HIAG boasts increased rental income and successful development portfolio | 26.08.24

• Increase in real estate income to CHF 37.1 million (+5.3%)
• Vacancy rate in total portfolio further down to record low of 3.5%
• Positive value changes of CHF 11.6 million due to further progress in developments
• Sale of apartments makes substantial contribution to profit of CHF 11.1 million (H1 2023: CHF 5.3 million)
• Cash effective tax savings over the next two years after the merger of subsidiaries
• Significant increase in net profit for the period to CHF 36.2 million (+63.5%)
• High financial flexibility with a solid balance sheet structure (equity: 53.6%; LTV net: 39.5%)

Basel, August 26, 2024 – The satisfactory half-year results once again reflect HIAG’s operational strength and the solidity of its business model. Real estate revenues increased significantly and vacancy rates were further reduced. The development portfolio was dominated by successful project completions and the handover of numerous rental and owner-occupied apartments to tenants and buyers. The current economic conditions with falling interest rates have a stabilizing effect on financing costs and support real estate values. The merger of three subsidiaries will result in significant tax savings over the next two years. From a balance sheet perspective, HIAG remains on a very solid foundation and has the entrepreneurial flexibility and certainty to realize its promising project pipeline as planned. Against the background of the good business performance and assuming the stable development of the Swiss economy, HIAG expects 2024 to be a good business year overall, which would also support the continuation of the current dividend policy.

Real estate income up and vacancy down again
Real estate income increased by CHF 1.9 million or 5.3% year-on-year to CHF 37.1 million (H1 2023: CHF 35.3 million). The further decline in the vacancy rate from 4.0% to 3.5%, as well as successful project deliveries and associated new leases in Biberist (SO), Windisch (AG) and Cham (ZG) contributed to this. The gross yield of the performing properties increased slightly to 5.6% (2023: 5.4%), while the net yield increased to 4.7% (2023: 4.2%). The weighted average remaining lease term (WAULT) remained constant at 6.8 years as of July 1, 2024 (January 1, 2024: 6.7 years). Compared to the 15 largest tenants, the WAULT as of July 1, 2024 was 8.6 years (January 1, 2024: 9.0 years).

Successful project completions and good progress in real estate development
The construction of the “Librec” commercial building on the “Papieri site” in Biberist (SO) was largely completed in the reporting period and the property was handed over to the tenants in February 2024. In the same period, the “kesselhaus” with 24 apartments and part of the commercial space was completed, thus concluding the multi-year development of the historic Kunzareal site in Windisch (AG). The “CHAMA” rental and condominium project in Cham (Canton of Zug) was also completed on time and within budget and the rented or sold units were handed over to the tenants and buyers. With the sales and project status in the first half of the year, HIAG achieved a profit contribution from promotions of CHF 11.1 million in the first half, which is significantly better than in the previous year (H1 2023: CHF 5.3 million). The building permit for the second phase on the Cham site (ZG) became legally binding in the reporting period. Construction of the 140 rental and condominium units started in August. Construction work started in the second half of 2023 on the vehicle-accessible logistics and industrial building “FAHRWERK” in Winterthur (ZH) and the 80-meter-high residential tower “ALTO” in Zurich-Altstetten is progressing as expected. Following the discovery of additional contaminated areas during preparatory work for the planned construction projects on “Campus Reichhold” in Hausen/Lupfig (AG), the start of construction at the site planned for the second half of 2024 will probably be postponed by several months.

Further value increases in the development portfolio
Compared to the first half of the previous year, which was still dominated by rising interest rates, the interest rate environment for HIAG has now improved significantly. The Swiss National Bank (SNB) lowered the key rate in two steps from 1.75% to 1.25% in the first half of 2024, with a further cut in the key rate towards the end of the year. In addition to easing financing costs, this interest rate trend also supports property values, resulting in the value of the income portfolio remaining stable at a change of CHF 1.0 million or 0.1% (H1 2023: devaluation of CHF 14.8 million or -1.3%). Despite the expected higher investments for “Campus Reichhold”, progress in project developments led to an overall appreciation of the development portfolio of CHF 10.6 million or 1.3% (H1 2023: revaluation gain of CHF 7.8 million or 1.1%).

