Allreal Holding Ag · SIX:ALLN
Allreal — H1 2022 Earnings Presentation
60 slides from Allreal's earnings presentation, Aug 24, 2022
Slide 1: Allreal Group: Analysts' and media conference
Allreal Group: Analysts’ and media conference Wednesday, 24 August 2022 Convincing half-year results in 2022 Roger Herzog CEO Thomas Wapp CFO
Slide 2: Agenda
Half-year Report 2022 Agenda • Overview • Half-year results for 2022 • Sustainability • Real Estate division • Projects & Development division • Evaluation and outlook 24.08.2022 Allreal Group – first half of 2022 2
Slide 3: Agenda
Half-year Report 2022 Agenda • Overview • Half-year results for 2022 • Sustainability • Real Estate division • Projects & Development division • Evaluation and outlook 24.08.2022 Allreal Group – first half of 2022 3
Slide 4: Encouraging increase in net operating profit
Overview Encouraging increase in net operating profit Group 111.3 • Net operating profit increased by 3.4% to –25.7% CHF 81.8 million 79.1 81.8 82.7 +3.4% • Both divisions performed well overall • Integration of Western Switzerland progresses • Lacklustre revaluation effect with unchanged discount r
Slide 5: Increased rental income due to portfolio expansion and low vacancy rates
Overview Increased rental income due to portfolio expansion and low vacancy rates 106.8 Real estate +4.9% 101.8 • Rental income went up by 4.9% to CHF 106.8 million in the first half of 2022 • At 1.5%, the cumulative vacancy rate remained at a very low level, with a positive impact on the attractive
Slide 6: Minimal positive development of the portfolio value
Overview Minimal positive development of the portfolio value 5128.1 Real estate 5105.7 +0.4% • As a result of the investments made in the period under review, the portfolio value rose to CHF 5.13 billion in total as at the balance sheet cut-off date • The valuation of the investment real estate resu
Slide 7: Positive result with slightly lower sales proceeds
Overview Positive result with slightly lower sales proceeds Projects & Development 37.5 –6.9% 34.9 • Earnings from Allreal’s Projects & Development division were CHF 34.9 million • As in the previous year, one-off effects resulting from the sale of development real estate amounting to CHF 15.6 milli
Slide 8: Improved profitability in the Realisation department
Overview Improved profitability in the Realisation department 11.2% Projects & Development 9.1% • The gross margin for third-party projects rose by 2.1 percent- age points to 11.2% – a significant improvement on the 2021 financial year • The Realisation department focused more on in-house projects,
Slide 9: Long-term and stable financing
Overview Long-term and stable financing 7.00 Finances • Stable equity ratio unchanged at 44.1% despite distribution to 4.95 4.27 shareholders in April 2022 and low revaluations • Net operating profit in the Real Estate division has already guaranteed distribution to shareholders at the same level as
Slide 10: Agenda
Half-year Report 2022 Agenda • Overview • Half-year results for 2022 • Sustainability • Real Estate division • Projects & Development division • Evaluation and outlook 24.08.2022 Allreal Group – first half of 2022 10
Slide 11: Convincing half-year results in 2022
Group Convincing half-year results in 2022 in CHF million H1 2022 H1 2021 Change Net operating profit 81.8 79.1 +3.4% Operating EBIT 100.7 106.6 –5.5% Net rental income 106.8 101.8 +4.9% Real estate earnings 96.0 91.8 +4.6% Earnings from P&D division 34.9 37.5 –6.9% Completed project volume P&D divi
Slide 12: Convincing half-year results in 2022
Group Convincing half-year results in 2022 threshold 30.06.22 31.12.21 31.12.20 31.12.19 Equity ratio >35% 44.1% 44.1% 48.4% 49.6% Net gearing <150% 107.3% 103.7% 88.6% 83.5% Interest coverage ratio >2.0 11.7 12.9 11.0 11.1 Ø Interest rate interest-bearing 0.63% 0.61% 0.71% 0.83% borrowings Ø Intere
Slide 13: Long-term and stable financing
