In the first half of 2018, property income grew by 12.6% year-on-year to CHF 23.4 million (1H 2017: CHF 20.8 million). Operating income before depreciation and revaluation increased from CHF 19.6 million to CHF 21.7 million (+10.6%). Following last year’s refurbishment of the rooms at Parkhotel Zug, the hotel & catering business unit also lifted its contribution to sales, up from CHF 8.3 million to CHF 8.5 million (+2.9%), and maintained gross operating profit (GOP) at a high 41.2%.

Including income from revaluation of CHF 3.5 million (1H 2017: CHF 7.2 million), EBIT amounted to CHF 23.4 million and net income to CHF 17.8 million. Both figures were lower year-on-year. By contrast, net income excluding income from revaluation grew by a significant 13.2% to CHF 14.8 million.

In the first half of the year, the Zug Estates Group invested CHF 62.5 million (first half 2017: CHF 49.7 million) in the further development of its sites. CHF 7.1 million of this sum was channeled into the Aglaya promotional project (first half 2017: CHF 5.3 million), while the bulk of investments again went into the Suurstoffi site in Rotkreuz.

Steady growth in value and slight increase in voids

The fair value of the portfolio saw an increase in the first half of 2018, up 4.2% to CHF 1.47 billion. The completion of additional residential and commercial properties led to a moderate increase in voids: on the reference date, June 30, 2018, these stood at 1.9% (December 31, 2017: 1.5%).

Other development and marketing successes

Both the Suurstoffi site and the Zug City Center site witnessed further development and marketing successes.

• For the first time in the history of the Metalli shopping mall, all retail space is let. Läderach Chocolatier Suisse will also be joining the ranks of popular brands at Metalli in Q3 2019.
• Demand for office space in the Metalli complex remains high. An arm’s-length contract extension until 2027 was signed with the Metalli’s largest office tenant. Rental contracts for a total of more than 2 600 m2 were extended in the first half.
• Slated for completion in summer 2019, widescale refurbishment work totaling CHF 4.4 million on the property at Baarerstrasse 14a is proceeding according to plan. Construction work has also started on store expansions for Metalli tenants Esprit and Confiserie-Café Speck. Completion is scheduled for October 2018 and projected to generate additional annual rental income of TCHF 95.
• The extensive refurbishment work on the hotel rooms, guest toilets, roof and external area of our subsidiary Hotelbusiness Zug AG was completed. The new room design received positive feedback from guests and the Hotellerie Suisse jury alike, and this is also reflected in higher revenues.
• Site master plans for the Zug City Center were presented by the four interdisciplinary teams in April 2018. Using the winning project as a basis, further feasibility factors are to be examined, including cost efficiency and implementation route.
• In July, Zug Estates and utility services provider WWZ Energie signed a declaration of intent to connect the Metalli development to the Circulago district heating system. As of 2020, the Metalli complex will be heated and cooled using water from Lake Zug. Marking a further milestone in our sustainability strategy, this is set to produce CO2 savings of 780 tonnes annually.
• The staggered handover of construction site A (Suurstoffi 16, 18, 20) to tenants was completed at the end of February 2018. Zug Estates invested a total of approximately CHF 115.3 million in this third construction phase. In addition to existing tenant companies Mobility and GfK, a group medical practice will be moving into construction site A. Occupancy levels are 100% for the apartments and 84% for the commercial premises.
• Construction work on the wooden high-rise, S22, was completed according to plan in July. Rental space has already been handed over to anchor tenant Amgen. Arval, Mobilezone and other new tenants will take up occupancy in the second half of the year. The world’s largest beer brewer, AB InBev, another attractive international corporate tenant, has also rented an area of 1 500 m2.
• The vertical garden high-rise Aglaya will have reached a height of 70 meters in October 2018, with completion scheduled for Q4 2019. The investment volume runs to around CHF 100 million, 92% of which is for promotional properties. As at mid-2018, 84% of apartments had been reserved or sold. Moreover, international coworking provider Spaces signed a long-term rental contract for the approximately 1 800 m2 of commercial premises.
• With planning and construction work on construction site 1 progressing to plan, the first stage can be handed over to Lucerne University of Applied Sciences and Arts on schedule in Q3 2019. Completion of the second stage is timetabled for Q2 2020. Long-term rental contracts have already been concluded for some 70% of the total 26 000 m2 of rental space.

Outlook for 2018

In light of the completion of construction site A and property S22, we are forecasting an increase in rental income. At the same time, property expenses will be higher as a result of refurbishment work at the Metalli center. We expect to be able to maintain revenue and gross operating profit (GOP) in the hotel & catering segment at the previous year’s level.

Overall, we are looking to see a slight improvement in operating income before depreciation and revaluation. Similarly, we are also projecting year-on-year growth in net income excluding income from revaluation.