Zug Estates Holding Halbjahresbericht 2017 Titel. Half-Year Report

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1 Zug Estates Holding Halbjahresbericht 2017 Titel B 20 8 Zug Estates can look back on a reassuring first half with a strong operational performance. Property income and net income excluding income from revaluation are significantly higher. Half-Year Report

2 Zug Estates Holding Halbjahresbericht 2017 Titel Company profile The Zug Estates Group conceives, develops, markets and manages properties in the Zug region. It focuses on central sites which are suitable for a wide range of uses and allow sustainable development. A large part of the real estate portfolio is located at two sites in Zug and Risch Rotkreuz and is broadly diversified by type of use. The total portfolio value as at June 30, 2018 was CHF 1.47 bn m Net income excluding income from revaluation as at June 30, 2018

3 +1+44+k Portfolio by site Based on fair value as at June 30, 2018 Portfolio by use Based on projected rental revenue 1 as at June 30, 2018 Suurstoffi site 44% 100+k k Education, leisure, 1% Other 100+k culture 5% 2% Other Hotel & catering 11% 31% Residential Parking 8% Retail 20% 23% Office 55% Metalli/ Zug City Center site 1 From point of view of real estate business unit Fair value of portfolio in CHF million % H Operating properties (at market value) Investment properties under construction and undeveloped plots Investment properties Residential space (based on projected rental revenue, right-hand axis)

4 Selected key figures H1 2018/ H1 2017/ % Zug Estates Group Operating revenue (excluding income from revaluation of investment properties) TCHF % Operating expenses TCHF % Operating income before depreciation and revaluation TCHF % Revaluation of investment properties (net) TCHF % Income from sale of investment properties TCHF % Operating income (EBIT) TCHF % Net income TCHF % Net income excluding income from revaluation 1 TCHF % Total assets TCHF % Interest-bearing debt TCHF % Interest-bearing debt in % of total assets 34.2% 32.5% Shareholders equity TCHF % Equity ratio 55.3% 56.9% Headcount FTE % Share Closing price CHF % Market capitalization 2 TCHF % Earnings per series B registered share 3 CHF % Earnings per series B registered share excl. revaluation 3 CHF % NAV at market value per series B registered share 2 CHF % Portfolio Investment properties TCHF % Investment properties under construction TCHF % Undeveloped plots TCHF % Total real estate portfolio TCHF % Operating properties (market value) TCHF % Total portfolio TCHF % Property income 4 TCHF % Vacancy rate investment properties 5 1.9% 1.5% Gross return investment properties 6 4.2% 4.1% 1 Equal to net income excluding income from revaluation of investment properties (net), excluding income from sale of investment properties and securities and corresponding deferred taxes 2 In relation to number of shares outstanding (series A registered shares converted) 3 In relation to number of shares on average outstanding (series A registered shares converted) 4 Comprises rental income and income from Miteigentümergemeinschaft Metalli 5 As at the balance sheet date, as a percentage of projected rental income 6 Projected rental income (annualized) as a percentage of the market value on the balance sheet date

5 Zug Estates Gruppe Half-Year Report 2018 Table of contents 3 Table of contents Report to the shareholders 4 Financial report 6 Annex 9 Notes 10 Portfolio 16 Contact details and upcoming events 19

