Continued demand for prime investment properties has ensured good growth in real estate markets. Under these conditions, and thanks to active portfolio management, Swiss Prime Site once again has very good results to report for the 2019 financial year.

Operating income rose by 3.7% to CHF 1 258.8 million, with the Real Estate and the Services segments making a positive contribution to this pleasing growth. The core real estate business increased income by 2.0%. Real estate-related Services increased their contribution to the group by 4.8% compared to the previous year. The value of the real estate portfolio grew by 5.0% to CHF 11.8 billion during the course of the year. The vacancy rate fell to 4.7% [4.8%] and, together with an attractive net yield of 3.5% [3.6%], reflects the quality of the portfolio. Profit rose significantly to CHF 608.5 million [CHF 310.9 million]. In addition to operating improvements, higher revaluations in the real estate portfolio and a one-off positive tax effect caused by tax cuts in some cantons contributed to this pleasing result.

For 2020, Swiss Prime Site expects economic and political conditions to be similar to those of the previous year. This should create a wide range of opportunities for both us and the real estate industry. In 2020, completed project developments, active asset, portfolio and vacancy management, recurring income from real estate developments and the continued realisation of the project pipeline will have a positive impact on the operational and strategic goals in the core real estate business. We expect solid contributions from the real estate-related Services segment. Selling the Tertianum Group will result in a one-off increase in profit excluding revaluations and deferred taxes. We will maintain an attractive dividend policy.

I would like to thank our valued shareholders, customers and partners for your trust and support. My thanks also go to all employees and the management across the entire Swiss Prime Site Group. In my time as a member of the Board of Directors and as its Chairman, we have all worked together to help Swiss Prime Site become a successful company in the real estate industry.

Prof. em. Dr. Hans Peter Wehrli
Chairman of the Board of Directors

2019 was a successful year for Swiss Prime Site. Operating income rose by 3.7% to CHF 1 258.8 million, with both the Real Estate and the Services segments making a positive contribution to this pleasing growth. The core real estate business increased income by 2.0%. Real estate services increased their contribution to the group by 4.8% compared to the previous year. The value of the real estate portfolio grew by 5.0% to CHF 11.8 billion during the course of the year. The vacancy rate fell to 4.7% [4.8%] and, together with an attractive net yield of 3.5% [3.6%], reflects the quality of the portfolio. Profits rose significantly to CHF 608.5 million [CHF 310.9 million]. In addition to operating improvements, increases in value in the real estate portfolio and a one-time positive tax effect arising from tax reductions in some cantons contributed to this result. Swiss Prime Site anticipates that operating results will improve across 2020 before revaluations and deferred taxes. This includes a material profit from the sale of the Tertianum Group.

After a good start to the year, the Swiss economy had a subdued performance in the second half of 2019. Global uncertainty led to weaker international demand for Swiss goods and services, while the revaluation of the Swiss franc also hindered growth. As a result, the domestic economy slowed down despite generous refinancing opportunities. However, attractive interest rates for real estate and high demand for prime investment properties led to growth in Swiss Prime Site’s area of the real estate market. Under these conditions, and thanks to active portfolio management, Swiss Prime Site once again has good results to report for 2019.

