In the financial year 2021, Allreal’s net profit was significantly higher than in the previous year. For Allreal – a real estate company with its own Projects & Development division – the acquisition of several companies in Western Switzerland marks a significant expansion of its business activities there and an improvement in the risk profile, thereby creating an additional driver of steady and high-quality portfolio growth. In addition, Allreal presented its revamped sustainability strategy in the previous year. The company is focusing on areas where it has the most influence and is setting itself ambitious goals.
Allreal’s net profit including revaluation effect went up by 9.2 percent in the period under review from CHF 167.2 million in 2020 to CHF 182.6 million in 2021. Revaluation gains for investment real estate again had a positive impact on net profit.
Excluding revaluation effect, the company is pleased to report a net operating profit of CHF 133.3 million, compared with CHF 124.7 million in the previous year – an increase of 6.9 percent. This was primarily a result of higher rental income on account of the portfolio growth, as well as of profit from the sale of development real estate in the Projects & Development division.
In expanding its business activities in Western Switzerland in October 2021, Allreal has reached an important milestone in the history of the company. With the acquisition of investment real estate amounting to CHF 486 million, the company increased the value of its overall real estate portfolio to considerably more than CHF 5 billion for the first time. In doing so, it achieved a broader geographic diversification and an increase in the residential share.
Allreal also acquired an extremely attractive portfolio of development projects in the cantons of Geneva and Vaud with a potential investment volume of over CHF 700 million. The projects will ensure long-term growth potential for Allreal over a number of years and will be realised by the general contractor Roof, which it also acquired. This means that both areas of business will benefit from the expansion of the business activities in Western Switzerland.
“For Allreal – a real estate company with its own Projects & Development division – the acquisition of several companies in Western Switzerland marks a significant expansion of its business activities there.”
Allreal’s share price was volatile in the period under review, but traded sideways in year-on-year terms. Allreal’s share price closed at CHF 202.00 on the cut-off date, meaning that it was almost unchanged on the year. Including profit distribution of CHF 6.75 per share in April 2021, the result was a positive overall performance of 2.6 percent.
Given the pleasing increase in profits, the growth potential from the expansion into Western Switzerland and the stable business development, the Board of Directors will propose a profit distribution of CHF 7.00 per share at the annual general meeting scheduled for 8 April 2022, an increase of CHF 0.25. This is composed of a dividend of CHF 3.50 per share and a distribution of CHF 3.50 per share from capital reserves, which is tax-free to Swiss private investors.
Allreal achieved an excellent result in the Real Estate division. With the expansion of the portfolio in Western Switzerland, the market value of investment real estate increased to CHF 5.11 billion. The properties newly added to the portfolio have been contributing to net income since mid-October 2021 and had already generated rental income of CHF 2.2 million by the end of the year.
An office property in Wetzikon ZH acquired in the second half of the year 2020 contributed in the reporting period the first time over the full 12 months to earnings. Together with the properties from the Grünhof site and Hardstrasse 299/301 in-house projects in the city of Zurich that were realised and let, rental income went up to CHF 204.4 million in the financial year 2021 from CHF 200.4 million in 2020.
At 1.6 percent, the cumulative vacancy rate was persistently at a very low level compared with the previous year and in a direct market comparison, reflecting the high quality of the property portfolio. However, this result is also a testament to Allreal’s prudent portfolio management in combination with customer-focused estate management. The early extension of various lease agreements that were important for the company ensures that there will again be no major change in the vacancy rate in the coming year.
Direct expenses for yield-producing properties in the period under review stood at CHF 27.8 million. This resulted in an expense rate of 13.6 percent. When taking into consideration the substantial expansion of the portfolio, the net yield amounted to a healthy 4.0 percent.
Owing to a reduction in the discount and capitalisation rates, the continuing low vacancy rate and stable rental income, the portfolio as a whole was revalued up-wards by CHF 64.3 million. The revaluation – which was carried out by the external property valuer – in addition to the changes in the portfolio led to the market value of the overall portfolio being increased by around 12.8 percent to CHF 5.11 billion.
Earnings from Allreal’s Projects & Development division were considerably higher than in the previous year (CHF 53.4 million, up from CHF 46.6 million in 2020), with earnings from sales Development significantly affecting the result (CHF 21.0 million, up from CHF 3.7 million in 2020). In the Realisation department, however, business remained challenging. The impact of the coronavirus was evident to some extent, first with delays resulting from inefficiencies in the construction process and subsequently with a rise in additional expenses, which led to a considerable reduction in margins. The gross margin in third-party business amounted to 9.1 percent, down from 12.0 percent in the previous year.
In the Development department, Allreal manages projects for its own portfolio and for third parties up to the planning application stage in close cooperation with the Realisation department. The potential construction volume of the work carried out stands at around CHF 1.9 billion. This means that the Development department takes a key strategic position within the company because it contributes substantially to the targeted expansion of investment real estate and the capacity utilisation of the Realisation department.
The volume of projects completed by the Realisation department decreased by 5.6 percent to CHF 343.2 million in the year under review. Of this volume, third-party projects accounted for 78.6 percent and in-house projects for 21.4 percent.
The secured order backlog as at the end of the year amounted to around CHF 694 million, corresponding to capacity utilisation for around two years.
The division was pleased to report an operating profit of CHF 20.9 million in the financial year 2021, up from CHF 10.6 million in 2020.
As at the cut-off date, financial liabilities had increased to CHF 2.73 billion, up by around CHF 547 million on the previous year. The average interest rate for financial liabilities had decreased again to 0.61 percent by 31 December 2021, by which point the average fixed-interest period had decreased to 44 months from 49 months a year earlier, which is relatively low.
In the financial year 2021, Allreal issued a 0.6 percent bond issue of CHF 250 million maturing in 2030, meaning that the company had refinanced 49.4 percent of financial liabilities through the capital market by the cut-off date. Fixed-rate mortgages accounted for 27.9 percent and fixed advances for 22.7 percent.
Group equity rose to CHF 2.56 billion, corresponding to a net asset value (NAV) per share of CHF 177.25 before deferred taxes. The equity ratio at the end of the year amounted to 44.1 percent and net gearing to 103.7 percent. This means that the company still has considerable debt capacity of around CHF 1.2 billion.
In publishing its sustainability strategy in 2021, Allreal took an important step towards ensuring sustainable success. The ESG strategy sets ambitious targets. For example, Allreal wants to become completely carbon neutral across its entire portfolio of yield-producing properties by 2050 at the latest and halve the share of fossil fuel in its energy consumption by 2030.
The company will therefore complete a consumption inventory of its yield-producing properties and draw up individual strategies for these properties by the end of 2022. In addition, the company will launch a broad-based drive to install solar power systems and renew its building management systems. Active management of user behaviour will also help to cut emissions.
In relation to the activities of the Projects & Development division, Allreal is fo-cused on the systematic use of renewable materials. In-house projects will involve taking the entire life cycle of individual materials into account as quickly as possible.
In view of the fact that interest rates remain low by historical standards and that the economy is performing well, the outlook for the Swiss real estate and construction sector is good. As a result of the expansion of its portfolio in Western Switzerland, Allreal is expecting income from real estate and in turn profits in the Real Estate division to increase. In the Projects & Development division, the company is expecting income from business activity to stabilise. Thus, the tried-and-tested business model that combines real estate with projects and development endures.
Allreal therefore expects net operating profit for the financial year 2022 to exceed the level of the previous year.
The Board of Directors and Group Management would like to take this opportunity to thank employees for contributing to the company’s success, as well as share-holders for the trust they have placed in us.