Collected property income increased by CHF 3.4 million, or 6.5%, to CHF 55.8 million. A reduction in vacancy rates, the completion of redevelopment projects and the acquisition of the redevelopment site in Meyrin contributed to this. Like-for-like growth (without non-recurring effects and acquisitions) was 4.7%. Thanks to long-term contract signatures and successful redevelopments, at CHF 33.3 million, revaluations contributed significantly more to the result than in the previous year (CHF 20.0 million). The sale of paper machine 9 in Biberist (CHF 7.1 million) also had a positive impact on the result, and more than compensated for HIAG Data’s negative CHF 4.3 million contribution to the result. The after-tax result thus rose from CHF 46.4 million to CHF 57.5, which corresponds to a 23.9% increase. Earnings (EBT) per share rose by CHF 1.96 to CHF 8.29, or by 30.9%.
Balance sheet footings were also strengthened by the successful issuing of a third bond for CHF 150 million. With a maturity of 5 years, the weighted average term for external financing increased from 3.1 years to 3.6 years. The resulting funds from the sales were invested in acquisitions in Meyrin, in the portfolio and in the expansion of HIAG Data. With an after-tax return of 7.9% and a dividend payout of approximately 4.0% from NAV for the 2017 business year, dividends rose by 5.6% to CHF 3.80 per share.
Great progress in the portfolio
2017 was characterised by the signing of very long-term rental contracts. Stadler Rail will take over the St. Margarethen site with construction rights until at least 2081, where it will efficiently reorganise and transfer a considerable part of its production from Altenrhein. HIAG was thus able to ensure that the area around the railway station, a part of which has historically already been ceded to Sieber Logistik for the same period, is not parcelled out. Through rental contracts with Doka Schweiz AG and Brugg Rohrsystem, which run for 20 years or more, there is also new momentum in Niederhasli and Kleindöttingen that will make its mark on the redevelopment of these sites in the long term. Other long-term agreements with Media Markt, Dachser and Baoshida contributed to the significant increase to 7.9 years in remaining rental duration compared to the previous year.
The rental in Cham is particularly satisfying. Supported by the upcoming development of 300 apartments and the On Your Marks athletic training centre, the vacancy rate in the existing building dropped from 32.7% to 12.0%. In addition to Teslas at TB Corse, Ferraris can now be test driven and purchased at this site, and AZ Direkt, Swiss IT-Factory and a paediatric practice have set up shop in the upper floors. The property has thus been successfully repositioned in the context of the overall redevelopment of the site.
With the sale and lease-back transaction of the Sulser site in February 2018, the positioning at the Brunegg logistic site was strengthened. HIAG is now represented with two sites in Brunegg. With the acquisition in Meyrin, HIAG can expand its long-term redevelopment pipeline at an exceptionally well-connected site. Both newly acquired sites will be managed under the inventory portfolio until redevelopment is foreseeable. The vacancy rate over the entire portfolio decreased by 1.0% to 14.3%, with a vacancy rate in the inventory portfolio of 12.3%.
Site redevelopment is bearing fruit
The Hive site in Meyrin (GE) got a new look with the new office building for Hewlett Packard Enterprise and HP Inc. The construction made full use of the technical possibilities available today, enabling delivery on schedule and below budgeted costs. And the site is not just bearing financial fruit: the park-like green areas that were created provide a special outdoor quality, and contribute to a productive honey harvest from the beehives set up at the site. The international restaurant concept Luigia will not only train its cooks at the heart of the site, but also run an attractive quarter restaurant. Two other buildings are already being planned at the site.
In Bremgarten, the second expansion phase was completed and handed over to Jeld-Wen, which is now listed on the NYSE. We are particularly pleased that the new development for Doka Switzerland can be carried out with the scrapping of the planning zone in Niederhasli. With this step, not only will Doka be committed to the site for at least another 15 years, but the new development also frees up the central area around the railway station, where over 300 apartments can be created in the medium term. In Dietikon, a rental contract was signed for a substitute building with a usable area of approximately 9’000 m², as well as existing areas scheduled for modernisation covering about 11’000 m². The 15-year contract will begin only after the departure of the current tenant and the completion of the building phase, which is not expected before 2021.