Group Long-term and stable financing Finances 100% • 48.5% of financial liabilities refinanced 80% 66% through the capital market by the cut- 60% off date 58% 56% 40% 49% 49% • The average interest lock-in period 20% amounted to 41 months 0% • Over the coming months, measures for 2019 2020 2021 H1 2
Slide 14: Stable financing situation
Group Stable financing situation CHF 900 Mio. 2.50% 859 CHF 800 Mio. 2.00% CHF 700 Mio. Bonds CHF 600 Mio. Fixed advances 1.50% CHF 500 Mio. and mortgages Interest rate on CHF 400 Mio. outstanding financial 175 1.00% debt CHF 300 Mio. 150 243 CHF 200 Mio. 174 148 182 200 0.50% 159 CHF 100 Mio. 135 1
Slide 15: Agenda
Half-year Report 2022 Agenda • Overview • Half-year results for 2022 • Sustainability • Real Estate division • Projects & Development division • Evaluation and outlook 24.08.2022 Allreal Group – first half of 2022 15
Slide 16: Initial measures underway
Sustainability Initial measures underway • Initial measures are underway with the aim of achieving the targets communicated in November 2021 • The first three projects as part of the broad-based drive to install solar power systems are on the agenda for the second half of 2022. The net investment up
Slide 17: Agenda
Half-year Report 2022 Agenda • Overview • Half-year results for 2022 • Sustainability • Real Estate division – Portfolio – Earnings • Projects & Development division • Evaluation and outlook 24.08.2022 Allreal Group – first half of 2022 17
Slide 18: Real Estate division – Portfolio Overview
Real Estate division – Portfolio Overview 5128.1 • As a result of the investments made in the period under review, 5105.7 +0.4% the market value of investment real estate increased to CHF 5.13 billion • The valuation of the investment real estate resulted in a net upward revaluation of CHF 1.1 milli
Slide 19: Stable mix of uses in the first half of the year
Real Estate division – Portfolio Stable mix of uses in the first half of the year as a percentage of rental CHF 106.8 CHF 80.4 income in the first half of 2022 (rounded) million million Mix of uses for yield-producing Commercial real estate tenants properties Office/Service 54% Canton of Zurich
Slide 20: Maturity profile improved thanks to early lease extension
Real Estate division – Portfolio Maturity profile improved thanks to early lease extension 23 22 15 as a percentage of target 14 rental income for commercial 13 13 real estate (rounded) 10 99 8 8 88 8 7 6 6 5 3 2 2 1 2028 2029 2030 2031ff 2022 2023 2024 2025 2026 2027 Open-ended The weighted remaini
Slide 21: Vacancy rate at persistently low level
Real Estate division – Portfolio Vacancy rate at persistently low level as a percentage (cumulative from gross target yield) 1.6 1.6 1.7 1.6 as at 30.06.2021 1.5 1.5 1.1 1.1 1.2 as at 31.12.2021 as at 30.06.2022 Yield-producing properties Residential real estate Commercial real estate 24.08.2022 All
Slide 22: Increased rental income thanks to expansion of portfolio in Western Switzerland
Real Estate division – Earnings Increased rental income thanks to expansion of portfolio in Western Switzerland • The increase in rental income of CHF 5.0 million to CHF 106.8 mil- lion breaks down as follows: (acquisitions and reclassifications) Change in rent-free period Change in rent reduction C
Slide 23: Increase in real estate expenses expected
Real Estate division – Earnings Increase in real estate expenses expected • Real estate expenses increased slightly by CHF 0.8 million to CHF 10.8 million, resulting in a real estate expense rate of 10.1% • Rents (like-for-like) down by 0.5% for commercial real estate and up by 0.3% for residential
Slide 24: Real estate expenses will increase in the second half of 2022
Real Estate division – Earnings Real estate expenses will increase in the second half of 2022 18.2 15.8 15.0 long-term average 15% 13.8 13.9 13.3 13.3 13.7 13.6 13.6 (incl. ESG measures) 11.6 10.1 real estate expenses for yield-producing properties as a percentage of rental income 2011 2012 2013 201
Slide 25: Flat line for revaluation gains
Real Estate division – Earnings Flat line for revaluation gains Residential Commercial Investment real Revaluation gains real estate real estate estate under Total construction +8.3 –8.6 +1.4 +1.1 6.4 7.6 City of Zurich 3.0 1.1 1.7 1.2 0.2 Rest of Canton of Zurich –0.3 –1.2 –4.2 –0.1 –5.1 Western Sw
