Allreal Holding Ag · SIX:ALLN
Allreal — H1 2021 Earnings Presentation
57 slides from Allreal's earnings presentation, Aug 25, 2021
Slide 1: Analysts' and media conference: Gratifying Half-year Results in 2021
Allreal Group: Analysts’ and media conference 25 August 2021 Gratifying Half-year Results in 2021 Roger Herzog CEO Thomas Wapp CFO
Slide 2: Agenda
Half-year Report 2021 Agenda • Overview • Half-year Results for 2021 • Real Estate division • Projects & Development division • Sustainability • Valuation and outlook 25 August 2021 Allreal Group – first half of 2021 2
Slide 3: Overview: Group
Overview Gratifying Half-year Results in 2021 Group • Net profit incl. revaluation effect rises significantly by 28.8% to CHF 111.3 million • Net operating profit increases by 25.6% compared with the previous year to CHF 79.1 million • Allreal now expects a net operating profit of more than CHF 130
Slide 4: Overview: Real Estate
Overview Gratifying Half-year Results in 2021 Real Estate • As at the balance sheet cut-off date, the market value of the portfolio amounts to CHF 4.58 billion • Investment real estate was revalued upwards by CHF 41.8 million (net) • Rental income increased by 1.7% to CHF 101.8 million • At 1.5%, th
Slide 5: Overview: Projects & Development
Overview Gratifying Half-year Results in 2021 Projects & Development • Earnings from the Projects & Development division rise by 52.4% to CHF 37.5 million as a result of high gains on sales • The gross margin for third-party projects remains at a respectable level (11.4%), albeit below target • All
Slide 6: Overview: Finance
Overview Gratifying Half-year Results in 2021 Finance • With a nine-year bond of over CHF 170 million being issued in July 2021, the credit limits available short-term are back above CHF 430 million in total • As a result, the average duration of financial liability increased from 44 months on the b
Slide 7: Agenda
Half-year Report 2021 Agenda • Overview • Half-year Results for 2021 • Real Estate division • Projects & Development division • Sustainability • Valuation and outlook 25 August 2021 Allreal Group – first half of 2021 7
Slide 8: Group: Net profit
Group Gratifying Half-year Results in 2021 243.2 161.0 167.2 142.0 +28.8% 124.7 115.6 +25.6% in CHF million 111.3 89.2 86.4 79.1 70.3 67.4 61.3 63.0 2018 2019 2020 H1 2021 2018 2019 2020 H1 2021 Net profit incl. revaluation effect Net profit excl. revaluation effect 25 August 2021 Allreal Group – fi
Slide 9: Group: Key results table
Group Gratifying Half-year Results in 2021 in CHF million H1 2021 H1 2020 Change Operating profit 79.1 63.0 +25.6% Operating EBIT 106.6 86.1 +23.8% Net rental income 101.8 100.1 +1.7% Real estate earnings 91.8 86.9 +5.6% Earnings from Projects & Development 37.5 24.6 +52.4% Completed project volume
Slide 10: Group: Financial ratios and thresholds
Group Gratifying Half-year Results in 2021 Threshold 30.06.21 31.12.20 31.12.19 31.12.18 Equity ratio > 35% 48.1% 48.4% 49.6% 48.1% Net Gearing < 150% 90.8% 88.6% 83.5% 91.5% Interest coverage ratio > 2.0 15.1 11.0 11.1 6.1 Ø Interest rate on financial liabilities 0.66% 0.71% 0.83% 1.48% Ø Duration
Slide 11: Group: Financial liabilities maturities
Group Gratifying Half-year Results in 2021 CHF 600 Mio. 1.50% CHF 500 Mio. CHF 400 Mio. 1.00% 566 CHF 300 Mio. 175 50 CHF 200 Mio. 0.50% Bonds 148 193 Fixed advances and 200 mortgages CHF 100 Mio. 210 150 159 124 Interest rate on 100 100 outstanding financial 30 CHF 0 Mio. 0.00% debt 2021 2022 2023
Slide 12: Group: Financing
Group Gratifying Half-year Results in 2021 Financing • With a fixed-income 0.6% bond issue of over CHF 170 million, 57.9% of total financial liabilities are refinanced via the capital market • Fixed-rate mortgages of CHF 238 million that are due for repayment by the end of 2022 with an average inter
Slide 13: Agenda
Half-year Report 2021 Agenda • Overview • Half-year Results for 2021 • Real Estate division - Overview - Portfolio - Results • Projects & Development division • Sustainability • Valuation and outlook 25 August 2021 Allreal Group – first half of 2021 13
Slide 14: Real Estate division: Overview
Real Estate division Overview • The market value of investment real estate rises as a result of an upward revaluation of around CHF 42 million to CHF 4.58 billion • The net return of yield-producing property goes up to reach a healthy 4.2% • The rent payments that were waived owing to the coronaviru
Slide 15: Real Estate division: Overview of leases
Real Estate division Overview • Allreal is in advanced negotiations with several large customers to extend leases early; these should be completed in the next few months • If the ongoing negotiations are concluded successfully, the weighted remaining term of fixed-term leases will increase to 5.7 ye
