Züblin: Operating income up, profit down

According to Züblin Immobilien Holding, the reasons for the CHF 1.1 million increase in net operating income to CHF 8.5 million are the purchase of an investment property in April 2019 and the reduction in vacancies.

Earnings before taxes (EBT) reportedly rose by 2.4 million to 5.6 million. However, at 4.6 million, profit was below the previous year's figure of 6.2 million. In the previous year, special tax-related items had a positive impact on profit, Züblin said.

According to the real estate company, the valuation of the real estate portfolio was influenced by the uncertainties surrounding Covid-19. Whereas a valuation gain of 3.0 million was recorded at the half-year point, the market values had declined as of the reporting date, resulting in a reduction to 0.2 million (previous year: 0.6 million).

The Board of Directors will propose to the Annual General Meeting 2020 the distribution of CHF 1.00 per registered share from the capital contribution reserves.

Portfolio value increases

As of March 31, 2020, the portfolio consisted of six office properties; five of them in the Zurich economic area, one in the Bern area. The total value had increased by 17.0 million to 217.9 million in the reporting period, mainly due to a new acquisition in Zurich-Oerlikon and value-enhancing investments.

Annualized rental income at the end of the fiscal year was 9.4 million, up 1.2 million on the previous year. The increase was due to acquisitions and several new leases. The vacancy rate decreased from 10.0% to 8.2% during the year, with 0.8% of the reduction attributable to the newly acquired property. The weighted average lease term (WALT) of the overall portfolio is 3.8 years.

The developments surrounding the Corona pandemic and the associated uncertainties had led to an additional risk premium shortly before the balance sheet date. The pure office properties of the portfolio in the city of Zurich were less affected than the properties in Bern, Baden and Egg. Asset Management is constantly reviewing the extent to which tenants in the properties will be affected by the lockdown, either directly or in the longer term. Efforts are being made to develop solutions that will safeguard earnings.

Restrained outlook

Whether and to what extent the property portfolio of the real estate holding company will be affected by the pandemic cannot be foreseen at present. Züblin sees a possible risk of non-payment as a result of the lockdown mainly limited to the tenant segments gastronomy, retail and sports/leisure activities. This segment accounts for 8% of annual rental income.

The impact of Covid-19 is expected to negatively affect the 2020/21 financial year, Züblin added. A slowdown in the economy and the resulting economic influences would have an impact on the business activities of existing, but also potential tenants. The company is committed to meeting the challenges with partnership-based solutions to secure its earnings base. Furthermore, the company's management sees itself encouraged to adhere to its investment strategy, which is geared to moderate growth. (ah)