Slide 26: Significant increase in net operating profit
Real Estate division – Earnings Significant increase in net operating profit +6.8% 70.6 • The Real Estate division reported net profit excluding 66.1 revaluation effect of CHF 70.6 million • This is used to determine the distribution to the shareholders • The share of the Group’s net operating profi
Slide 27: Agenda
Half-year Report 2022 Agenda • Overview • Half-year results for 2022 • Sustainability • Real Estate division • Projects & Development division - Business activities – Earnings • Evaluation and outlook 24.08.2022 Allreal Group – first half of 2022 27
Slide 28: Projects & Development division Overview
Projects & Development division Overview • Earnings from the Projects & Development division decreased by 37.5 –6.9% CHF 2.6 million to CHF 34.9 million 34.9 • Income from the sale of development real estate had an impact in this respect • Business remained challenging for the Realisation department
Slide 29: Sizeable income from the sale of development real estate
P&D division – Development Sizeable income from the sale of development real estate Bäuler, Rümlang ZH: Sale of land spanning 10,583 m2 as the last part of development reserve Selling price: CHF 18.8 million Profit: CHF 13.1 million Florenstrasse, Winterthur ZH: Sale of residential real estate Total
Slide 30: Record number of development projects
P&D division – Development Record number of development projects 200 212 Investment properties in German-speaking CHF ≈2.2 1042 Switzerland Condominiums in German-speaking 424 billion Switzerland Investment properties in Western Switzerland 287 Condominiums in Western Switzerland Third-par
Slide 31: Development of profitable long-term projects for own portfolio or retail
P&D division – Development Development of profitable long-term projects for Allreal’s own portfolio or retail Site, Sünikon-Steinmaur ZH; several plots spanning a total area of Baarermatte, Baar ZG; development and realisation of a mixed- 4,916 m2 for the realisation of residential real estate; cons
Slide 32: Projects completed in Western Switzerland in the first half of 2022
P&D division – Realisation Projects completed in Western Switzerland in the first half of 2022 Route du Pas-de-l’Echelle, Veyrier GE: Three new-build apartment buildings with a total of 33 apartments. The project was executed by Allreal’s Projects & Development division. Completion: March 2022 Total
Slide 33: Further expansion of the portfolio as a result of in-house projects
P&D division – Realisation Further expansion of the portfolio as a result of in-house projects Bellerivestrasse 36, Zurich Riesbach: Comprehensive modernisation of a six-storey commercial building from Allreal’s own portfolio in accordance with the plans of C.F. Møller Architects; LEED Platinum cert
Slide 34: Investment real estate under construction for own portfolio
P&D division – Realisation Investment real estate under construction for own portfolio Avenue du Cimetière 22, Petit-Lancy GE: Construction of a new-build apartment building with 17 rental apartments. The amount of space available for rent totals 1,067 m2. The project is being executed by Allreal’s
Slide 35: Around 80 new-build and conversion projects under construction
P&D division – Realisation Around 80 new-build and conversion projects are currently under construction Dietlimoos, Adliswil ZH: Site development for a private owner with Letzi Turm, Zurich Altstetten: New construction comprising two a total of 325 apartments and some 9,000 m2 of space reserved 70-m
Slide 36: Lower share of third-party projects in the volume of projects completed
Projects & Development division – Earnings Lower share of third-party projects in the volume of projects completed Projects for third parties/in-house projects share of the volume of Projects for third parties 77.2% projects completed in CHF 155.5 first half of 2022 (in %) In-house projects for
