René (RZ), how was the 2024 financial year from your view?

RZ: The market environment for real estate in Switzerland started the year on a solid footing and gradually improved as the year progressed. We can point to very good results with significant growth in earnings: Funds from operations per share (FFO I) increased by 4.2% to CHF 4.22. Many areas contributed to this result. We increased rental income by 6% to CHF 464 million with the first-time letting of several new buildings and also achieved growth of 3.3% on a like-for-like basis. In our own property portfolio, we achieved efficiency gains with our focussed building stock and further streamlined our portfolio with sales. The other strategic business area – Asset Management – was dominated by the acquisition of the Fundamenta fund assets of CHF 4.2 billion in the first half of the year. This was followed by major capital increases for various products, especially in the second half of the year. The renewed investment appetite on the part of investors has had an extremely positive effect on our range of products in Asset Management in 2024. In summary, I am very pleased to see that our two-pillar strategy is bearing fruit.

Marcel (MK), how do you gauge the market conditions in general?

MK: The Swiss National Bank implemented several interest rate cuts over the past year, which has made investments in real estate even more attractive. We anticipate that the popularity of real estate as an investment category will endure and even increase. Currently, yields on Swiss government bonds are not much more than 0%. Real estate continues to yield around 3% or more, depending on the location and category, and offers protection against inflation with linked rents. This differential makes the investment class attractive in two ways. First, as an investment class, real estate tends to attract yield oriented investors. Second, favourable external financing can further enhance real estate yields. This effect applies across all areas: pension funds and insurance companies buy more properties with their new assets, private investors can get better financing again and investors of all types are buying more indirect investment products.

And of course what’s always most important for real estate – we are experiencing solid economic growth with a growing population and close to full employment. This means that office space and residential properties are in demand.

A good segue: what does that mean for letting?
RZ: Basically, growing demand is meeting supply that is trending downward. We see this in particular in the number of new building permits in the country, which has been falling for a long time. If we look one level lower, we see that there is particular demand for very good locations and quality and/or modern buildings, while properties in outer areas with poor connections and lower quality are harder to let. In the retail market we have a more positive outlook than before; it seems to have reached a certain balance between online and offline sales, and areas frequented by the public are in demand once again. We also see this in the rise in turnover rent at our locations. Some people are even talking about a «retail renaissance», although personally I would not go quite so far. In our Infrastructure segment, where we let laboratories and production spaces primarily to the life sciences sector, the completed extensions on the Stücki Campus in Basel were a great success. The residential market, which we cover through our Asset Management business, continues to develop very well, with steady population growth in the metropolitan regions. In this area we are seeing that investment from pension funds in particular is on the up again, and they are looking for investment products.

What happens next, after the closure of Jelmoli?
RZ: Jelmoli will close its doors for good at the end of February 2025, and naturally we view this with mixed feelings. The closure of the Jelmoli department store after around 190 years brings an impressive business story to an end, which is emotionally challenging for its employees and loyal customers. We are very conscious of this. On the other hand, the spirit of Jelmoli, this department store steeped in tradition, with its long-term focus and sustainable repositioning, will be preserved. So we are very happy to have received the enforceable building permit for the building modification in November, following extensive planning and preparatory works. And if we look a little further into the future, we are delighted that the Manor Group will start moving into the new Jelmoli building in 2027 and will operate a flagship store of around 13 00 m², spread over three floors. With Manor, as well as ultra-modern office space, a fitness club and an inviting rooftop terrace, the Jelmoli building will become a magnet for Zurich, filling it with new life with an appeal that reaches far beyond the city limits. I am personally convinced that our project will make the city centre noticeably more attractive. And I am proud that we will be making a valuable contribution to the positive future development of the inner city.

Jelmoli is probably the most prominent construction project. How are the other projects progressing?
RZ: As a major developer in Switzerland, we currently have a construction volume of around CHF 170 million planned for 2025. On top of that, we have a large project pipeline of an additional CHF 2 billion for subsequent years, which holds great potential. Last year we managed to complete Stücki Park in Basel and the JED new build in Schlieren, with ultra-modern spaces of 70 000 m2 and 15 000 m2 respectively, and handed them over to tenants. The construction project «Maaglive» on the Prime Tower site, with its residential and cultural focus, was somewhat drawn out due to appeals. However, we are confident that here too we will ultimately receive the enforceable building permit. There are major development projects in the wings for 2025 as well. In Zurich-Albisrieden, our goal is to deliver a new example for the development of a sustainably blended neighbourhood. We are creating two replacement new builds for service and commercial use in particular. In the near future, this campus will see social enterprises together with urban commerce and the food industry moving in and stimulating the economy of this neighbourhood within urban residential districts.

