- Property income up to CHF 70.3 million (+3.9%)
- Vacancy rate in the overall portfolio reduced to a record low of 4.0%
- Strong development portfolio largely offsets market-related devaluation in yielding portfolio
- Sale of non-strategic properties and condominiums makes substantial contribution to earnings (CHF 23.4 million; after tax)
- Net income excl. revaluation significantly increased to CHF 48.6 million (+26.7%)
- Sustainability-linked syndicated credit facility strengthens entrepreneurial resilience
- Higher proposed dividend of CHF 3.10/share (+6.9%) reflects positive expectations
Basel, 04 March 2024 - HIAG delivered a strong operating performance in the 2023 financial year in a challenging market environment. All three business segments Site Development, Portfolio and Asset Management and Transactions contributed significantly to the company's success. Rental income increased significantly and vacancy rates were reduced to a record low. Significant increases in the value of the development portfolio made it possible to cushion the interest rate-related devaluation of yielding properties. The sale of non-strategic properties and the sale of condominiums made a substantial contribution to earnings. In the reporting year, HIAG strengthened its financial and entrepreneurial resilience by signing a sustainability-linked, committed, syndicated credit line of CHF 500 million and developing a "Green Financing Framework". The high value that HIAG places on sustainable business activities is reflected in its Sustainability Report, which also takes into account the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and is now published as a stand-alone publication. In light of the good business performance and promising prospects for the future, the Board of Directors will propose a 6.9% higher dividend of CHF 3.10 per share at the Annual General Meeting on 18 April 2024 (2022: CHF 2.90/share).
Property income increased and vacancy rate reduced
Property income increased by 3.9% to CHF 70.3 million in the 2023 financial year (2022: CHF 67.7 million). The reduction in the vacancy rate from 6.4% to a record low of 4.0% as well as successful project completions in the previous year and the associated new rental agreements (+CHF 2.3 million compared to the previous year) contributed to this. The consistent implementation of index adjustments for commercial rental agreements and the implementation of the mortgage reference interest rate for residential rents led to additional income of CHF 1.4 million. Transaction activity resulted in an overall decrease in rental income of CHF 1.6 million. Rental income of CHF 0.8 million from interim use was also lost because of the start of construction on development projects. At around 16.6% of property income, the expenses for real estate included in operating expenses were within the expected and usual range. The gross yield of the yielding properties increased to 5.4% (2022: 5.2%) and the net yield rose to 4.2% (2022: 3.9%). As expected, the weighted average unexpired lease term (WAULT) decreased slightly to 6.7 years as at 1 January 2024 (1 January 2023: 7.0 years). In relation to the 15 largest tenants, the WAULT as at 1 January 2024 was 9.0 years (1 January 2023: 10.6 years).
Progress on property projects according to plan
During the reporting period, construction work began on the “ALTO” residential tower with a commercial base in Zurich-Altstetten and the “FAHRWERK” logistics and industrial building in Winterthur (ZH). The construction of the commercial property for Librec AG on the Papieri site in Biberist (SO) was also largely completed, and the property was handed over to the tenant in February 2024. The construction of the “kessel haus” property in Windisch (AG) – a timber hybrid construction with 24 flats and a share of commercial space – was completed, thereby finalising the multi-year development of the historic “Kunzareal” site. All spaces in the “kessel haus” property have been let and were handed over to the tenants in January 2024. The “CHAMA” rental and condominium project in Cham (ZG) is on time and on budget. The marketing of the 87 rental flats, which started in the reporting period, met with great demand. All of the rental flats were let before construction was completed. The 52 condominiums are also attracting widespread interest. With the sales and project status, HIAG realised a profit contribution from promotions of CHF 13.6 million in the reporting period (2022: CHF 4.6 million).
Successful transaction business in an unstable market environment
HIAG successfully continued its transaction business in the 2023 financial year. In the reporting period, four properties that were no longer in line with the strategy were sold at prices averaging around 15% above the carrying amounts. The gross income from the properties sold in the reporting year totalled CHF 16.7 million (2022: CHF 6.0 million).