6 4 Zug Estates Group Half-Year Report 2018 Report to the shareholders Report to the shareholders The successful first half of 2018 seen by the Zug Estates Group is reflected in a 12.6% year-on-year increase in property income and a significant rise in net income excluding revaluation from CH F 13.0 million to CHF 14.8 million. Dear shareholders, Ladies and gentlemen Zug Estates can again look back on a reassuring first half with a strong operational performance. Key indicators showed positive progress, and further site development milestones were reached % Net income excluding revaluation and special effects increased to CHF 14.8 million. Operating successes In the first half of 2018, property income grew by 12.6% year-on-year to CHF 23.4 million (1H 2017: CHF 20.8 million). Operating income before depreciation and revaluation increased from CHF 19.6 million to CHF 21.7 million (+10.6%). Following last year s refurbishment of the rooms at Parkhotel Zug, the hotel & catering business unit also lifted its contribution to sales, up from CHF 8.3 million to CHF 8.5 million (+2.9%), and maintained gross operating profit (GOP) at a high 41.2%. Including income from revaluation of CHF 3.5 million (1H 2017: CHF 7.2 million), EBIT amounted to CHF 23.4 million and net income to CHF 17.8 million. Both figures were lower year-on-year. By contrast, net income excluding income from revaluation grew by a significant 13.2% to CHF 14.8 million. In the first half of the year, the Zug Estates Group invested CHF 62.5 million (first half 2017: CHF 49.7 million) in the further development of its sites. CHF 7.1 million of this sum was channeled into the Aglaya promotional project (first half 2017: CHF 5.3 million), while the bulk of investments again went into the Suurstoffi site in Rotkreuz. Steady growth in value and slight increase in voids The fair value of the portfolio saw an increase in the first half of 2018, up 4.2% to CHF 1.47 billion. The completion of additional residential and commercial properties led to a moderate increase in voids: on the reference date, June 30, 2018, these stood at 1.9% (December 31, 2017: 1.5%). Other development and marketing successes Both the Suurstoffi site and the Zug City Center site witnessed further development and marketing successes. For the first time in the history of the Metalli shopping mall, all retail space is let. Läderach Chocolatier Suisse will also be joining the ranks of popular brands at Metalli in Q Demand for office space in the Metalli complex remains high. An arm s-length contract extension until 2027 was signed with the Metalli s largest office tenant. Rental contracts for a total of more than m 2 were extended in the first half. Slated for completion in summer 2019, widescale refurbishment work totaling CHF 4.4 million on the property at Baarerstrasse 14a is proceeding according to plan. Construction work has also started on store expansions for Metalli tenants Esprit and Confiserie-Café Speck. Completion is scheduled for October 2018 and projected to generate additional annual rental income of TCHF 95.

7 Zug Estates Group Half-Year Report 2018 Report to the shareholders 5 The extensive refurbishment work on the hotel rooms, guest toilets, roof and external area of our subsidiary Hotelbusiness Zug AG was completed. The new room design received positive feedback from guests and the Hotellerie Suisse jury alike, and this is also reflected in higher revenues. Site master plans for the Zug City Center were presented by the four interdisciplinary teams in April Using the winning project as a basis, further feasibility factors are to be examined, including cost efficiency and implementation route. In July, Zug Estates and utility services provider WWZ Energie signed a declaration of intent to connect the Metalli development to the Circulago district heating system. As of 2020, the Metalli complex will be heated and cooled using water from Lake Zug. Marking a further milestone in our sustainability strategy, this is set to produce CO 2 savings of 780 tonnes annually. The staggered handover of construction site A (Suurstoffi 16, 18, 20) to tenants was completed at the end of February Zug Estates invested a total of approximately CHF million in this third construction phase. In addition to existing tenant companies Mobility and GfK, a group medical practice will be moving into construction site A. Occupancy levels are 100% for the apartments and 84% for the commercial premises. Construction work on the wooden high-rise, S22, was completed according to plan in July. Rental space has already been handed over to anchor tenant Amgen. Arval, Mobilezone and other new tenants will take up occupancy in the second half of the year. The world s largest beer brewer, AB InBev, another attractive international corporate tenant, has also rented an area of m 2. The vertical garden high-rise Aglaya will have reached a height of 70 meters in October 2018, with completion scheduled for Q The investment volume runs to around CHF 100 million, 92% of which is for promotional properties. As at mid-2018, 84% of apartments had been reserved or sold. With planning and construction work on construction site 1 progressing to plan, the first stage can be handed over to Lucerne University of Applied Sciences and Arts on schedule in Q Completion of the second stage is timetabled for Q Long-term rental contracts have already been concluded for some 70% of the total m 2 of rental space mio. Property income in the first half of 2018, representing a year-on-year increase of 12.6%. Outlook for 2018 In light of the completion of construction site A and property S22, we are forecasting an increase in rental income. At the same time, property expenses will be higher as a result of refurbishment work at the Metalli center. We expect to be able to maintain revenue and gross operating profit (GOP) in the hotel & catering segment at the previous year s level. Overall, we are looking to see a slight improvement in operating income before depreciation and revaluation. Similarly, we are also projecting year-on-year growth in net income excluding income from revaluation. Zug, August 2018 Dr. Beat Schwab Chairman of the board of directors Tobias Achermann CEO