Slide 16: Completion of the Grünhof site in Zurich Aussersihl
Real Estate division – Portfolio Completion of the Grünhof site in a prime city centre location in Zurich Aussersihl New build with a total of 88 rental apartments in the courtyard formerly used for commercial purposes and a re- placement building, as well as office and commercial space; development
Slide 17: Completion of office building at Hardstrasse 299/301
Real Estate division – Portfolio Completion of the office building at Hardstrasse 299/301 in Zurich-West Office building with 5,960 m2 of lettable floor space; project development, realisation and ownership: Allreal; investment volume: around CHF 36 million; start of construction: summer 2018; occup
Slide 18: Renovations at Bellerivestrasse 36
Real Estate division – Portfolio Renovations to the office building at Bellerivestrasse 36 are underway Construction work underway to extensively modernise the office building; after around two years of construction work, the property will be a sustainable landmark at Lake Zurich; development, reali
Slide 19: Stable mix of uses and tenants
Real Estate division – Portfolio Stable mix of uses and tenants as a percentage of rental income in the first half of 2021 (rounded) Mix of uses for yield-producing Commercial real estate tenants properties Office/Service 59% Canton of Zurich 15% Residential 22% Generali Switzerland 7% Tra
Slide 20: Distribution of rental periods
Real Estate division – Portfolio Distribution of rental periods 21 17 15 as a percentage of target rental income for 10 11 commercial real estate 7 (rounded) 6 6 4 2 1 Leases broken down by sector Banks/Insurance companies 22% 2029 2027 2021 2022 2023 2024 2025 2026 2028 2030ff Open-ended Servic
Slide 21: Vacancy rate persistently at a very low level
Real Estate division – Portfolio Vacancy rate persistently at a very low level by industry standards as a percentage (cumulative from gross target yield) 2.1 as at 30 June 2021 1.6 1.6 1.5 1.4 1.5 1.3 1.3 1.1 as at 31 December 2020 as at 30 June 2020 Yield-producing Residential real Commercial real
Slide 22: Results: Rental income breakdown
Real Estate division Results • The increase in rental income of CHF 1.7 million to CHF 101.8 million breaks down as follows (CHF million): in CHF million decrease of waived rent portfolio changes in the payments as a result of decrease in rent-free the coronavirus previous year +2.6 +1.7 periods +1.
Slide 23: Results: Real Estate expenses
Real Estate division Results • Real Estate expenses fall by CHF 3.2 million to CHF 10.0 million, which leads to a low property expense rate of 9.9% • Various renovation projects will be completed in the second half of 2021: fire prevention work and roof renovations at the Escher-Wyss site, Zurich-
Slide 24: Real estate expenses go down temporarily
Real Estate division – Results Real estate expenses go down temporarily, but will rise again as the year continues 18.2 normalised bandwidth 15.8 15%-17% 14.9 15.0 13.3 13.8 13.3 13.7 13.5 13.2 11.6 9.9 Real estate expenses for yield-producing properties as a percentage of rental income 2010 2011 20
Slide 25: Positive contribution to net profit from revaluation
Real Estate division – Results Positive contribution to net profit from revaluation Residential real Commercial real Investment real Revaluation estate estate estate under in total construction +48.1 -12.7 +6.4 +41.8 1st half-year 2021 +3.7 (CHF million) +3.5 +18.5 +50.7 City of Zurich +26.1 +18.2 R
Slide 26: Results: Rents and net operating profit
Real Estate division Results • Rents (like-for-like) down 0.6% for residential real estate and 1.4% for commercial real estate • The five largest vacant properties account for around CHF 1.2 million, which represents 75% of the total vacancy costs • The Real Estate division reported net operating pr
Slide 27: Agenda
Half-year Report 2021 Agenda • Overview • Half-year Results for 2021 • Real Estate division • Projects & Development division - Overview - Business operation - Results • Sustainability • Valuation and outlook 25 August 2021 Allreal Group – first half of 2021 27
Slide 28: Projects & Development division: Overview
Projects & Development division Overview • Earnings from the Projects & Development division rise by 52.4% to CHF 37.5 million • High income from the sale of development real estate has a significant impact on the results • The sale of development reserves in Dielsdorf ZH and Rümlang ZH, as well as
Slide 29: Disposal of two plots from development reserves
P & D division - Development Disposal of two plots from development reserves Neuwisen, Dielsdorf ZH: disposal of a building plot for Bäuler, Rümlang ZH: disposal of a land consisting of industrial use, with 46,419 m2 of land area; sale price: 2,271 m2 as part of a development reserve which now CHF 5
