In the first half of 2016, Zug Estates posted an operating income before depreciation and revaluation of CHF 19.4 million. This represents a year-on-year increase of 4.5%. At the same time, property income rose by 3.1% to CHF 19.7 million. The fall in sales in the hotel & catering business unit (owing to the absence of catering income from Theater Casino Zug) were in line with expectations; gross operating profit (GOP) rose from 39.4% to 41.7%. The Group's operating expenses for the first half of the year were down 12.4% year-on-year.

The Group invested CHF 30.0 million in the further development of its sites, including in particular the Suurstoffi site. In addition, the book value of the investment properties increased by CHF 14.4 million net as a result of the revaluation (2015: CHF 32.8 million). The continuous development and positioning of the Suurstoffi site as a preferred location for housing and business, and the above-average quality of the locations and properties in the portfolio made a significant contribution to the positive income from revaluation. As part of the streamlining of its portfolio, Zug Estates sold a property in Baar, generating a profit of CHF 0.4 million in the process.

As a result of the lower revaluation, EBIT and net income were down on the previous year's figures at CHF 32.8 million and CHF 24.7 million respectively. Net income excluding revaluation increased by 5.6% to CHF 12.1 million.

Decline in vacancy rate

As at June 30, 2016 (reference date), the portfolio's vacancy rate stood at 4.2% (June 30, 2015: 6.4%, December 31, 2015: 5.4%).

Development projects on track

In the first half of 2016, important progress was made on the development of the Suurstoffi and Zug city center sites:
 

• Construction of the third development phase, with 152 rental apartments, student apartments and office and commercial space for about 500 workplaces, is progressing according to plan. Occupation of the three buildings is expected to proceed on a staggered basis from fall 2017 onward. The investment volume amounts to roughly CHF 110 million. Some 70% of the commercial space has already been let to the market research institute GfK and the car-sharing service provider Mobility.
• HSLU’s choice of location will allow Zug Estates to proceed with the integrated planning of the western section of the Suurstoffi plot on which the final site for the Department of Computer Sciences and part of the Lucerne School of Business is to be constructed by 2019. This will enable it to make a start on the necessary adaptation of the development plan in cooperation with the local municipality. The development plan was publicly announced this spring and is to be put to the vote of the citizens of Risch in November 2016. In tandem with work on the development plan, designs for the new building were invited by public competition. A consortium consisting of Büro Konstrukt and Manetsch Meyer is now working on the preliminary plans of the winning project «Peripteros». The planning application should be submitted as soon as the decision on the development plan has been taken. The new building is expected to be occupied in the summer of 2019.
• The consistently strong demand for office space prompted the decision by Zug Estates to begin planning an office building for 600 workplaces and to see the project through to the granting of a building permit. The building permit was granted in July 2016. Negotiations with an anchor tenant are at an advanced stage, leading Zug Estates to expect the project to be launched this year. The building is to be constructed on the basis of a composite masonry-and-timberwork design and once completed will be Switzerland’s tallest wood building with a height of 36 meters.
• In June 2016, a planning application for the 70 meter vertical garden high-rise «Aglaya» in the center of the site was submitted. The upper floors will comprise 85 apartments, which will be sold as condominium properties. Office space for around 75 workplaces is planned on the first three floors. Construction is due to start in fall 2016, with occupancy scheduled for winter 2018/19. The apartments will go on sale in fall 2016.
• A master plan was initiated to tap into the future development of the Zug City Center site.

Outlook for the second half

In operating terms, Zug Estates expect income in the real estate business unit to rise overall, despite the disposal of two sizeable properties in 2015. The vacancy rate will be lower at the end of 2016. The carefully planned development of the Suurstoffi site will remain an important priority. In 2016, Zug Estates expect overall investment in the real estate portfolio to total about CHF 75 million.
 

Owing to the absence of revenue from the Theater Casino Zug, income in the hotel & catering segment is expected to be about CHF 2.0 million lower than in the previous year. However, with the focus now on this segment, Zug Estates are projecting a further increase in gross operating profit (GOP).
 

For the year as a whole, the Group expect operating income before depreciation and revaluation to match the previous year's level. In the second half of 2016, it expect to continue to generate income from the revaluation of investment properties (net), although levels will be down year-on-year. Zug Estates expect to see net income excluding income from revaluation match the previous year’s level.