8 6 Zug Estates Group Half-Year Report 2018 Financial report Consolidated balance sheet Assets in CHF thousands Note Cash and cash equivalents Trade receivables Other receivables Inventories Promotional properties Prepaid expenses Total current assets Investment properties Investment properties under construction Undeveloped plots Operating properties Other tangible assets Prepayments for tangible assets Financial assets Intangible assets Total fixed assets Total assets Liabilities and shareholders equity in CHF thousands Note Current financial liabilities Trade payables Other current liabilities Accrued expenses Current provisions Total current liabilities Long-term financial liabilities Long-term provisions Deferred tax liabilities Total long-term liabilities Total liabilities Share capital Capital reserves Treasury shares Retained earnings Total shareholders equity Total liabilities and shareholders equity

9 Zug Estates Group Half-Year Report 2018 Financial report 7 Consolidated income statement in CHF thousands Note Property income Hotel & catering income Additional income from ordinary business operations Net proceeds of trade payables and receivables Other operating revenue Total operating revenue Property expenses Cost of goods purchased for hotel & catering Personnel expenses Other operating expenses Total operating expenses Operating income before depreciation and revaluation Revaluation of investment properties (net) Result from sale of investment properties Operating income before depreciation (EBITDA) Depreciation Operating income (EBIT) Financial result Income before taxes (EBT) Tax expenditure Net income Earnings per share in CHF Earnings per series A registered share, undiluted Earnings per series B registered share, undiluted There are no potential dilutive effects to report. The diluted earnings per share correspond to the undiluted earnings per share

10 8 Zug Estates Group Half-Year Report 2018 Financial report Consolidated statement of cash flows (condensed) in CHF thousands Cash flow before change in working capital Change in working capital Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Change in cash and cash equivalents Composition of net cash and cash equivalents Net cash and cash equivalents at the beginning of reporting period Net cash and cash equivalents at the end of reporting period Change in cash and cash equivalents In the first half of 2018, non-cash investments of TCHF (first half 2017: TCHF ) were made. Statement of changes in equity in CHF thousands Share capital Capital reserve Treasury shares Retained earnings Total shareholders equity Balance on Sale of treasury shares Distribution to shareholders Net income Balance on Balance on Sale of treasury shares Distribution to shareholders Net income Balance on Profit from the sale of treasury shares and the associated tax payments were recognized as an increase in the capital reserves, without affecting net income

11 Zug Estates Group Half-Year Report 2018 Annex 9 Annex General information Domiciled in Zug, Switzerland, Zug Estates Holding AG is a Swiss joint stock company. Its shares are listed on SIX Swiss Exchange. Principles The present, unaudited consolidated financial statements were prepared in accordance with Accounting and Reporting Regulation Swiss GAAP FER 31 and the special provisions for real estate companies of Art. 17 of the SIX Swiss Exchange Directive on Financial Reporting and present a true and fair view of the financial position, the results of operations and the cash flows. The principles of consolidation and valuation applied in the present consolidated financial statements are unchanged compared with those published in the 2017 consolidated financial statements. Scope of consolidation The scope of consolidation remained basically unchanged compared with the annual financial statements as at December 31, Real estate valuation method and technique The properties held for investment purposes were valued on the basis of the fair value assessments (update valuations) performed by a recognized independent real estate expert (Wüest Partner AG) as at June 30, 2018 using the DCF (discounted cash flow) method. The valuation method and technique applied for the half-year financial statements for 2018 are unchanged from the previous year.

