Zug Estates to benefit from hotel and restaurant recovery in 2022
Zug Estates was able to increase its 2022 consolidated result by more than six percent without revaluation and special effects. However, due to lower revaluations, the result after revaluation is almost 50% below the previous year.
Real estate company Zug Estates describes 2022 as "very pleasing" despite the much changed economic environment. The lifting of the Corona restrictions has led to a strong recovery in demand for rental space, particularly in the office and commercial sectors, as well as sharply increased sales of hotel and restaurant uses, the company says in presenting its annual report for 2022.
For the 2022 financial year, Zug Estates reports a consolidated result of CHF 39.8 million - a significant drop compared with 2021, when the figure was still CHF 75.6 million (CHF -35.8 million or -47.3%). However, the good prior-year result was entirely due to higher revaluation effects and the sale of a property in Zug, the real estate company said. Net profit excluding revaluation and special effects was CHF 33.8 million, an increase of CHF 6.3% or CHF 2.0 million (previous year: CHF 31.8 million).
Rentals of 18,000 sqm
The group's real estate income increased by 3.7% or CHF 2.2 million to CHF 62.2 million in the reporting period. This was mainly due to the reduction of vacancies and additional income from the acquisition of the Renggli Group, Zug Estates said. Real estate expenses amounted to CHF 7.8 million (previous year: CHF 7.6 million).
According to Zug Estates, commercial leases for around 18,000 sqm with rental income of more than CHF 7.2 million p.a. were extended or newly concluded in the 2022 financial year, in particular for office space in the Suurstoffi. The vacancy rate decreased from 4.0% to 1.6%. The weighted average remaining lease term (WAULT) was 6.3 years as of December 31, 2022.
Hotel & Catering segment recovers
The company recorded a significant increase in hotel & catering revenue, which rose from CHF 8.4 million in 2021 to CHF 14.7 million now (+75.3%).
Operating income reached CHF 80.1 million (PY: CHF 74.2 million) and operating income before depreciation and revaluation increased by 6.0% or CHF 2.8 million to CHF 49.7 million.
Revaluation earnings slump
2022, Zug Estates recorded a revaluation gain of CHF 6.8 million, corresponding to 0.4% of the portfolio value of investment properties. The ratio was CHF 35.6 million or 84.0% lower than the previous year's result of CHF 42.4 million.
EBIT decreased from CHF 93.2 million in 2021 to now CHF 53.0 million due to the lower revaluation, a minus of CHF 40.2 million or 43.1%.
Decline in Group earnings expected
For 2023, Zug Estates anticipates higher real estate income in the Real Estate business unit, although this will be offset by higher financing costs and conversion-related vacancies and investment costs for individual rental spaces in the Metalli shopping avenue. In the Hotel & Catering segment, revenues and earnings are likely to be below the previous year despite the recovery, the company said. This is due to the overall renovation of the Bären property and the planned complete renovation of the catering and conference areas in the Parkhotel.
"Overall, we expect a slightly lower consolidated result for the 2023 financial year, excluding revaluation and special effects," Zug Estates wrote in the statement.