The current building projects are progressing according to plan: in Frauenfeld, 39 residential units and 2’300 m² of office space are now being created in three phases. In Meyrin, the transformation of approximately 9’000 m² of the existing building is already taking place. In Wetzikon, the general renovation of a nine-unit apartment building is well advanced. In 2018, four projects will also enter the building phase: in Neuchâtel, a Migros subsidiary and a Luigia Restaurant will occupy a substantial portion of the ground floor area, which is the last unused area at the site. In Niederhasli, the relocation of Doka Schweiz can be tackled. In Wetzikon, a construction site creating 16 rental units will open on Weststrasse. In Biberist, where buyers for paper machines 6 and 8 have also been, the construction of a data centre for HIAG Data will begin in 2018, so that the previously completed data centre can be made available for test environments and further developments only.
Next generation cloud infrastructure
HIAG Data continued to successfully develop its cloud infrastructure and strengthen its partnership with Microsoft and HPE. Based on customer orders, the HIAG Board of Directors initiated investments in the latest development stage of its cloud infrastructure. The “Network Centric Multicloud 4.0” was presented to cloud system providers and system integrators alongside partners and customers at a launch event in March 2018. It can be obtained via an automated portal starting from April 2018. Partnerships with NVIDIA for processes using graphics processing units (GPUs), with CHG Meridien for Workplace as a Service (WaaS) and Veeam for Backup as a Service (BAAS) were announced at this event. HIAG Data and the Ärztekasse, the health insurance fund, also presented the first electronic patient file to meet all national and international requirements on patient data safety.
With its offering, HIAG Data provides an infrastructure-related element that allows for the integration of the public cloud offer, existing private cloud solutions and its own hyper-scalable cloud infrastructure via a highly secure dedicated network – which does not require a detour through the relatively unsafe public internet for cloud access. The specific requirements of the health and media sectors were addressed with vertical solutions, and specific solution offerings are being prepared for other branches.
HIAG Data’s executive board was expanded during the business year with five branch experts, and the reinforced operations team began work in Biberist.
Digitalisation and infrastructure
The term digitalisation may seem over-used these days, but it is a buzz word for good reason. Each of our tenants must deal with the opportunities that new technologies offer their business model. Companies also have to accept the risk of disruption. As part of a study tour, HIAG’s executive board experienced the dynamics of Silicon Valley, and we were able to see that at least in California, innovations are exclusively digital and almost never in infrastructure. It is not a coincidence that a Swiss company, Stadler Rail, won the bid for train compositions as part of the tender for the electrification of the only rail connection – the Caltrain. The cycle doesn’t stop here: we are convinced that a secure and scalable infrastructure is a prerequisite for the successful development of new business models, and without perfectly tailored infrastructure, the potential of disruptive business models remains limited.
Circumstances, such as companies initiating long-term effective investments and increasingly accurate trend indicators showing a positive economic up-turn, giving us confidence for the current financial year. It has become clear that the use of digital technologies carries abundant potential for our tenants and for us. These technologies will also allow us to increase the efficiency of the development process within the value creation chain. In addition to the targeted use of new technologies, adjustments are also necessary in the assignment of roles and in the ways we cooperate in the process, and we want to refine them in 2018.
Thinking high quality innovations through to the end is one of the strengths of Swiss companies, and we want to contribute to this with our infrastructure. We also want to continue playing our role as an incubator of ideas that are relevant to Switzerland as a location, and we see medium and long-term potential in implementing greater added value in our site portfolio. On that note, we hope you enjoy reading this report.
Dr. Felix Grisard
President of the Board of Directors
Chief Executive Officer