The office and retail areas continue to make up the bulk of the portfolio at Swiss Prime Site. Will that remain the case, or are you planning changes?
RZ: Our medium-term goal is for the office area to make up around 50% and retail spaces around 20% of our portfolio. Together with infrastructure, in particular city logistics, laboratories and retirement living, that covers the service-based Swiss economy pretty well. It provides us with a diversified mix, which on the one hand keeps overall risk low, and on the other hand allows us to realise further growth. Our strategy is to let modern office spaces in very good locations. In the coming years, we will be generating substantial stakeholder value with this strategy through developments, particularly in our own portfolio. We have major repositioning projects with a considerable portion of office space planned, for example the Jelmoli building in Zurich and the «Grand Passage» in Geneva.

Let’s talk about the transaction market. What’s your view there?
MK: Activity continually increased in the market in the past year, with the result that we sold 23 properties with proceeds of CHF 345 million. As far as finances are concerned, I can also report that this result was 3% over the last appraisal values – for me, a reassuring indication that the valuers assess the market fairly but conservatively. We must say that we ourselves were somewhat surprised at the momentum towards the end of the fourth quarter, when we had a sales volume of over CHF 200 million. We knew that many funds had sufficient capital after new capital increases and that buyers’ interest in the processes would increase sharply overall, but we had not anticipated the speed. From our perspective, the properties and transactions on offer are becoming larger – and so the buyer mix is changing in the direction of institutional investors. In 2024 we were once again a net seller in the market, and only purchased one very small property for consolidation purposes, as we fundamentally review acquisitions against strict requirements for yields and fit with the portfolio. But with the sustained activity on the transaction market, we have a more optimistic view of 2025 in relation to acquisition opportunities, which we will continue to review very selectively.

Anastasius (AT), let’s look at the Asset Management area. How has the business progressed overall, and in particular with the Fundamenta acquisition?
AT: I’m very satisfied with developments in the Asset Management area over recent years. With the acquisition of Fundamenta we became the largest independent real estate asset manager in Switzerland, by a considerable margin. As at the end of the year, we had CHF 13.3 billion in assets under management. Last year, income totalled CHF 71 million. Looking back, I think that with the interest rate cuts by the SNB, the Fundamenta acquisition was particularly well-timed. Strong investor appetite last year meant that we were able to secure customer funds of CHF 600 million by means of capital increases – with a strong increase in momentum in the second half of the year. The demand for our expertise and our offerings accelerated this.

How do you view the Swiss market for real estate asset managers?
AT: In recent years we have seen consolidation in the asset management landscape, and launching new real estate products has become more challenging. The challenges have increased significantly, particularly in the area of sustainability and from a regulatory perspective, coupled with more complex building permit processes. Our customers have correspondingly higher expectations in relation to professionalism. The rising interest rates in 2022 and 2023 also forced out a number of providers, as it had become harder to generate yields. It remains to be seen whether the latest interest rate cuts will give rise to new competitors again despite the hurdles.

Which products and services can investors at Swiss Prime Site Solutions benefit from?
AT: In comparison with the previous year, an even broader range of products as a result of the Fundamenta acquisition, which complemented our product range with pure residential products and bespoke developments. There are also real estate funds in Germany in our mix, providing Swiss investors with access to the German real estate market. We manage products that are regulated by FINMA or the OPSC1 and geared towards pension schemes. In addition, private investors – amongst others – have the option of making liquid investments in Fundamenta’s listed real estate company with almost exclusively residential properties, and qualified investors can participate in a fund with a commercial focus. But we don’t just offer investment products – we also offer investment-specific services such as advisory mandates for third-party clients.

With the acquisition of the Fundamenta Group, you now have a presence in Germany, as you mentioned. What are your near-future plans for this market?
AT: We have two products in Germany. One of these is also open to qualified Swiss investors. The German market is particularly interesting for investors after the interest rate turnaround and the correction, because Germany also has insufficient residential stock and has built far too little over recent years. So we aim to further strengthen this area of Asset Management and offer clients exciting opportunities.