The core real estate business contributed the lion’s share to the growth of the group. Viewed over the whole of the 2019 financial year, 128 000 m2 (~8% of rentable space) was let or re-let. Swiss Prime Site Immobilien made some adjustments to the portfolio selling smaller properties during the course of the year. The sale of commercial floor space in condominium ownership of a building in the Espace Tourbillon project in Geneva is proceeding as planned. The first sales of various plots were completed in the second half of the year. Some tenants have already moved into the modern and architecturally open YOND in Zurich-Albisrieden. At the Schönburg in Berne, almost all of the 142 residential properties and retail spaces have been handed over to tenants. The hotel with 180 beds is scheduled to open in 2020. Additional projects under construction, with a total of around CHF 560 million in the pipeline, are well under way. The existing buildings in the major JED project in Schlieren will be tailored to the requirements of the two anchor tenants. In the second half of 2019, a catering provider was selected to operate a range of restaurant and event spaces on the site. This should further increase JED’s appeal. In the Stücki Park in Basel, good progress is being made in the construction of the office and laboratory spaces in the first stage. At the DIY store a1 in Oftringen, the first renovated spaces are now back in use. A further eight development projects are currently planned. The total investment in this project totals around CHF 940 million. Both assisted living projects in Olten and Paradiso have been fully let to Tertianum. The construction projects in Lancy (Alto Pont-Rouge) and Basel-Stadt (Stücki Park) are in demand. The building permit for the JED new building (2226) in Schlieren has been issued. The architecture tender for the maaglive project in Zurich-West started in autumn 2019.

The Services segment grew in line with expectations. In a challenging market, Wincasa slightly increased managed real estate assets to CHF 71.0 billion. At the same time, the digital transformation of the business model is proceeding at full speed. Jelmoli expanded its range of services to optimise the customer experience on offer. As well as a Breitling bar, Pallas Kliniken opened its new aesthetics flagship location in the premium department store in the heart of Zurich in 2019. Tertianum made more progress with its growth strategy than planned, increasing operating efficiency and adding value for guests by improving its digital offering. Ahead of schedule, Swiss Prime Site Solutions renewed the contract to collaborate with the Swiss Prime Investment Foundation and significantly increased its assets under management compared to the previous year to CHF 2.3 billion.

Swiss Prime Site reported a 3.7% increase in operating income to CHF 1 258.8 million in 2019, with both segments making a positive contribution to this growth. In the core real estate business, performance was in line with expectations and operating income increased to CHF 519.5 million. The increase of CHF 10.3 million or 2.0% was primarily due to the increase in income from real estate developments. Active vacancy management and forward-looking letting and renewal activities also contributed significantly to this result. The property portfolio achieved a value of CHF 11.8 billion, growing by 5.0% compared to the end of 2018. As at 31 December 2019, Swiss Prime Site’s stock comprised a total 187 high-quality real estate properties [end of 2018: 190 properties]. At 3.5% [3.6%], the net yield is at an attractive level in the market for prime investment properties. The vacancy rate of 4.7% is slightly lower than the previous year.

In the Services segment, operating income rose by 4.8% to CHF 828.4 million in 2019. Wincasa increased income from real estate services by CHF 148.1 million (+2.5%) compared to the previous year. The digitalisation of the business model and the accompanying cultural change is being systematically implemented. The portfolio of real estate managed by Wincasa reached a market value of around CHF 71 billion. Jelmoli – The House of Brands achieved income from retail of CHF 127.8 million [CHF 131.3 million]. In challenging market conditions, the premium department store accelerated the expansion of its services and brand offerings. Tertianum expanded its network of residential and care centres. The company now has more than 80 locations across Switzerland and achieved income from assisted living of CHF 423.9 million (+6.8%) in 2019. Swiss Prime Site Solutions conducted two capital increases for the Swiss Prime Investment Foundation, resulting in significant acquisitions. Assets under management thus increased from CHF 1.6 billion to CHF 2.3 billion. Income from asset management rose significantly by 60.2% to CHF 13.5 million [CHF 8.5 million].

Swiss Prime Site’s operating result (EBIT) jumped by 31.3% to CHF 628.3 million [CHF 478.6 million]. The Real Estate segment contributed the lion’s share of this increase. EBIT from core business reached CHF 572.9 million (+32.9%). This includes revaluations of CHF 204.4 million [CHF 68.3 million]. The growth reflects the generally high appeal and quality of the real estate in the portfolio. In particular, the property at Müllerstrasse 16, 20 in Zurich made a major contribution to this growth due to a big revaluation gain after a new, long-term contract was signed. As at the end of 2019, the weighted average real discount rate stood at 3.06%. This was 16 basis points below the previous year’s figure. Excluding revaluations, EBIT also rose by 3.4% to CHF 424.9 million [CHF 411.1 million]. The pro rata pre-tax profits of the sold development projects in Plan-les-Ouates (Espace Tourbillon) and Berne (Weltpost Park), a retail property in Geneva sold in the first half of the year and additional sales in the second half of 2019 totalled CHF 37.6 million. The operating expenses of the Real Estate segment increased by CHF 6.3 million to CHF 171.4 million [CHF 165.1 million]. This increase is primarily due to expenses in connection with the property developments sold.