12 10 Zug Estates Group Half-Year Report 2018 Notes Notes 1 Investment properties, investment properties under construction and undeveloped plots in CHF thousands Zug City Center, Zug, investment properties Suurstoffi site, Risch Rotkreuz investment properties Balance on Investments Revaluation (net) Balance on Accumulated acquisition values as at Accumulated acquisition values as at Difference market values/acquisition values as at Difference market values/acquisition values as at Balance on Investments Revaluation (net) Balance on Accumulated acquisition values as at Accumulated acquisition values as at Difference market values/acquisition values as at Difference market values/acquisition values as at Comprises the properties under construction at the Suurstoffi site in Risch Rotkreuz (excluding promotional properties) 2 Comprises the undeveloped part of the Suurstoffi site in Risch Rotkreuz. The undeveloped plots are stated at cost less accumulated depreciation in accordance with the principles of valuation 3 Additions from investments include non-cash transactions from the accrual of building costs as well as from trade payables 4 Factoring the development risk into the fair value valuation may lead to temporary differences between fair values and acquisition values during the development phase

13 Zug Estates Group Half-Year Report 2018 Notes 11 Other investment properties Total inv. properties Total inv. properties under construction 1 Undeveloped plots Total The discount rates applied to the valuation of the investment properties and the investment properties under construction as at the balance sheet date were within a range of 2.8% to 3.8% (December 31, 2017: 2.8% to 3.9%).

14 12 Zug Estates Group Half-Year Report 2018 Notes 2 Financial liabilities The financial liabilities of TCHF as at June 30, 2018 (December 31, 2017: TCHF ) break down into mortgage loans with financial institutions in the amount of TCHF (December 31, 2017: TCHF ) as well as a five-year bond paid up on February 17, 2017, with a book value of TCHF (December 31, 2017: TCHF ). The face value of the bond was TCHF The difference against the book value is attributable to issuing costs amortized over the term of the bond. The financial liabilities are structured as follows by maturity: Residual term in CHF thousands Under 1 year to 3 years to 5 years to 10 years Over 10 years Total financial liabilities Of which current Of which long-term The average residual term of the interest-bearing debt is 5.4 years (December 31, 2017: 6.4 years). The average capital-weighted interest rate on all interest-bearing financial liabilities is 1.9% (December 31, 2017: 2.0%). To secure the long-term financial liabilities, properties with a book value of TCHF (December 31, 2017: TCHF ) have been encumbered. 3 Shareholders equity Shares issued On April 10, 2018, the general meeting of shareholders of Zug Estates Holding AG, voted on the basis of a voluntary conversion offer in favor of converting series A registered shares into series B registered shares. As at June 30, 2018, the shares broke down as follows: Shares issued Security number Nominal value CHF Number Votes Capital CHF Series A registered shares Series B registered shares Total In the first half of 2018, Zug Estates Holding AG sold series B registered shares at an average price of CHF (first half 2017: series B registered shares at an average price of CHF ).

15 Zug Estates Group Half-Year Report 2018 Notes 13 As at June 30, 2018, Zug Estates Holding AG held no treasury shares (December 31, 2017: series B registered treasury shares). Non-distributable statutory reserves amounted to TCHF as at June 30, 2018 (December 31, 2017: TCHF 7 625). Shareholders equity per share in CHF Shareholders equity per outstanding series B registered share, before deferred taxes Shareholders equity per outstanding series B registered share, after deferred taxes NAV at market value per share in CHF NAV at market value per outstanding series B registered share Earnings per share Information on series A registered shares Series A registered shares issued Number Average outstanding series A registered shares Share in net income attributable to series A registered shares TCHF Applicable number of series A registered shares Number Earnings per series A registered share, undiluted 1 CHF Information on series B registered shares Series B registered shares issued Number Series B registered treasury shares (weighted average) Number Average outstanding series B registered shares Share in net income attributable to series B registered shares TCHF Applicable number of series B registered shares Number Earnings per series B registered share, undiluted 1 CHF There are no potential dilutive effects to report. The diluted earnings per share correspond to the undiluted earnings per share.

