All goals met
In 2021, HIAG met all goals, bolstered its strong position in the Swiss real estate market and considerably improved the key financial figures. All development projects progressed according to plan and the vacancy rate continued to decrease. In the transaction business, logistics and development properties with commercial uses and long-term leases were acquired. A large portion of non-strategic real estate slated for divestment was able to be sold profi tably and more quickly than planned. The placementof a seven-year fixed-rate bond at attractive conditions and the successful capital increase sustainably shored up the company’s core financing. The Board of Directors and Executive Board have been strengthened with the election of a finance specialist and a real estate specialist, and the entry of the new CFO.
Marco Feusi, CEO, and Rico Müller, CFO, in an interview with real estate specialist Beat Seger
What were the most important events of the business year 2021?
Marco Feusi: In Niederhasli, the development of a sub-site was successfully completed with the handover of the new office building to Doka Schweiz. This paves the way for the planning of the future centre near the railway station. We are jointly developing about 300 apartments, business premises, restaurants and spacious green spaces with the municipality and SBB Immobilien on an approximately 17,000 m² site. In Cham, we were granted the building permit for the first stage of our CHAMA project, where HIAG is building around 140 apartments and condominiums and 3,000 m² of flexible-use office, service and commercial space. Construction is planned to start in spring 2022. The adjustment of the reconstruction plan for the second stage with about 140 apartments is also well under way. In Pratteln, the master plan was completed using the study for urban planning study, and the quarter planning process for the centrally located HIAG site has begun. In Zurich, we made a breakthrough in close cooperation with the city. HIAG will be building a high-rise apartment building with a retail section at its site in the up-and-coming Altstetten quarter. Other important events included the successful placement of shares in the fourth quarter, the completion of the Board of Directors with the election of a finance specialist and a real estate specialist, as well as the handover of the CFO position to Rico Müller.
Rico Müller: In the yielding portfolio, we proved the quality of the portfolio along with HIAG’s management skill with several successful follow-on leases. The vacancy rate was further decreased. In Brunegg, we were able to sign a seamless follow-on lease for a logistics property. The contract with an established Swiss whole sale distributor will run for 10 years and the rent reflects the high demand for well-located logistics areas. The commercial site in Kleindöttingen is almost fully leased. Options for densification through replacement constructions are currently being reviewed. At “The Hive” technology campus in Meyrin, the training pavilion of the international catering company Luigia and the new global headquarters of the electrical components manufacturer LEM were handed over.
How did demand for surface area evolve?
MF: The rental situation in Kleindöttingen and the revival of demand in Biberist show that demand is looking good in the secondary sector. Demand for quality rental space for industry and retail is still on the rise. Unlike with residential use, we go about creating commercial space only if we have a good pre-leasing situation, which reduces the investment risk. We put in preliminary work on planning and infrastructure development and are therefore able to respond quickly to inquiries. That gives us a competitive advantage for the rental. In Aathal and Dietikon, we were able to rerent around 1,200 m² of retail space at attractive rental levels. That indicates a certain uptrend in demand in the stationary non-food segment, which is still struggling.
Does the Swiss real estate market still off er suitable properties for acquisition?
RM: Thanks to its land reserves, HIAG has strategic room to manoeuvre and is not under any pressure to buy or build. The objective is to continually increase profitability and realise the potential in our development pipeline in the long term.
MF: It should be noted that HIAG’s potential really shows when high-quality projects for long-term leasing agreements are implemented. We have the surface area. Market demand determines the time of project realisation. Our acquisitions should be viewed with this in mind.
What sets HIAG’s portfolio apart from other real estate companies listed on the Swiss stock exchange?
MF: The large land reserves and the above-average development pipeline. Our real estate portfolio is fairly valued and off ers a strong basis for HIAG’s positive performance in comparison with the changes in ownership that can be seen in the transaction market. Solid development margins are also among HIAG’s strengths.
How does HIAG manage economic cycles at sites with a large amount of retail space?
MF: We review our tenants’ creditworthiness in detail and analyse which sectors they operate in, which segments they cover, how diversified they are and what market position they hold. This has turned out to be an eff ective protection against economic fluctuations.
RM: Our proximity to tenants and our partnerships based on mutual trust are equally important. The economic consequences of the pandemic were therefore marginal for HIAG in 2021.
HIAG’s third strategic pillar is the transaction business. What is HIAG’s approach?
MF: We are consistently looking for opportunities that fit into our portfolio. This involves a lot of work for the entire organisation. With the transaction business, we continually increase the quality of our portfolio. The rental income from acquisitions of yielding properties with long-term leases strengthens cash flows. It is the cornerstone of our dividend policy. Acquisitions of development properties extend and broaden the project pipeline and off er potential for value growth. In addition, the sale of non-strategic properties allows regular and substantial net profit.
RM: Divestments are part of our capital recycling strategy. We use the profits to finance the development of our real estate portfolio, among other things.
What goals are you pursuing through your sustainability reporting?
RM: After publishing a sustainability report for the first time last year, we have now gone one step further by applying the GRI Standard. The choice of the “core option” aff ords us a certain pragmatism without sacrificing the quality of our reporting. During the reporting year, we strengthened our team with a dedicated sustainability specialist, and the Board of Directors approved the Sustainability Strategy 2025. As President of the Audit Committee, the President of the Board of Directors is currently responsible for sustainability on the Board of Directors. As CFO, I am the one in charge of this topic on the Executive Board.
How is the HIAG Solar joint venture coming along?
MF: The cooperation with aventron, our joint venture partner, works extremely well. To date, four facilities with an output of more than 1 MWp are connected to the grid. Another six units totalling 2 MWp will be put into operation by mid-year. By the end of the year, another three units with 1.7 MWp are planned. We are aiming at an output of around 6 MWp by 2024. HIAG currently makes 140,000 m² of rooftop surface area available and acts as a point-of-contact for customers at our sites, while aventron takes care of the technology, installation and operation. The aim is to achieve the highest possible captive consumption at the HIAG sites. It helps that tenants’ interest in solar power has increased significantly.
What does HIAG’s digital roadmap look like?
RM: Digitisation is an important part of the Strategy 2025. Our goal is to increase effi ciency across the entire organisation. Consequently, digitisation also includes cooperation with our partners, tenants and suppliers. Therefore, in addition to data availability and quality, it is also important that we retain data sovereignty and ensure data security.
MF: In order to keep pace with the dynamics of digitisation, we also work with “PropTech” companies in order to generate added value for our users at the sites.
Two bonds will come due in 2022. What do you have planned?
MF: HIAG can look back on a very successful business year 2021. All goals were met. The key financial figures also improved considerably. I am therefore convinced that we have a good starting position for the future refinancing.
RM: In terms of debt, we continue to prefer bonds for basic financing, and as far as variable financing is concerned, we are currently evaluating various alternatives. With the proceeds from the capital increase, we were able to pay back a large part of our mortgage-backed loans and we are now preparing a new financing model.
What makes HIAG stand out?
MF: HIAG achieved record results in 2021, to which all three business units made signifi cant contributions, and has attractive growth potential. Our development pipeline and value increasing potential are above average in the Swiss stock exchange. Our portfolio and asset management are characterised by efficiency and close proximity to our tenants. We have also demonstrated our strength in the transaction business.
RM: HIAG’s business model is unique in the Swiss real estate market; unlike in the Anglo-Saxon financial market for example, it is still little known here. We will therefore not only provide transparent information about business performance in the future, but also increasingly discuss our strategy and HIAG’s attractive risk/return profile with our stakeholders.