Transactions expected in the second half of the year
The transaction market has already picked up noticeably against the background of the positive development of the interest rate environment. As already communicated, individual sales of real estate are expected in the second half of the year, which should again make a positive contribution to earnings. As expected, no real estate was sold in the reporting period.

Good operating performance reflected in higher net profit for the period
At CHF 45.7 million, EBIT increased significantly by 32.6% compared to the previous year (H1 2023: CHF 34.5 million). The encouraging valuation result and higher real estate income and higher income from the sale of apartments more than compensated for the high income from the sale in the previous year of properties that were no longer in line with the strategy. Cost discipline also supported the good operating result.

As expected, the maturing fixed-rate loans in the past and current year had to be refinanced at higher interest rates, which is reflected in the financial expenses. Overall, the financial result improved by CHF 1.7 million to CHF 7.5 million (H1 2023: CHF 5.9 million).

The optimization of the group structure will lead to significant tax savings over the next two years, as existing loss compensations from previous years can be included in the current tax.

Overall, HIAG significantly increased its net income for the period by 63.5% to CHF 36.2 million (H1 2023: CHF 22.1 million). Adjusted for revaluation effects, net income for the period was CHF 25.5 million, or 6.9% lower than the prior year figure (H1 2023: CHF 27.4 million). This is mainly due to high proceeds from the prior year sale of properties that were no longer in line with the strategy.

High financial flexibility and solid balance sheet structure
At CHF 260 million, approximately half of the sustainability-related committed syndicated credit line of CHF 500 million was used at the reporting date. The net loan-to-value (LTV) ratio was 39.5% at the reporting date (31 December 2023: net LTV ratio of 39.8%) and is well below the self-imposed limit of 45%. At the reporting date, the equity ratio was very comfortable at 53.6% (31 December 2023: 53.9%). This gives HIAG sufficient financial headroom to realise current and medium-term real estate projects.

Progress made in implementing the sustainability strategy
HIAG also consistently pursued the goals of its sustainability strategy during the reporting period. In mid-April, a 4,500 m² photovoltaic system was installed at the “Papieri” site. This is located on the completed new building “Librec” and was realized by HIAG Solar. The new system not only makes it possible to supply “Librec” with solar energy, but also feeds surplus energy directly into the grid of the “Papieri” site. With the commissioning of another HIAG Solar system in Kleindöttingen, the announced expansion target of 6 MWp capacity by 2024 was significantly exceeded. With a capacity of 1,170 kWp, this system is the largest in the HIAG Solar portfolio.

Positive future based on proven business model
HIAG’s strategy with its three business segments has proven to be robust, especially in challenging times, and enables management to look to the future with confidence, even in an environment that is still dominated by some uncertainty. The expected reduction of the policy rate by the Swiss National Bank (SNB) towards the end of the year should further reduce financing costs and also have a positive effect on property values ​​and the transaction market. The acute housing shortage in some regions of Switzerland is likely to worsen due to the continued high level of immigration, so that good demand can be expected for HIAG’s current residential construction projects in Zurich, Cham and Wetzikon. Given the strength and resilience of the Swiss economy, HIAG expects rental demand for commercial space to develop positively, even in the current volatile environment, with locations with good transport connections likely to benefit.

Against this background, HIAG expects a good financial year in 2024 overall, which also argues for a continuation of the current dividend policy.

Web links
Online Half-Year Report 2024 | Half-Year Report 2024 (Reporting Center)

Conference call and webcast
On Monday, August 26, 2024 at 9:00 a.m., Marco Feusi, CEO, and Stefan Hilber, CFO, will present the 2024 half-year results and answer questions during a conference call with audio webcast.

The presentation will be given in German.

To join the conference call you can use the following numbers:
+41 58 310 50 00 (Switzerland/Europe) / +44 207 107 06 13 (UK).
Other international numbers can be found here: Dial-in list

The webcast can be attended via the following link: Webcast

Repetition
A replay of the webcast will be available at the following link: Replay