Espace increases profit by five percent
Espace Real Estate Holding Ltd increased its profit by 5.1 percent to CHF 12.3 million in the 2015 financial year. According to the company, this was mainly due to the CHF 600,000 increase in rental income, the eight percent increase in net income from real estate to CHF 24.7 million and the reversal of provisions for taxes of CHF 2.9 million that were no longer required.
The market value of the real estate portfolio increased by 5.8% to CHF 625.7 million (previous year: CHF 591.3 million).
Espace has announced plans to further increase and rejuvenate its portfolio of investment properties through new buildings and complete renovations. Accordingly, investments of around CHF 172 million are planned over the next two to four years. A capital increase is to be carried out in April.
Increase in value of investment properties
The value of investment properties increased by ten percent to CHF 549.3 million. The main reason for this was the transfer of two new residential properties worth CHF 38 million to the investment property category, according to Espace. A total of CHF 32.8 million was invested in the portfolio in 2015.
Higher rental income
Rental income rose by 1.9% year-on-year to CHF 31.3 million (previous year: CHF 30.7 million), although significant vacancies of 13.7% (previous year: 13%) were still recorded. Espace explains the vacancy rate with refurbishments, first-time lettings and lower demand for commercial space - the latter due to the changed exchange rate situation against the euro. In addition, a number of new lettings will not generate income for the full year until 2016.
Real estate expenses fell significantly by 16.1% to CHF 6.5 million, as most of the expenses for re-letting had already been incurred in the previous year. Net rental income therefore improved by eight percent to CHF 24.7 million (previous year: CHF 22.9 million). The pre-tax return on equity was lower at 4.5% (previous year: 5.8%) due to a particularly high gain on sale of CHF 7.2 million in the previous year. The equity ratio was 41.1% (previous year:TP3k 42.81).
Further projects in the pipeline
Planning applications have been submitted for the "Hasenmatt" residential development in Grenchen (36 apartments) and "Espace Birse" in the municipality of Valbirse (BE; 25 age-appropriate apartments and 26 rental apartments). Construction is scheduled to begin in the second half of 2016.
Espace is currently preparing the building applications for two residential projects and a commercial building. In Biel on Schwanengasse, a further residential building with 58 apartments is to be built and in Zuchwil a further stage of the "Volaare" residential development. Here, Espace plans to replace 36 old apartments with around 80 new apartments. In the immediate vicinity of a production plant of the American Biogen Group in Luterbach (SO), Espace is planning a multi-purpose commercial building, which will be leased in its entirety for 15 years by the long-standing tenant, the Schaffner Group. The new building will house the headquarters, laboratory, research and development.
Espace Real Estate is cautiously optimistic about the future in view of the market environment. Due to negative interest rates and the generally very low mortgage rates, real estate investors' yield expectations have fallen again, the company writes in a press release. As real estate prices have been high for some time and are likely to remain so for the time being, real estate investors are generally prepared to rent at lower prices. This trend has been clearly noticeable for commercial space for some time, and increasingly and to a lesser extent on the residential market. Espace cannot completely escape this trend.
The gross yield on the real estate portfolio fell by 0.27 percentage points to 6.59% (previous year: 6.86%). Thanks to the rejuvenation of the portfolio, the net yield remained virtually unchanged at 4.65% (previous year: 4.64%). These yield figures are above average in the current environment, writes Espace. (ah)
