Adjusted for the effects of the first-time application of proportional consolidation for Miteigentümergemeinschaft Metalli (restatement), property income rose by 6.3% in the first half of 2019 compared with the same period of 2018 to CHF 26.7 million (previous year CHF 25.2 million). This is due to projects completed in 2018 being recognizable in full in the first half of 2019.

Owing to decreased demand, the hotel & catering business unit reported a 3.8% drop in revenue to CHF 8.2 million. However, cost savings meant that the gross operating profit was held at 39.3%, a respectable level compared with the sector as a whole.

Operating income increased overall from CHF 35.3 million to CHF 36.7 million (+4.0%).

Income from revaluation of CHF 11.5 million (first half 2018: CHF 3.5 million) led to EBIT of CHF 32.8 million (first half 2018: CHF 23.9 million) and a 43.5% rise in net income to CHF 26.1 million (first half 2018: CHF 18.2 million). The year-on-year improvement in both figures is also thanks not least to the sale of the last two condominiums on Rote Trotte in Baar at a profit of CHF 1.0 million. In spite of higher value-preserving property expenses, net income excluding income from revaluation rose slightly by 1.4% to CHF 15.4 million.

In the first half of the year, the Zug Estates Group invested CHF 84.8 million (first half 2018: CHF 62.5 million) in the further development of its sites. CHF 24.5 million of this sum was channeled into the Aglaya promotional project (first half 2018: CHF 7.1 million), while the bulk of investments again went into the Suurstoffi site in Rotkreuz.

Steady growth in value and voids slightly higher

The fair value of the portfolio saw an increase in the first half of 2019, up 4.7% to CHF 1.61 billion. The completion of additional commercial space caused a moderate rise in the vacancy rate: on the reference date, June 30, 2019, it stood at 3.2% (June 30, 2018: 1.9%, December 31, 2018: 2.9%). Contractually assured rental space of around 3 000 m² has not been factored into the vacancy rate and will not be included in the calculation until the second half of the year.

Marketing in step with high level of construction activity

Both the Suurstoffi site and the Zug City Center site witnessed further development and marketing successes.

City Center site/Metalli, Zug

• Demand for retail and office space in the Metalli complex remains high. Rental contracts for a total of more than 850 m² were renewed or extended in the first half.
• Slated for completion at the end of 2019, the second phase of widescale refurbishment work totaling CHF 1.1 million on the property at Baarerstrasse 14a is proceeding according to plan. Preparations have also begun for the connection to the Circulago lake water district heating system. Zug Estates has set itself the goal of meeting the heating and cooling needs of the entire Metalli complex CO₂-free with water from Lake Zug as of April 2020.
• The adjustments to the Metalli and Bergli development plans necessary to develop the City Center will be handled jointly with the City of Zug. In this connection, a planning agreement was concluded with the City of Zug defining the general parameters for the joint project. Urban design studies with three planning teams begin in August. A structure project is to be in place at the beginning of 2020 as a basis for the adjustments to both development plans. The modified development plans are expected to come into force in 2022/23.

Suurstoffi, Rotkreuz

• Local amenities are set to be further expanded and enhanced with à la carte restaurant Sapori’s and the Globegarden childcare center.
• A long-term rental contract has been concluded with Burger Söhne AG (Dannemann) for the top storey of the wooden high-rise Arbo (construction site 1).
• Global medical device company Align Technology has signed a long-term rental contract for the final two floors of wooden high-rise S22 with a total area of 2 950 m².
• In the first half of 2019, longer-term rental contracts were concluded for almost 5 900 m² of commercial space at the Suurstoffi site, representing an annual value of more than CHF 1.4 million.
• With completion work on the vertical garden high-rise Aglaya progressing to plan, staggered occupation of the condominiums is expected to commence in November 2019. As at June 30, 2019, 92% of the apartments had been reserved or sold.
• Building work on construction site 1 is also proceeding as planned. The first stage can be handed over to Lucerne University of Applied Sciences and Arts on schedule in Q3 2019. Implementation of the second stage will be completed on schedule in Q2 2020. Long-term rental contracts have already been concluded for 70% of the total 26 000 m² of rental space.

Outlook for the second half of 2019

For the 2019 financial year we are looking to see a marked increase in operating income before depreciation and revaluation thanks in particular to the initial tranche of the projected sales proceeds from the Aglaya apartments. We expect net income excluding income from revaluation to again be higher than the previous year.

As for the real estate business unit, we are predicting growth in rental income on the back of full-year rental revenue from S22 and construction site A as well as from occupancy of phase one plots at construction site 1 and rental space in the Aglaya building. At the same time, property expenses will be higher as a result of further refurbishment work at the Metalli center and initial maintenance carried out at the Suurstoffi site.

We expect revenue and gross operating profit in the hotel & catering segment to be down slightly against 2018.

Reporting:

The detailed Half-Year Report can be found on our website www.zugestates.ch under Downloads.

We will be holding a webcast in German at 10:30 a.m. CEST. Following the presentation, Tobias Achermann (CEO) and Mirko Käppeli (CFO) will be available to answer any questions. Registration is not necessary.

Dial in: +41 44 580 65 22 / Pin Code: 48812033#

https://webcasts.eqs.com/zugestate20190830

The presentation can be viewed on our website www.zugestates.ch (from 10:00 a.m. CEST) under Downloads.