Industries – Real Estate & Construction

REAL ESTATE & CONSTRUCTION

The real estate industry is an important part of the Swiss economy. According to a study published by the Swiss Homeowner Association (HEV), the Federal Office for Spatial Development (ARE) and the Federal Housing Office (BWO), the real estate industry contributes 18% to Switzerland’s GDP and approximately one sixth of all Swiss employees is associated with this industry.

YOUR CONTACT PERSON

Christian Gätzi, CFA
Partner
christian.gaetzi@ifbc.ch

CURRENT TOPICS & CHALLENGES

Digitalisation

The pressure for digitization is also increasing in the real estate and construction industries. Building Information Modelling (BIM)-based planning, execution, management of real estate and the communication through social media between tenants and administration are becoming increasingly important.

Sustainable trend towards real estate investments

Despite historically low returns, the trend towards real estate investments continues. However, this is more due to the lack of investment alternatives than to the market prospects in this sector.

Preparing for the possible downturn

While capacity utilisation in the construction industry is still high, future orders in this sector are uncertain. The likelihood of a downturn, especially in the fields of building construction, seems to be increasing.

Rising interest rates increase the likelihood of market corrections

Rising interest rates reduce valuations for real estate on the one hand and increase the attractiveness of alternative investment opportunities on the other.

The increase in vacancies reflects the emerging structural problem in the real estate sector

The declining immigration, the trend towards innovative working models such as home office and the increasing relevance of online shops are leading to an increase in vacancies both in rented apartments and in office and retail space.

High proportion of administrative expenses at real estate companies

A higher share of administrative expenses in relation to total costs of a real estate companies reduces its market value compared to the net asset value. Therefore, real estate companies that can exploit economies of scale have a competitive advantage over small providers.

NOTABLE RECENT TRANSACTIONS

Baloise acquires PAX Anlage

In March 2017, the insurance company Baloise acquired the PAX Anlage with a real estate portfolio of CHF 425 million.

Talbot acquires ImmoMentum

In August 2017, Talbot made a public takeover bid for the outstanding shares of ImmoMentum. The acquired real estate portfolio had a value of CHF 266 million.

Investis acquires 50% of Polytech Ventures Holding SA

Polytech Ventures Holding SA promotes innovative start-up companies in the field of digitization. The acquisition is intended to accelerate the digital transformation of the Investits Group.

M&A TRENDS AND MARKET ANALYSIS

NAV multiples of Swiss real estate companies (before deferred taxes)

Median
75%-Quartil
25%-Quartil
>

  • NAV values after deferred taxes are not fully comparable as the various companies calculate their deferred taxes differently. We therefore show NAV multiples before deferred taxes as comparable values.
  • Since the end of 2013, the median ratio between NAV per share and the share price has risen from 0.8x to 1.1x and is now at its highest level since end of 2012.

EBITDA multiples of listed European real estate agencies and managers

Median
75%-Quartil
25%-Quartil
>

  • The EBITDA multiple shown is based on the Enterprise Value at the respective time and the EBITDA of the last 12 months.
  • The EBITDA multiples of European real estate agencies and managers are relatively volatile. This is particularly due to the low average capitalization of peer group companies.

EBITDA multiples of listet European construction companies

Median
75%-Quartil
25%-Quartil
>

  • The EBITDA multiple shown is based on the Enterprise Value at the respective time and the EBITDA of the last 12 months.
  • The median of the European construction companies stays within a narrow range. Between end of 2012 and 2017, the median fluctuated between 7.0x and 9.4x.
  • Since mid-2016, the median has increased to 9.4x by end of 2017, whereby the bandwidth of the multiples has increased significantly.