Plazza AG: Earnings and profit decline

Plazza explains the decline in profit primarily with the CHF 15.4 million lower increase in the valuation of the properties compared to the previous year; it is also influenced by the vacancy of commercial space.

According to the company, vacancies in Zurich are also the reason for the decline in rental income from CHF 9.4 million to CHF 7.2 million. Rental income from the residential segment, on the other hand, remained largely stable compared with the prior-year period, despite rent reductions due to the lower reference interest rate.

Vacancy rate for commercial space falls, but remains high

In the reporting period, Plazza was able to reduce the vacancy rate for commercial properties by seven percent to 71 percent. However, the re-letting of two large commercial buildings in Zurich remains a challenge, according to the company.

At CHF 5.4 million, income before taxes from the revaluation of real estate was 15.4 million lower than in the same period of the previous year (20.8 million). As a result, EBIT fell from 26 to 10.1 million. In the previous year, the revaluation had been driven by the sharp drop in interest rates, Plazza said.

The portfolio value increased by 18.6 to CHF 515.4 million in the reporting period (previous year: 496.8 million).

Plazza has a high level of cash resources and, according to its own information, does not need to draw on any mortgages. The equity ratio was 85.9 percent at the end of the reporting period. The aim is to expand the portfolio and gradually put the existing land reserves to use.

Project developments in focus

Plazza currently has two major development projects in the pipeline: The "Im Glattgarten" development in Wallisellen, which has been under construction since the beginning of the year and will comprise 218 apartments, and the 68,000 square meter development site in Crissier near Lausanne. An approved design plan has been available for these since February 2016. During the reporting period, the Plazza Board of Directors gave the go-ahead for the preliminary project covering the entire site, with the results expected to be available in the second half of 2017. A decision will then be made on the investment volume, stages and the possible involvement of co-investors. A start of construction from 2020 is realistic.

In order to better reflect the high priority of real estate projects, Plazza intends to strengthen itself in this area and is currently looking for a manager of this area.

For the second half of 2016, the company expects an operating result in the order of magnitude of the first six months. (ah)