Switzerland’s biggest property company, Intershop Holding AG, is going through a period of turbulence following changes in ownership and management. In the six months to June 1997 profits fell dramatically, but this was due to one-off capital gains in the equivalent period of 1996, and to a further SFr 19m write-down of Intershop’s 16.7% stake in the French property company Interbail. The only sale of any size during the first half was the disposal of a 22.5% stake in the 16,000 m2 Illuster Shopping Centre in the Swiss city of Uster, realising a small profit. This is in keeping with a new policy of avoiding minority interests.
For the full year the company is forecasting net profits of SFr 45m, up from SFr 23m in 1996. But to achieve this, significant sales will be necessary. Intershop has already decided to close down its US operation, which had accounted for 39% of the portfolio and contributed 30% of profits. The 19 US properties include several sizeable holdings like the Thornton Town Center in Thornton, Colorado, which totals 50,428 m2 and the 52,000 m2 Village Mall in Danville, Illinois.
Also earmarked for liquidation is the separate US property company IPU Intershop, in which Intershop holds a 22.28% stake. IPU owns, or part owns, 16 properties totalling 170,000 m2 across the US. At the December year end, the value of IPU’s stake was $96m. The IPU and Intershop portfolios are now being marketed together. Offers have been received for some of the company’s Swiss shopping centres and, if these progress, then net profits this year could be higher than forecast.
These moves reflect a radical change in direction as the company transforms itself from a long-term investor into a property trader. The company has set itself the target of achieving a 15% return on equity by the year 2000, compared with the current return of less than 10%.
Intershop’s largest shareholder has always been the Winterthur insurance group, but recently Martin Ebner’s BZ group has been building its own separate stake in Intershop. Through a vehicle called Stillhalter Vision, BZ now controls 29.1% of the shares, giving Ebner an effective stranglehold on the company.
Ebner’s motivation is profit rather than asset growth, hence the change in emphasis at Intershop. From now on the company will aim to develop properties and sell them on within three to five years.
To achieve the required return, Intershop is also targeting higher-yielding markets, notably the Czech Republic, where it now has three retail developments in and around Prague. The 36,000 m2 Cerny Most shopping centre, anchored by Globus and Marks & Spencer, is about to open. A second scheme, Praha West, is about to start on site. Again Globus is the anchor tenant, supported by a range of smaller units. And a third site has recently been acquired at Chodov, south of the city centre.
Proceeds from the US disposals will be reinvested within Switzerland itself, where the company is adopting an opportunistic “bottom fishing” strategy. To this end it has set up a new subsidiary, Schweitzerische Gessellschaft fur Immobilien (SGI), which will have SFr 1bn to spend on buying properties from the banks with a view to reselling at a profit. So far this year, SGI has spent SFr 100m, and purchases include a portfolio from Swiss Bank Corporation.
Chairman Jacques Mller stepped down at the end of May, to take up a new post as chairman of the hotel and leisure group Moevenpick. His place on the Intershop board was taken by BZ’s managing director, Kurt Schiltknecht.
Half year ended 30/6 (SFr m)
|
1997 |
1996 |
|
|
operating revenue |
90.8 |
85.1 |
|
operating expenses |
64.8 |
59.2 |
|
operating profit |
26.0 |
25.8 |
|
pre-tax profit |
14.2 |
73.6 |
|
net profit |
6.6 |
57.3 |
Intershop Holding AG
Bleicherweg 33
8002 Zurich
tel +41 1 283 4600
fax +41 1 283 4610