Slide 30: Overview of own developments relevant to income
P & D division – Development Overview of own developments relevant to income Eggen, Lucerne: Winning project from the competition, Renggerstrasse, Zurich Wollishofen: Demolition of own submitted by Caruso St John Architects, with 77 condo- commercial property and construction of a new property miniu
Slide 31: Overview of own developments relevant to income
P & D division – Development Overview of own developments relevant to income Inzlingerstrasse, Riehen BS: residential complex Spiserstrasse, Zurich Albisrieden: Residential complex comprising 17 semi-detached houses; winning project with 63 condominiums (Allreal) and 43 rental from the competition w
Slide 32: Business was challenging for the Realisation department
P & D division – Realisation Business was challenging for the Realisation department • Business was challenging for the Realisation department, with inefficiencies in the construction process • In some cases, work was commissioned but cancelled by the service provider at short notice, which led to a
Slide 33: Business was challenging for the Realisation department
P & D division – Realisation Business was challenging for the Realisation department • The completed project volume stood at CHF 160.5 million in the first half of 2021 • Of this, third-party projects accounted for 82.9%, and own projects for 17.1% • The gross margin for third-party projects is at a
Slide 34: All projects terminated were completed on time
P & D division – Realisation All projects terminated were completed on time and with a high level of quality Bellariarain, Zurich Wollishofen: 13 five-floor apartment Badenerstrasse, Zurich Wiedikon: total refurbishment buildings comprising 180 rental apartments in total; buil- and extension of an o
Slide 35: More than 70 projects in progress
P & D division – Realisation More than 70 projects in progress Dietlimoos, Adliswil ZH: Site development for a third Letzi Turm, Zurich Altstetten: New construction with two party with around 250 apartments and some 7,600 m2 of 70-metre residential high-rise buildings comprising 178 space for commer
Slide 36: Agenda
Half-year Report 2021 Agenda • Overview • Half-year Results for 2021 • Real Estate division • Projects & Development division • Sustainability • Valuation and outlook 25 August 2021 Allreal Group – first half of 2021 36
Slide 37: Sustainability: Overview
Sustainability Overview • The portfolio of yield-producing properties will be fully carbon neutral by 2050 • The share of fossil fuels in energy consumption will be halved by 2030 • Among the factors contributing to this will be the active management of tenants’ behaviour, the broad-based expansion
Slide 38: Sustainability: Energy sources
Sustainability Overview percentage share of energy source 24.5 35.5 6.4 renewable energy gas heating oil electricity (general) 33.6 In 2020, a total of 66.02 GWh of energy was consumed in Zollstrasse/Josefstrasse/Klingenstrasse, Zurich; running the portfolio of yield-producing property. Around imple
Slide 39: Agenda
Half-year Report 2021 Agenda • Overview • Half-year Results for 2021 • Real Estate division • Projects & Development division • Sustainability • Valuation and outlook 25 August 2021 Allreal Group – first half of 2021 39
Slide 40: Increased customer focus and flexible solutions pay off
Valuation and outlook Increased customer focus and flexible solutions pay off Real Estate • The increased customer focus allows for results- orientated discussions and a better understanding of tenants’ needs • Customers benefit from Allreal single-handedly being able to provide flexible solutions a
Slide 41: Increased customer focus and flexible solutions pay off
Valuation and outlook Increased customer focus and flexible solutions pay off Real Estate • No major commercial leases are up for renewal in the immediate future, so it is expected that there will only be a very slight increase in the vacancy rate over the year 2021 as a whole • Net operating profit
Slide 42: Keeping a close eye on the market
Valuation and outlook Keeping a close eye on the market Projects & Development • Prices and margins remain under pressure • The coronavirus pandemic has shown that market participants that have strong finances and are well organised quickly adapt to the new environment • It is essential that the mar
Slide 43: Keeping a close eye on the market
Valuation and outlook Keeping a close eye on the market Projects & Development • The importance of internal projects increases owing to the profit potential • General contractors with a unilateral focus on the third- party market are at a disadvantage; the market adjustment will advance further • Ne
