A solid first half year 2020

SF Urban Properties Ltd (SFUP) (SIX Swiss Exchange: SFPN) looks back at a solid first half-year 2020. Intensive support of our tenants as well as continuous optimisation of operating expenses paved the way for solid results despite all the adverse effects resulting from COVID-19.

Consolidated first half-year 2020 results

Property income declined by 5.5% in the first half-year 2020 due to booking COVID-19-related risk provisions of CHF 0.74 million and setting up allowances for bad debts of CHF 0.2 million. In the wake of years of diminshing initial returns, revaluation effects were less pronounced. The contribution from revaluations to the total results amounted to CHF 0.8 million in the first half-year 2020 (PY: CHF 2.0 million). Net profit excluding revaluation effects decreased year-on-year by CHF 2.0 million to CHF 5.5 million. Overall, EBIT dropped to CHF 8.6 million (PY: CHF 11.9 million). Accordingly, the EBIT margin edged down to 62.6% (PY: 73.6%). Earnings per share (EPS) excluding revaluation effects amounted to CHF 1.64 (PY: CHF 2.22), while equity (NAV) per listed share was CHF 95.62 as at 30 June 2020 (30 June 2019: CHF 91.92).

In which form the financial consequences of the emergency restrictions and prohibitions will ultimately be resolved politically is still up in the air. SFUP from the outset has been eager to find long-term solutions with roughly 65 tenants that are oriented toward the political guidelines currently in effect. The financial impact amounted to CHF 0.74 million in the first half-year 2020. With a view toward the overall year 2020, we estimate the impact here at less than 3% of annual net rental income.

Real estate portfolio

The Company’s strategy is still focused on the cities of Zurich and Basel. The value of the portfolio edged up marginally in the first half-year 2020 from CHF 647.8 million to CHF 648.5 million due to appreciation gains. The reporting period-based vacancy rate declined even further to 2.5% in the first half-year 2020 (PY: 3.1%) thanks to the proactive leasing strategy. As at the reference date 30 June 2020, the vacancy rate amounted to just 2.3% (PY: 2.4%).

Ongoing projects

The Company achieved significant progress with regard to ongoing projects. For instance, all ten residential units of the development project located at Sandreuterweg 39 in Riehen have been reserved or paid on account already at the present time. Transfer of ownership for the property at Klusstrasse 38 in Zurich has been carried out in the interim. The trading property comprising roughly 14 apartments is undergoing further development. The relevant building permit was granted in July 2020. The building permit for the project located at Elsässerstrasse 1+3 in Basel is expected to be granted in the third quarter of 2020. Additional supplementary types of use for the Walzwerk Site Münchenstein/Arlesheim are under review on an ongoing basis. SFUP decided in May 2020 to divest its 50% co-ownership stake in the property at Badenerstrasse 425-431 in Zurich. The purchase agreement with acquisition price of CHF 27.25 million was signed on 28 August 2020. Net profit after deducting property gains tax amounts to roughly CHF 7 million.

Solid financing

The Company’s equity ratio edged down slightly from 46.5% at the end of 2019 to 46.0% at the end of June 2020. The average interest rate including swaps for interest-bearing borrowed capital amounted to 1.63% in the reporting period versus 1.52% as at the end of 2019. The average fixed interest period declined insignificantly in the first half-year 2020, from 9.2 years at the end of 2019 to 8.8 years at the end of June 2020.

Outlook for second half-year 2020

The focus of the second half-year is directed at maintaining the very low vacancy rate. The focal point with regard to development projects in the next six months is aimed at marketing. The Board of Directors and management are convinced that sufficient precautions have been taken for the second half-year 2020 with the initiated measures. Expectations continue to point to impressive financial results for 2020, which paves the way for continuity of the attractive dividend policy to date.