Annualised property income increased by 8.6% to 60.9 million CHF (2017: 56.1 million CHF) during the business year 2018. The three sale-and-lease-back transactions in Brunegg, Goldach and Pratteln contributed significantly to this. Additionally, in the second half of the business year, the vacancy rate decreased compared with the first half of the year, most notably with successful rentals at sites that had been vacant for long periods. At 76.4 million CHF, the impact of revaluations was significantly higher than in the previous year (33.3 million CHF) thanks to long-term leases and successful redevelopments. At HIAG Data, the investment phase was extended due to the refocusing of the model. Despite the investments losses of HIAG Data totaling 16.5 million CHF, nonetheless HIAG increased net income by 5.9% to 60.9 million CHF (2017: 57.5 million CHF) and earnings per share to CHF 7.60 (2017: CHF 7.15) in the business year 2018.
Strategic acquisitions increase profitability and strengthen the long term value of the “land bank”
The acquisitions in Brunegg, Goldach and Pratteln are consistent in all ways with HIAG’s strategy. With 5.9 million CHF per year over a rental term of 15 years each, these transactions will strengthen annualised property income in the long term. In addition, all the sites have medium and long-term development potential. In Brunegg, the planning for an expansion of the high-bay warehouse is well under way with the current tenant. The new construction of a hall is continuing at the approximately 63’000 m2 site in Goldach. It will also be let for 15 years following completion. In Pratteln, there are signs that the industrial use of the site is in its final cycle, and the current industrial area around the railway station can be transformed into a long-term central area with approximately 50’000 m2 of office and living space.
Average lease term increased to nearly 10 years
The weighted average lease term was again significantly extended compared with the previous year from 7.9 years to 9.7 years. The long-term building rights agreement with Stadler Rail in St. Margrethen and the sale-and-lease-back transactions during the year under review contributed to this, with long-term triple-net leases worth approximately 10% of HIAG’s rental income and the re-letting of the former recruiting centre in Windisch to the FARO Foundation with a term of more than 25 years. The FARO Foundation will operate a residence for people with disabilities at the Kunzareal site from mid-2019.
Vacancy rate decreased due to site redevelopment
The vacancy rate was 14.3%, as in the previous year, and has improved significantly by 3.7% since the IPO in 2014. The rental contracts in Cham were particularly satisfying: the vacancy rate in the existing building dropped from 66.8% to 10.2% and the Lorzenpark site was successfully repositioned with the planned development of 300 apartments, the arrival of the OYM (on your marks) Centre of Excellence for top athletes and research, and hospitality units. Not least, the early arrival of the Tesla Store laid the groundwork for Pit Lane, a Ferrari specialist, and Formula V-Racing Lounge, a company specialising in high-end Formula 1 simulators, to choose Lorzenpark as their premises. Driven by anchor users, HIAG has circled back to its earlier pre-project decisions in order to refocus the future positioning and build on the impact of existing users to achieve even higher quality positioning.
Portfolio revaluations in the portfolio reflect redevelopment progress
With Regus, another anchor tenant has been gained in Meyrin after Hewlett Packard Enterprise (HPE) for the existing building at “The Hive” campus. The conversion is already under way and will be completed in 2019. Negotiations for the redevelopment of another building are well advanced. In the centre of the campus, a restaurant and training pavilion is currently being built for the dynamic Swiss restaurant group Luigia. Starting in 2020, the new pavilion will form a meeting point at the heart of the campus. The site’s position as a hub for international groups benefits from prominent anchor tenants and its immediate proximity to CERN.
In Dietikon, a rental contract was signed at the beginning of 2018 with the Austrian furniture retailer XXXLutz 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 after the departure of the current tenant and the completion of the building phase, which will not be before 2021.
Following the scrapping of the planning zone in Niederhasli, new construction of office and hall buildings is being carried out for Doka Schweiz, thus securing the tenant for another 15 years. The new development of the central area around Niederhasli railway station also offers medium-term potential for more than 300 apartments.
The transformation of the Walzmühle site in Frauenfeld is mostly complete, where 39 residential units and 2’300 m2 of office space are being created. The topping-out ceremony took place in February. Most of the commercial space has already been let, and the first leases for the residential units were signed nine months before completion. Local supply is ensured by the arrival of the “Werk 3” café run by the Frauenfeld-based bakery and pastry shop Stähli, providing seating for more than 50 people and a takeaway counter.
Potential value of the site leverages entrepreneurial community
At the Papieri site in Biberist, floor space has gradually been freed up with the dismantling of the paper machines, and with HIAG Data, the infrastructure for the business models of the fourth industrial revolution is being created. Today, startups are developing and scaling transnational business models here. These innovative companies include a provider of 3D printing solutions for use in professional sports, mobility and securing clean drinking water in developing countries, as well as an eSports leisure centre with a venue for eSports tournaments and cloud-supported high-end simulators for racing. Of the building’s surface area, 1% is currently being used in this way. HIAG has thus positioned the Biberist site as a destination for startups that are building their business models on new technologies, including big data, artificial intelligence, data security and high-performance network connections.
Pioneers in industrial site redevelopment for the fourth industrial revolution
In Diesbach, HIAG has chosen Alpine Co-Working as a partner in order to convert the site into a retreat and getaway destination, offering the workforce of large corporations and organisations space to rethink and redesign their business models and enabling companies to successfully meet the challenges of the digital economy and the fourth industrial revolution. The project at the Legler site will meet the retreat requirements of established companies, which up until now have gone to boutique hotels and spa resorts, or have even created their own resort locations. The upcoming transformation corresponds to this fast growing trend. In addition to rooms for workshops and events, the site has adequate accommodation and catering facilities, and will be suitable for business and family events with up to 150 guests. At the same time, it will become an “alpine hub” for today’s digital nomads. With the creation of serviced apartments in Meyrin, Biberist, Cham and Aathal, HIAG will transfer parts of this concept to other sites and thus prominently position the Diesbach site.
HIAG DATA strategic focus
HIAG Data was originally launched by HIAG to position its site portfolio as prime real estate in terms of the “digital connections” location criterion. This strategy is already starting to bear fruit in Meyrin, Biberist and Diesbach, and is expected to be gradually expanded to the entire portfolio. At the same time, possibilities are opening up for HIAG Data that extend far beyond the real estate strategy. The use of cloud solutions and related transaction-based software solutions enables industry-independent and attractive new business models. In order to help companies with very high data security, data independence and data availability requirements to make this change faster, HIAG Data and SIX, as operator of the Swiss financial marketplace infrastructure, announced their intention to jointly develop and operate Secure Swiss Cloud Services. SIX and HIAG Data are thus establishing a cloud-based ecosystem for the Swiss financial market. HIAG Data will provide the highly secure and highly efficient cloud platform. In order not to limit HIAG Data’s growth potential through its real estate strategy, HIAG would like to create conditions that will enable further investments in the HIAG Data business model by third-party investors independent of HIAG Immobilien.
Switzerland benefits from an excellent starting point to position itself as an attractive environment for the dynamic development of new business models. Switzerland’s own DNA, with the world’s highest number of patents filed, allows Switzerland to distinguish itself internationally, as Silicon Valley has done for the last twenty years. Switzerland has been acknowledged in politics, industry and research, as shown by numerous successful initiatives. HIAG can play a lead role in shaping and contributing to this development with its site portfolio. With the initiatives in Meyrin, Biberist and Diesbach, as well as the expansion of HIAG Data, an excellent starting position has been secured.
With this in mind, we hope that you will enjoy reading this annual report and be inspired by its contents.
Dr. Felix Grisard
President of the Board of Directors