first six months of 2017, Zug Estates posted operating income before depreciation and revaluation of CHF 19.6 million. This represents a year-on-year increase of 0.9%. At the same time, property income rose by 5.4% or approximately CHF 1.1 million to CHF 20.8 million. The hotel & catering business unit reported sales of CHF 8.3 million and gross operating profit (GOP) of 41.7%, practically matching the previous year’s figures. At CHF 11.6 million, the Group’s first-half operating expenses were up 7.5% year-on-year owing to pre-investments in the future growth of the portfolio.
In the first half of 2017, the Group invested CHF 49.7 million in the further development of its sites. In addition, the book value of investment properties increased by CHF 7.2 million net following revaluation (previous year: CHF 14.4 million). The above-average quality of the locations and properties as well as the continuous development and positioning of the Suurstoffi site contributed to the income from revaluation. As part of the streamlining of its portfolio, Zug Estates sold two properties in Baar, generating a profit of CHF 1.0 million.
In order to finance the further expansion of the portfolio, a CHF 100 million 0.7% bond with a term from 2017 to 2022 was successfully issued in January 2017.
As a result of the lower revaluation gain, EBIT and net income were down on the previous year’s figures at CHF 26.1 million and CHF 20.0 million respectively. Net income excluding revaluation was, however, up by 7.9% to CHF 13.0 million.
Market value higher, vacancy rate lower
The market value of the portfolio also saw an increase in the first half of 2017, up 4.0% to CHF 1.34 billion as at the reference date.
Moreover, the portfolio’s vacancy rate decreased once again, standing at 1.4% as at June 30, 2017 (reference date) (June 30, 2016: 4.2%, December 31, 2016: 1.8%).
Development projects and marketing on track
Further headway was made on the development and marketing of the Suurstoffi and Zug City Center sites:
- Construction of the third development phase (buildings S16, S18 and S20) of the Suurstoffi site is progressing according to plan. Completion and the staggered handover to tenants are scheduled for the fourth quarter of 2017 and through into the first quarter of 2018. The investment volume for the 11,331 m2 of commercial space and 152 apartments amounts to roughly CHF 110 million. Carsharing service provider Mobility and market research institute GfK are the principal tenants. The current occupancy level for the apartments is 100%, and for the commercial space 76%.
- Construction work on what is currently set to be Switzerland’s tallest wooden building is going to schedule. The investment volume for office building S22 is approximately CHF 55 million. Long-term rental agreements have been concluded with the companies Amgen and Arval (Schweiz) AG for around 44% of the commercial space. Negotiations (some at an advanced stage) with further prospective tenants are underway. The first occupants are scheduled to move in during summer 2018.
- Timetabled for completion in early 2019, the vertical garden high-rise Aglaya is in the design and build phase. The investment volume runs to CHF 100 million, almost 90% of which is for promotional properties. As at the end of August 2017, 51% of apartments are sold or reserved.
- The development plan for the campus of Lucerne University of Applied Sciences and Arts was accepted on November 29, 2016 by the Risch Rotkreuz Municipal Assembly and approved on March 28, 2017 by the Cantonal Government of Canton Zug. The building permit became legally binding on July 26, 2017. The investment volume amounts to CHF 175 million. The plan envisages three buildings with approximately 26,000 m2 of rentable commercial space. Long-term rental contracts have been signed with Lucerne University of Applied Sciences and Arts for nearly two-thirds of this space. The campus is scheduled for completion in summer 2019.
- Consistently strong demand for commercial space prompted the decision by Zug Estates to begin planning work on the remaining two buildings at the Suurstoffi site (S43 and S45).
- A master plan was initiated to develop the Zug City Center site. Initial results are expected in the first quarter of 2018.
- Preparations for renovation of the 73 rooms at the Parkhotel Zug have also been completed, with work due to be carried out in the second half of 2017.
Outlook for the second half of 2017
In operating terms, we expect income in the real estate business unit to rise on the strength of the space rented by Lucerne University of Applied Sciences and Arts (taken to income over the full year) and the envisaged partial occupancy of newbuilds under the third development phase at the Suurstoffi site in the fourth quarter of 2017.
In light of the room renovation work at the Parkhotel Zug, we are forecasting a slight decrease in sales in the hotel & catering segment.
For the year as a whole, we expect operating income before depreciation and revaluation to be at the previous year’s level. However, due to the predicted slowdown in market momentum, we anticipate that income from the revaluation of investment properties (net) will be down on the previous year, and that this will similarly impact net income. Net income excluding revaluation is expected to be higher than in the previous year.
In 2017 we are projecting a total investment volume of approximately CHF 160 million, including promotional property. |
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About Zug Estates
The Zug Estates Group conceives, develops, markets and manages properties in the Zug region. It focuses on centrally located sites suitable for a wide range of uses and with potential for sustainable development. A large part of the real estate portfolio is located at two sites in Zug and Risch Rotkreuz and is broadly diversified by type of use. The Group also runs a city resort in Zug incorporating the two leading business hotels Parkhotel Zug and City Garden, augmented by a range of restaurant outlets. As at June 30, 2017, the total portfolio value was CHF 1.34 billion.
Zug Estates Holding AG is listed on the SIX Swiss Exchange, Zurich, (ticker symbol: ZUGN; securities number: 14 805 212).
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