Slide 37: Considerably improved gross margin and increasing share of in-house projects
Projects & Development division – Earnings Considerably improved gross margin and increasing share of in-house projects 741 • The completed project volume amounted to CHF 155.5 million, 694 638 including 22.8% in-house projects 608 • The gross margin for third-party projects rose by 2.1 percentage p
Slide 38: Agenda
Half-year Report 2022 Agenda • Overview • Half-year results for 2022 • Sustainability • Real Estate division • Projects & Development division • Evaluation and outlook 24.08.2022 Allreal Group – first half of 2022 38
Slide 39: Assessment of the real estate market
Evaluation and outlook Assessment of the real estate market • The first half of 2022 was shaped by rising inflation and the about- turn in interest rates performed by central banks • The Swiss economy is robust and demand for Swiss real estate in central locations is undiminished • In the Real Estat
Slide 40: Outlook for the Real Estate division
Evaluation and outlook Outlook for the Real Estate division • Very attractive portfolio of yield-producing and development properties with a focus on the Zurich and Geneva business centres and a potential investment volume of around CHF 2.2 billion • Demand for attractive housing in urban locations
Slide 41: Outlook for real estate market valuation
Evaluation and outlook Outlook for real estate market valuation • During the second half of 2022, changes to market conditions will result in adjustments to the underlying assumptions under DCF models that altogether have a neutral impact on value as it stands: a) An increase in long-term inflation
Slide 42: Assessment of the Projects & Development market
Evaluation and outlook Assessment of the Projects & Development market • In the Projects & Development division, the company expects business to be easier to forecast • Although market conditions are challenging, the division’s own business activities are well under control • Thanks to the secured o
Slide 43: 2022 financial year
Evaluation and outlook 2022 financial year • The future is still looking bright for the Swiss real estate and construction market • Increased returns on real estate for the Real Estate division and stabilisation in the Projects & Development division can be expected in the 2022 financial year • Base
Slide 44: Allreal builds value
alilreal builds value
Slide 45: Note – Additional information
Half-year results for 2022 Note – Additional information • Key figures (PPS 46–48) • Financing (PPS 49) • Real Estate (PPS 50–53) • Projects & Development (PPS 54–57) • Sustainability (PPS 58–60) 24.08.2022 Allreal Group – first half of 2022 45
Slide 46: Key figures – Convincing half-year results in 2022
Half-year results for 2022 – Key figures Convincing half-year results in 2022 243.2 182.6 167.2 142.0 133.3 124.7 –25.7% +3.4% 111.3 89.2 86.4 82.7 79.1 81.8 67.4 63.0 2019 2020 2021 H1 2022 2019 2020 2021 H1 2022 Net profit incl. revaluation effect Net profit excl. revaluation effect in CHF million
Slide 47: Key figures – Convincing half-year results in 2022
Half-year results for 2022 – Key figures Convincing half-year results in 2022 H1 2022 H1 2021 Change in CHF or 30.06.2022 or 31.12.2021 EPS incl. revaluation effect 5.01 7.03 –28.7% EPS excl. revaluation effect 4.95 5.00 –1.0% NAV per share as at the cut-off date 152.85 154.85 –1.3% Share price as a
Slide 48: Key figures – Convincing half-year results in 2022
Half-year results for 2022 – Key figures Convincing half-year results in 2022 H1 2022 2021 2020 2019 Return on equity (%) – incl. revaluation effect 6.5 7.3 7.0 10.6 – excl. revaluation effect 7.8 6.5 6.2 7.2 Net return portfolio (%) – Total 3.9 4.2 4.1 4.3 – Residential real estate 2.7 3.0 2.8 3.1
Slide 49: Financing – Debt financing structure
Half-year results for 2022 – Financing Debt financing structure Financing structure 2021 2021 2020 2019 Capital market (bond issues) 48.5% 49.4% 55.9% 57.7% Fixed-rate mortgages – banks 17.0% 17.2% 12.7% 15.2% Fixed-rate mortgages – insurance 10.2% 10.7% 13.4% 14.6% companies/pension funds Bank loan