16 14 Zug Estates Group Half-Year Report 2018 Notes 4 Property income The reported property income of TCHF (first half 2017: TCHF ) comprises actual rental income and income from the Miteigentümergemeinschaft Metalli. in CHF thousands Actual rental income Income from Miteigentümergemeinschaft Metalli Total property income Proportional gross profit The individual contractual relationships with external tenants had the following terms as at the balance sheet date, based on the annualized projected rental revenue: Term, share in % Under 1 year, incl. unlimited rental contracts Over 1 year Over 2 years Over 3 years Over 4 years Over 5 years Over 6 years Over 7 years Over 8 years Over 9 years Over 10 years Total As at June 30, 2018, the five largest tenant groups together generated 24.6% (as at December 31, 2017: 24.7%) of annualized projected rental revenue. Tenants, share in % Tenants, share in % Novartis 7.1 Novartis 7.2 Migros Migros UBS 4.6 UBS 4.6 Nord Stream 3.3 Nord Stream 3.3 Lucerne University of Applied Sciences and Arts 2.9 Lucerne University of Applied Sciences and Arts Various companies of the Migros Group

17 Zug Estates Group Half-Year Report 2018 Notes 15 5 Segment report The Group s business activities comprise the business units real estate and hotel & catering. in CHF thousands Real estate Hotel & catering Corporate & eliminations Operating revenue Operating expenses Revaluation of investment properties (net) Operating income before depreciation (EBITDA) Operating income (EBIT) Total in CHF thousands Real estate Hotel & catering Corporate & eliminations Operating revenue Operating expenses Revaluation of investment properties (net) Income from disposal of investment properties Operating income before depreciation (EBITDA) Operating income (EBIT) Holding company expenses and inter-segment revenues are eliminated in the Corporate & eliminations column Total All revenues were generated in the canton of Zug. Ownership of the entire portfolio i.e. investment and operating properties rests with the real estate business unit. Based on an integrated view of the hotel & catering business unit, i.e. factoring in all properties used by the unit and all associated expenses and credits arising from rent paid to the real estate business unit, in the year under review the hotel & catering business unit generated operating income of CHF 2.3 million (first half 2017: CHF 2.2 million).

18 16 Zug Estates Group Half-Year Report 2018 Portfolio Portfolio Investment properties Zug City Center site Place Form of ownership 1 Ownership share in % Year of construction Year of refurbishment Baarerstrasse (Metalli I/II, Zug Estates share) Zug M /1991 Baarerstrasse 14a (Metalli III) Zug A Industriestrasse 13a/c (Metalli IV) Zug A Industriestrasse 16 (leasehold) 2 Zug BR-P 100 Industriestrasse 18 Zug A Haldenstrasse (Haldenhof) Zug A Residential development Haldenstrasse/Metallstrasse/ Bleichimattweg Zug A Total Zug City Center site Suurstoffi site Suurstoffi 5, 9, Risch Rotkreuz A /2012 Suurstoffi Risch Rotkreuz A Suurstoffi 7, 11 (Alte Suurstoffi) Risch Rotkreuz A 100 ca Suurstoffi 8 12 Risch Rotkreuz A Suurstoffi 14 Risch Rotkreuz A Suurstoffi Risch Rotkreuz A Suurstoffi 41 Risch Rotkreuz A Total Suurstoffi site Other Hofstrasse 1a/b Zug A Rote Trotte Baar S Total other Total investment properties (excl. investment properties under construction) Investment properties under construction Suurstoffi 22 (Baufeld A) Risch Rotkreuz A Suurstoffi 37/39 (Aglaya) Risch Rotkreuz A /2019 Suurstoffi 1 6 (Lucerne University of Applied Sciences and Arts) Risch Rotkreuz A 100 Total investment properties under construction Undeveloped plots Suurstoffi site Risch Rotkreuz A 100 Total undeveloped plots Total real estate portfolio 3 Operating properties 3,4 Zug A/S 100 Total portfolio 1 SO: sole ownership; LHP: leasehold plot; CO: co-ownership; C: condominium 2 Zug Estates AG is the ground lessor 3 Information on floorspace and number of parking spaces excludes properties under construction 4 The following properties located in Zug serve completely or partly as operating properties: Industriestrasse 14 (Parkhotel Zug), Industriestrasse 16 (Résidence), Metallstrasse 20 (City Garden Hotel), Haldenstrasse 9, 10, 11 (Serviced City Apartments), Baarerstrasse 30 (Restaurant Bären) and Industriestrasse 12 (Zug Estates offices)

