Baar, 28 August 2014: Allreal reports gratifying business development for the first six months of 2014 and a correspondingly pleasing result. Net income excluding revaluation gains amounts to CHF 55.4 million, unchanged compared to the previous year.

Due to higher revaluation gains, net income including revaluation gains amounts to CHF 65.2 million, or 10.1% above that of the previous year.

Earnings generated from the rental of income-producing properties, the maintenance of real estate and the completed project volume resulted in total earnings of CHF 567.7 million.

Allreal's share closed on the cut-off date at CHF 126.00, or 2% above that recorded on
31 December 2013. The overall performance of 6.4% follows from the positive price change and the profit distribution of CHF 5.50 per share.

Despite the gratifying business development in the first half of 2014, Allreal expects operating results for the entire 2014 financial year at the level of earlier years but below that of the previous year.

Income-producing properties with higher rental income
Compared to the first half of 2013, rental income during the period under review grew by 2.5% to CHF 74.6 million. During the first six months, for the first time, the headquarters of Allianz insurance company located in the Richti Areal in Wallisellen made a fully income-relevant contribution to growth. Without the profit-generating sale of two large commercial buildings in the 4th quarter of 2013, the growth of rental income would have been stronger. The cumulative vacancy rate in the period under review amounted to 5.6%.

Real-estate expenses incurred by income-producing real estate in the first half of 2014 amounted to CHF 10.9 million, or 14.6% of rental income. The portfolio's net yield amounted to a very good 4.8% - unchanged from the previous year.

In the course of the first half of 2014, Allreal transferred the management of additional income-producing buildings to Hammer Retex. On the cut-off date, the company, which was acquired in 2012, managed 36% of Allreal's income-producing properties in terms of the portfolio's market value.

The portfolio of income-producing real estate grew noticeably thanks to the reclassification of four investment properties under construction. The additions concern the second stage of the Eikenøtt residential development in Gland VD, the two residential buildings Favrehof in Wallisellen ZH and Escher-Terrassen in Zurich-West as well as the Toni-Areal in Zurich-West. Transfer of the space rented by Canton Zurich was carried out on schedule effective 1 May 2014; the demanding settlement of the entire project's accounts is currently in progress.

Fit-out to tenant specifications financed in advance by Allreal is recorded in the consolidated balance sheet as a financial asset and depreciated across the 20-year duration of the rental agreement. The tenant fit-out decreases the property's market value by the corresponding amount.

The sale of the commercial building located on Buckhauserstrasse 32 in Zurich Altstetten effective1 April 2014 resulted in a profit of CHF 0.9 million, or 15% above market value.

When taking into consideration changes of ownership and reclassifications carried out in the first half of 2014, the portfolio of income-producing real estate grew from 60 to 63 properties effecitve 30 June 2014 and now comprises 21 residential and 42 commercial buildings.

Valuation of the investment properties by an external estimator resulted in an increase of the portfolio value by CHF 12.4 million effective 30 June 2014.

The entire value of the investment real estate portfolio on the cut-off date amounted to CHF 3.46 billion. The market value of income-producing real estate amounted to CHF 3.25 billion and that of investment real estate under construction CHF 0.21 billion.

The Real Estate division's contribution toward the group's net profit represents a share of 64.4%.

Successful completion of several large projects
The Projects & Development division's result from business activity for the period under review amounted to CHF 63.0 million. The result is 16% above that of the previous year and characterised by a large number of transfers in ownership of development real estate. A pre-tax profit of CHF 28.3 million is reported on a sales volume of about CHF 183 million in total.

The division's earnings before interest and taxes (EBIT) in the first half of 2014 grew to CHF 31.6 million, or 50.5% above that of the comparable period in 2013.

Numerous project developments were successfully advanced during the first six months of the year. They include the site development in Bülach Nord and Dielsdorf and construction start of the commercial and residential building on Schiffbaustrasse in Zurich-West. An architecture competition with international participation was carried out during the first half of 2014 for the commercial building on Schiffbauplatz. The residential project on Pfruendmattstrasse in Mettmenstetten progressed to construction stage.

As expected, completion of several projects in the Realisation department during the period under review represents a lower volume of completed projects amounting to CHF 489.6 million. The on-schedule transfer of the rented space in Toni Areal to Canton Zurich on 1 May 2014 represented an important milestone for the department. 

The share of own projects of the entire project volume in the period under review amounted to 42.5%. The lower share compared to the previous year reflects the completion of large own projects on Richti-Areal in Wallisellen and Toni-Areal in Zurich-West. Of the project volume completed in the first six months of 2014, 88% applies to newly constructed projects and 12% to refurbishment and conversion projects.

The order backlog on the cut-off date of CHF 1.08 billion will secure utilization of available capacity in the Realisation department for a period of over one year.

In the first half of 2014, 47 residential units from own development and production were sold. As on 30 June 2014, 176 units in 8 projects were unsold, of which 19 units ready for occupation.

Development real estate implemented in the first six months of 2014 was sold for a total of CHF 182.8 million. This amount includes the transfer of ownership to an institutional investor on
17 June 2014 of the Ringhof residential and commercial building on Richti-Areal in Wallisellen.

Thanks to the operating net profit of CHF 20.3 million, the Projects & Development division's contribution toward the group's net profit represents a share of 35.6%.

Strong capital resources as basis for business success
Financial debt in the first six months of 2014 grew by CHF 123 million to CHF 1.8 billion and was refinanced by means of a new 1.25% debenture loan of CHF 125 million maturing in 2019.

The average interest rate for financial liabilities on the cut-off date amounted to 2.07% with an average time to maturity of 51 months.

Open credit lines of CHF 651 million and borrowing capacity of CHF 1.3 billion on the cut-off date ensure unproblematic refinancing of the 2.125% convertible bond scheduled for repayment in October 2014. Repayment of the CHF 200 million convertible bond in the fourth quarter will result in even lower average interest payments for financial liabilities.

The equity ratio on the cut-off date amounted to 47.0% and net gearing to 88.5%.

Unchanged assessment of continued business development
Allreal's portfolio of income-producing properties will continue to grow in the second half of 2014 owing to the reclassification of three commercial buildings, namely Herostrasse in Zurich Altstetten, Lilienthal-Boulevard in Opfikon, and Richtiring in Wallisellen.

Owing to portfolio growth and a stable vacancy rate, Allreal expects a strong increase in rental income for the second half of 2014.

Development and implementation of new and conversion projects are subject to high pressure from the competition and on margins. Consequently, Allreal's focus on projects with good profit potential connected with the consolidation of the Projects & Development division is very demanding. In terms of residential units, we continue to expect longer absorption times and, therefore, lower sales profits. Hence, Allreal expects the Projects & Development division to report results for the second half of 2014 below those of the period under review.

Despite a gratifying business development in the first half of 2014, Allreal expects operating results for the entire 2014 financial year at the level of earlier years but below that of the previous year.

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