Slide 50: Further portfolio growth to be expected from in-house projects
Half-year results for 2022 – Real Estate Further portfolio growth to be expected from in-house projects 5.0 5.0 4.3 4.2 4.1 3.9 in CHF billion/million 3.5 3.5 3.5 as at the cut-off date 67% (rounded) 2.5 2.6 (excl. investment real estate under construction) 3,308 3,304 1,647 1,659 3,226 3,232 3,399
Slide 51: High-quality portfolio, with a focus on Zurich and Geneva
Half-year results for 2022 – Real Estate High-quality portfolio, with a focus on Zurich and Geneva regional distribution of 6.6 6.5* 5.4 5.4 7.2 7.1 yield-producing properties 13.4 13.4 26.1 26.1 7.1 7.1 as a percentage of the 29.7 29.7 market value as at 30.06 or 32.9 32.8 31.12 39.0 39.1 Other reg
Slide 52: Geographical distribution of the residential units
Half-year results for 2022 – Real Estate Geographical distribution of the residential units 2,426 656 979 557 234 Total number of rental City of Zurich Rest of Canton of Zurich Western Switzerland Other regions apartments 1000 250 450 250 100 908 235 405 900 90 400 209 800 200 189 350 200 80 176 308
Slide 53: Share of yield-producing properties that Allreal manages
Half-year results for 2022 – Real Estate Share of yield-producing properties that Allreal manages 2022 2021 Managed by Allreal Third party Allreal Third party Residential real estate in the 29.0% 71.0% 28.7% 71.3% metropolitan area of Zurich* Residential real estate in the 17.1% 82.9% 16.4% 83.6% re
Slide 54: P&D – Overview
Half-year results for 2022 – P&D Overview H1 2022 2021 2020 2019 Earnings from P&D division (CHF million) 34.9 53.4 46.6 66.3 Share of third-party business in earnings 38.4 49.1 76.8 55.4 from P&D (%) Gross margin third-party projects (%) 11.2 9.1 12.0 13.3 Net profit from P&D division (CHF million)
Slide 55: Gains on sales influence earnings H1 2022
Half-year results for 2022 – P&D Gains on sales influence earnings -2% 3%–3% 7% 2% 10% Earnings from the P&D division (%; rounded) 34% Fees from third-party business 32% Earnings from placements H1 2022 49% H1 2021 45% Capitalised company-produced assets Gains on sales Other income 14% 9% Sales redu
Slide 56: Breakdown of earnings from the Projects & Development division
Half-year results for 2022 – P&D Breakdown of earnings from the Projects & Development division in CHF H1 2022 H1 2021 Change Third-party business 13.4 15.2 –11.8% (earnings from placements, and fees) Gains on sales 15.6 18.4 –15.2% Capitalised company-produced assets 5.0 3.2 +56.3% Other income 0.9
Slide 57: Gross margin third-party projects
Half-year results for 2022 – P&D Gross margin third-party projects H1 2022 2021 2020 2019 Completed project volume – third parties 120.0 269.6 280.4 270.0 (CHF million) Earnings from realisation of P&D (CHF million) 13.4 24.5 033.7 35.8 Gross margin third-party projects (%) 11.2 9.1 12.0 013.3 24.08
Slide 58: Ambitious ESG targets – carbon reduction targets being developed
Sustainability Ambitious ESG targets – carbon reduction targets being developed Environment Complete a full consumption inventory and draw up property strategies by the end of 2022 Carbon neutrality by 2050 at the latest Halve the use of fossil fuels by 2030 Start offsetting some carbon emissi
Slide 59: Ambitious ESG targets – genuine equal opportunities
Sustainability Ambitious ESG targets – genuine equal opportunities Social Compile and communicate on all areas covered by Allreal as it stands: achieved in 2021 Workplace health and safety all round Create criteria for decisions on semi-retirement: achieved in 2021 Create a staff strategy aime
Slide 60: Ambitious ESG targets – remuneration system geared to the long term
Sustainability Ambitious ESG targets – remuneration system geared to the long term Governance The sustainability management team will be operational by the middle of 2022. Swiftly putting together a team of specialists in each of the ESG Organisational integration at company areas is a priority ma