Slide 44: Profit forecast for 2021 increased
Valuation and outlook Profit forecast for 2021 increased • Assurance can be given that the distribution to shareholders will be no lower than in the previous year • Allreal now expects a net operating profit of more than CHF 130 million for 2021 as a whole 25 August 2021 Allreal Group – first half o
Slide 45: Allreal builds value
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Slide 46: Appendix – index
Half-year Report 2021 Appendix – index • Key figures (FN 47-48) • Financing (FN 49) • Real Estate (FN 50-53) • Projects & Development (FN 54-57) 25 August 2021 Allreal Group – first half of 2021 46
Slide 47: Half-year Results 2021 – Key figures
Half-year Results 2021 – Key figures Gratifying Half-year Results in 2021 in CHF H1 2021 H1 2020 Change as at 30.06.2021 as at 31.12.2020 EPS incl. revaluation effect 7.03 5.43 +29.5% EPS excl. revaluation effect 5.00 3.96 +26.3% NAV per share as at cut-off date 151.80 151.75 +0.0% Share price as at
Slide 48: Half-year Results 2021 – Key figures
Half-year Results 2021 – Key figures Gratifying Half-year Results in 2021 H1 2021 2020 2019 2018 Return on equity (%) – excl. revaluation effect 8.0 6.2 7.2 5.9 – incl. revaluation effect 9.3 7.0 10.6 7.3 Net return portfolio (%) – Total 4.2 4.1 4.3 4.4 – Residential real estate 3.3 3.0 3.1 3.3 – Co
Slide 49: Half-year Results 2021 – Financing
Half-year Results 2021 – Financing Gratifying Half-year Results in 2021 Financing structure 2021 2020 2019 2018 Capital market (bond issues) 49.8% 55.9% 57.7% 52.1% Fixed-rate mortgages – banks 12.5% 12.7% 15.2% 14.9% Fixed-rate mortgages 13.3% 13.4% 14.6% 14.1% – insurance companies/pension funds B
Slide 50: Further portfolio growth foreseeable from own developments
Half-year Results 2021 – Real Estate Further portfolio growth foreseeable as a result of own developments 4.4 4.5 4.2 4.1 3.9 CHF billion/million 3.5 3.5 3.5 as at the cut-off date (rounded) 2.5 2.5 2.6 72% (excl. investment real estate under construction) 3209 3232 3399 2699 3113 3226 1248 2817 275
Slide 51: High-quality portfolio focused on Zurich metropolitan area
Half-year Results 2021 – Real Estate High-quality portfolio with a focus on the metropolitan area of Zurich regional distribution of yield-producing pro- 1.4 1.4 1.9 1.9 perties as a percentage 0.6 0.7 3.6 4.3 0.9 0.9 4.7 5.1 6.8 5.1 5.2 of the market value as 5.3 5.3 8.0 4.8 4.4 at 30.6.2021 and 60
Slide 52: Geographical distribution of the residential units
Half-year Results 2021 – Real Estate Geographical distribution of the residential units as at the cut-off date 1922 656 979 287 Total number of rental City of Zurich Rest of Canton of Zurich Other regions apartments 800 250 450 100 235 405 728 400 90 88 700 200 80 600 189 350 74 561 176 308 70 300 6
Slide 53: Share of yield-producing properties that Allreal manages
Half-year Results 2021 – Real Estate Share of yield-producing properties that Allreal manages 2021 2020 Managed by Allreal Third party Allreal Third party Residential real estate in 34.6% 65.4% 34.6% 65.4% greater Zurich area* Residential real estate in the 65.2% 34.8% 65.0% 35.0% rest of Switzerlan
Slide 54: Half-year Results 2021 – P & D Overview
Half-year Results 2021 – P & D Overview H1 2021 2020 2019 2018 Earnings from P & D (CHF million) 37.5 46.6 66.3 52.6 Share of third-party business 42.4 76.8 55.4 77.0 in earnings from P & D (%) Net profit from P & D (CHF million) 14.6 7.8 20.0 9.0 25 August 2021 Allreal Group – first half of 2021 54
Slide 55: Result impacted by high gains on sales
Half-year Results 2021 – P & D Result impacted by high gains on sales Earnings from the 1st half-year 2021 1st half-year 2020 Projects & Development division (%; rounded) 2% -2% -5% Earnings from placements 10% 4% 7% Fees for third parties 13% 39% Capitalised company- 32% produced assets 49% Gains o
Slide 56: Breakdown of earnings from the Projects & Development division
Half-year Results 2021 – P & D Breakdown of earnings from the Projects & Development division in CHF H1 2021 H1 2020 Change Third-party business 15.2 18.8 -19.1% (earnings from placements, and fees) Gains on sales 18.4 1.6 - Capitalised company-produced assets 3.2 3.3 -3.0% Other income 0.7 0.9 -22.
Slide 57: Business is challenging for the Realisation department
Half-year Results 2021 – P & D Business is challenging for the Realisation department • Focus on projects with calculable risks, realistic contract terms and solid profit expectations H1 2021 2020 2019 2018 Completed project volume (third parties, CHF million) 133.1 280.4 270.0 290.3 Earnings from r