Successes in the development portfolio compensate for market-related devaluations
Despite the sharp rise in interest rates, the Swiss property market has so far proved robust in recent times. Measured against the marked increase in interest rates, the devaluation of the yielding properties in the 2023 financial year was moderate (as anticipated) at 2.4% or CHF 27.4 million. The progress made in the development portfolio largely compensated for the loss in value due to the rise in interest rates. The development portfolio was valued CHF 25.4 million or 3.4% higher on a net basis. Overall, this resulted in a slight devaluation of the entire investment property portfolio in the amount of CHF 1.9 million or 0.1%.
Sustainability-linked syndicated credit facility increases financing security
HIAG still has a solid balance sheet with a high equity ratio of 53.9% (31 December 2022: 53.1%) and a low net loan-to-value (LTV) ratio of 39.8% (31 December 2022: 40.9%). The signing of a sustainability-linked, committed, syndicated credit facility with a volume of CHF 500 million and a term of five years strengthens HIAG's financial and entrepreneurial resilience. The syndicated loan replaced a large share of the outstanding mortgages. A maximum of up to 10% of the financing will remain as mortgage-backed loans. Currently, 30% of the syndicated credit facility has been drawn, which gives HIAG great leeway in financing future projects and in refinancing. HIAG continues to pursue a conservative financing policy, whereby attention is paid to a balanced maturity profile. In line with the interest rate environment, the average interest rate for all financial liabilities increased from 1.0% to 1.6% in 2023. The weighted fixed interest rate duration as at the balance sheet date was 3.2 years (31 December 2022: 2.8 years), and the weighted capital commitment duration was 3.4 years (31 December 2022: 2.8 years).
Milestones reached in the implementation of the sustainability strategy
The 2023 financial year was characterised by numerous highlights in terms of sustainability, namely the newly concluded, syndicated credit facility linked to sustainability criteria, the pilot certification of the Wydeneck site in Dornach (SO) with the new "Minergie site" label, and the implemented "sustainable facility management" package of measures. In addition to the sustainable syndicate financing, a "Green Financing Framework" was developed, which will also allow "Green Bonds" to be issued in future. The Sustainability Report also takes into account the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), and is now published as a stand-alone publication. In addition, certain key figures in the Sustainability Report were subjected to an independent external audit.
Increase in the dividend
In light of the company's strong performance in the 2023 financial year and promising future prospects, the Board of Directors will propose to the Annual General Meeting on 18 April 2024 a 6.9% higher dividend of CHF 3.10 per outstanding share (2022: CHF 2.90/share). 75% of the distribution is to be made from the capital reserves, which is tax-privileged for private individuals domiciled in Switzerland.
Outlook
HIAG successfully started the 2024 financial year. The current business development and demand for rental space are encouraging. The development projects are also progressing according to plan. HIAG expects continued robust growth in the Swiss property market and demand for rental space in central locations with good access for the respective use. By the end of the 2024 financial year, HIAG expects an increase in property income of around 6% and a further reduction in the vacancy rate. Sales of condominiums in the “CHAMA” project are also expected to make a positive contribution to earnings in the current year 2024. There are multiple indications that interest rates have peaked. Many economists expect the SNB to cut policy rates by the end of the year. Because of the maturing low-interest bond to be refinanced in May 2024, HIAG nevertheless expects a slight increase in the average debt financing rate. In the course of the completion of numerous projects, HIAG expects a significant increase in rental income in the medium term.
Conference call and live webcast
On Monday, 4 March 2024, at 9.00 am, Marco Feusi, CEO, and Stefan Hilber, CFO, will explain the 2023 results and answer questions during a conference call with audio webcast.
To participate in the conference call, please use the following numbers:
+41 58 310 50 00 (Switzerland/Europe) / +44 207 107 06 13 (UK)
You can find more international numbers here: Dial-in list
You can attend the webcast via the following link: Link to the webcast
Recording
A recording of the webcast will be available via this link: Link to the recording