19 Zug Estates Group Half-Year Report 2018 Portfolio 17 Plot area m 2 Residential m 2 Office m 2 Retail m 2 Hotel/catering m 2 Leisure/ cultural/ education m 2 Storage/other m 2 Total rentable space m 2 Total no. of parking spaces

20 18 Zug Estates Group Half-Year Report 2018 Portfolio Additional information in CHF thousands or % Book value Book value Projected rental revenue Projected rental revenue Vacancy rate Vacancy rate Zug City Center site, Zug Suurstoffi site, Risch Rotkreuz Other Investment properties Investment properties under construction Undeveloped plots Total real estate portfolio Operating properties Total portfolio Due proportion of fair value and projected rental revenue for (co-owned) property at Baarerstrasse 20 22, Zug 2 In accordance with financial reporting principles, operating properties are stated at cost less write-downs. Wüest Partner AG estimated the fair value as at December 31, 2017 at TCHF (December 31, 2016: TCHF ) Additional information on Suurstoffi development project, Risch Rotkreuz Occupancy level by floor area (commercial units) or number (residential units) Suurstoffi Residential 100% 100% Student accommodation 100% 100% Commercial 84% 81% Suurstoffi 22 Commercial 70% 60% Suurstoffi 37/39 Commercial 0% 0% Suurstoffi 1 6 Commercial 69% 69% Stand for promotional properties based on number (residential use) Suurstoffi 37/39 Residential 84% 70% Completion Suurstoffi 22 Summer 2018 Suurstoffi 37/39 Q Development pipeline Suurstoffi 22, approx. 600 workplaces, Amgen, Arval, Mobilezone, AB InBev Suurstoffi 37/39 (Aglaya), 85 condominiums, approx. 100 workplaces Suurstoffi 1 6, Lucerne UASA campus Investment: approx. CHF 55 million Projected rental revenue p.a.: approx. CHF 3.0 million Investment: approx. CHF 100 million (promotional share: approx. 92%) Projected rental revenue p.a.: approx. CHF 0.5 million Investment: approx. CHF 185 million Projected rental revenue p.a.: approx. CHF 8.0 million Suurstoffi 43/45 Investment: approx. CHF 70 million Projected rental revenue p.a.: approx. CHF 4.0 million Zug City Center site, development vision 2030 Design phase Construction phase Development potential Investment: approx. CHF million ][

21 Zug Estates Group Half-Year Report 2018 Contact and upcoming events 19 Contact details and upcoming events Contact Investor Relations Mirko Käppeli, CFO T ir@zugestates.ch Address Zug Estates Holding AG Industriestrasse 12 CH-6300 Zug T ir@zugestates.ch Agenda Publication of the Annual Report Annual general meeting of shareholders Publication of the Half-Year Report 2019 Exchange trading Series B registered share Zug Estates Holding AG Securities number: ISIN: CH Ticker symbol SIX Swiss Exchange: ZUGN Bloomberg: ZUGN:SW Online, download, print This Half-Year Report is published in German and English. The German version shall prevail and be binding. The electronic version of the report can be downloaded from A copy of the printed Half-Year Report can be ordered by mail from ir@zugestates.ch. Notes on possible forward-looking statements: The present Half-Year Report of Zug Estates Group may contain forward-looking statements. Such statements can be identified by expressions such as shall, assume, expect, anticipate, intend, aim, future or similar terms, as well as by discussions of strategies, goals, plans or intentions, etc. They are subject to known or unknown risks and uncertainties that could cause actual results and occurrences to differ materially from the expectations contained or implied in the forward-looking statements. Publishing information Editor Zug Estates Holding AG Project management Philipp Hodel, Head of Corporate Communications Copyrights Zug Estates Holding AG, September 2018 Concept/design/production Linkgroup AG, Zurich, Print Printed on climate-neutral FSC-certified paper

22 A Zug Estates Holding Halbjahresbericht 2017 Titel Zug Estates Holding AG Industriestrasse 12 CH-6300 Zug