The Services segment produced EBIT of CHF 55.5 million [CHF 47.6 million]. Tertianum and Swiss Prime Site Solutions achieved particularly strong operating results. The growth of the network and efficiency gains enabled Tertianum to contribute to this growth. With two capital increases and several portfolio acquisitions for the Swiss Prime Investment Foundation, Swiss Prime Site Solutions almost doubled its results. Despite the transformation process, Wincasa almost maintained its results from the previous year. In 2020, the real estate service provider is set to increase investment in digitalising the business model. Jelmoli’s results were less than the previous year’s due to the challenging bricks-and-mortar retail trade environment. The operating expenses of the Services segment rose by 3.9% to CHF 771.9 million [CHF 742.6 million]. The increase of CHF 29.3 million is due to increased personnel costs connected to the growth of the group company Tertianum. The Swiss Prime Site Group employed a workforce totalling 6 506 persons [6 321] on the balance sheet date.

Swiss Prime Site achieved a large profit of CHF 608.5 million [CHF 310.9 million] in 2019. This was due to operational improvements, higher revaluations and the release of deferred tax liabilities amounting to CHF 172.5 million from cantonal tax rate reductions. Attractive refinancing and higher recognised borrowing costs connected to real estate developments reduced financial expenses to CHF 70.7 million [CHF 75.8 million]. Excluding revaluations and deferred taxes, profit amounted to CHF 315.7 million (+9.7%). Earnings per share (EPS) rose clearly to CHF 8.00 [CHF 4.27]. Excluding revaluations and deferred taxes, EPS was CHF 4.14 [CHF 3.95], including an increase of 4.6% in the weighted number of shares.

Swiss Prime Site issued two bonds on the capital market in 2019 – an 8-year, 1.25% bond of CHF 350 million and a 12-year 0.375% bond of CHF 170 million. The weighted average interest rate fell to 1.2% [1.4%]. The weighted average residual term to maturity of interest-bearing financial liabilities was 4.2 [4.3] years. The comparison between the interest rate on financial liabilities of 1.2% and the net yield of 3.5% achieved on the property portfolio shows that the interest rate spread remains attractive at 2.3% [2.2%].

As at the end of 2019, the equity ratio of Swiss Prime Site stood at solid 44.4% [43.9%]. The loan-to-value ratio of the property portfolio was 45.7% – virtually unchanged from the previous year [45.3%]. At CHF 71.87 per share, the NAV after deferred taxes was 6.1% higher than the previous year’s figure. This takes into account the withholding tax-free distribution of contribution reserves of CHF 3.80 per share as at 4 April 2019. Swiss Prime Site’s return on equity reached 11.5% [6.4%] and is above the Company’s long-term target, primarily due to the aforementioned one-off effect.

For 2020, Swiss Prime Site expects the economic and political conditions to be similar to those of the previous year. This should create opportunities, for both the Company and the real estate industry. The completion of development projects, active asset, portfolio and vacancy management, recurring income from real estate development projects and the realisation of the project pipeline will help the group achieve its operational and strategic goals in the core real estate business in 2020. Swiss Prime Site anticipates contributions from the real estate-related Services segment as planned. Selling the Tertianum Group will lead to increased profit before revaluations and deferred taxes and to a change in the income statement and balance sheet structure. The Company will maintain an attractive policy on dividend distribution to shareholders.