René, from the group perspective, how will the two segments complement each other in future?
RZ: Following the demerger of the non-­strategic units Wincasa, Tertianum and the Jelmoli retail business and our accompanying focus on the core competency of real estate, we are now operating with a very streamlined structure. Moreover, we can offer our services efficiently and use synergies even better with economies of scale from the group – the keyword here is «platform». We know how the real estate market works, which property strategy is the best fit and how construction projects are implemented. And naturally this expertise is also shared internally between the two segments where it makes sense. We have gained additional expertise with our new colleagues at Fundamenta, who have already been successfully integrated. In the process we simplified infrastructure duplications, for example by maintaining just one joint location, and have already fully integrated the IT.

Marcel, let’s talk about the financing situation. How do you see it?
MK: Almost every day I remind everyone how important it was to move our financing strategy to an unsecured basis and to gear ourselves more towards the capital market. For our portfolio sales, we can proceed at twice the speed as we are not faced with complicated security transfers, and when it comes to new financing we have seen credit spreads widening at the banks. Swiss Prime Site can access a large number of financial instruments – from green bonds and privately placed loans to the classic loan. This means we can always optimise the conditions. Overall, the interest rate moves by the SNB have resulted in massive reductions in the cost for new financing. Here we are talking around a 1% point through the base interest rate alone. So the issue of debt has become a much lower priority for our investors and in the market as a whole. Independent of the market situation, we continue to abide by our targets. We have a resilient property portfolio and that is reflected on the liabilities side too, with a conservative loan-to-value (LTV) ratio of under 40%.

There is currently a lot of talk about a future population of 10 million for Switzerland. How do you view this development?
RZ: Population growth is a reality, and we have to make the best of it. Above all, we should be creating more supply for the increasing demand now. The real estate industry has been trying to do this for a long time by creating more living space through densification, further development, renovations, adding storeys and new builds. On the other hand, there are long-overdue issues that Switzerland needs to address as soon as possible. Along with better spatial planning that promotes blended districts with residential and commercial parts, we also need, for example, to standardise and shorten permit processes, radically rethink appeal options – today almost anyone can lodge an objection at no cost – and finally regulate noise protection under a uniform basic regulation, in which the legal decisions also follow a clear logic. It is only by improving these framework conditions that we will succeed in making adequate spaces for living, working and leisure available for a growing population. It is crucial for the whole environment to remain investor-friendly, because without investment there is no building – or at least not in the volume we need.

What sustainability results for its properties can Swiss Prime Site report for 2024?
RZ: Last year, we continued to consistently implement our sustainability strategy. In essence, the strategy consists of sustainable development and construction as well as the sustainable use and operation of properties. Circular economy in construction and climate neutrality in operation constitute the most important pillars here. A total of 97% of eligible spaces now have environmental certificates by external assessors, and we have managed to reduce the emissions intensity of our portfolio by a further 13%. Consequently we are now sitting at 7.7 kg CO₂ / m² adjusted for weather, which is well below the linear target pathway to net zero in 2040. Last year many tenants opted for green leases – that is, rental agreements with mutual obligations on climate-­friendly measures – meaning that we are currently at 76% of our total area. The target for the end of 2025 remains 100%. For 2025, we are planning further important projects based on circular principles. On the «YOND Campus» in Zurich, an existing building is deliberately being retained, and the building components and materials that arise from demolition are being stringently reviewed for reuse – on the site or elsewhere in the portfolio. We do that with all our projects, incidentally.

In summary, where are the opportunities and challenges for 2025 at Swiss Prime Site?
RZ: I anticipate that the Swiss economy will make further progress again in 2025, supported in particular by the domestic economy with services and consumption. For our broadly diversified portfolio with over 2 000 tenants, this means brisk demand for modern, high-quality office space in central locations, and also that our retail spaces will be well-frequented by consumers. We are efficiently structured and offer rental spaces and investment products in almost all areas of the real estate sector. This means we are well-positioned for 2025 – and for the years that follow.

In the medium term, at Swiss Prime Site we view the sustained population growth as an opportunity, not a problem. We offer spaces for living, working and leisure, and are committed to using the existing supply more sustainably by creating attractive living spaces for everyone where possible. That is our mission, and we are ideally positioned for it!