Board of Directors and Group Management on the 2021 financial year


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A Performance in 2021
B Sustainability
C Business expansion into Western Switzerland
D Outlook for the financial year 2022

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Allreal had another very good financial year in 2021. What were the highlights?
Ralph-Thomas Honegger: I’d like to single out three particular highlights of the financial year 2021 that are key to Allreal’s performance. First, the expansion into Western Switzerland with the acquisition of a number of real estate companies and a general contractor from Immosynergies Holding in Geneva being completed in mid-October. Second, the presentation of the sustainability strategy. And third, the fact that our core business performed well.

However, there were also some negatives to go with the positives. What challenges were you faced with in the past financial year?
Ralph-Thomas Honegger: The main negative in the past financial year was the coronavirus. Luckily, losses resulting from rent payments being waived owing to the pandemic were limited. Nevertheless, it was associated with a number of restrictions. Although carrying out our day-to-day operational business from home went without a hitch, it was extremely difficult to work collaboratively to develop new ideas. When face-to-face contact is required, having places to meet is essential. Digital rooms are only of limited use as a substitute for physical meeting rooms. In addition, the coronavirus crisis has heavily affected total and general contracting and accelerated the structural transformation of the sector that was already underway.

Roger Herzog: Net operating profit of over CHF 130 million in 2021 – well above the level recorded in the previous year – represents another outstanding result for Allreal in a challenging environment. At CHF 64 million, the revaluation result was considerably more positive than we were expecting. With vacancy rates remaining low, rental income went up by 2% compared with the previous year to around CHF 204 million. Contributing to this were various construction projects that have been transferred from the Projects & Development division to the Real Estate division in the past year. Examples of such projects are the commercial property at Hardstrasse 299/301, the welfare building in which we’re currently located and the Grünhof site in Zurich Aussersihl. One important and prominent project that we’ve been able to proceed with despite the challenging times we’ve faced in the past year is the total refurbishment of the property at Bellerivestrasse 36 in Zurich Riesbach – something I’m particularly pleased about. This is a perfect example of how Allreal works: we take properties out of our portfolio for redevelopment and refurbishment, and then return them to the portfolio once the work is complete. This creates added value for the customer whilst simultaneously enhancing Allreal’s earnings profile.

In November 2021, Allreal presented its new sustainability strategy. What are the most important points?
Roger Herzog: When formulating the sustainability strategy, we consciously focused on the topics that Allreal is most able to influence. Our property portfolio is right at the forefront of this. We also focused on the topics over which we have the most leverage so that we could achieve something. No greenwashing – just as many concrete achievements as possible. With regard to our sustainability strategy, we have a clear vision: we want to become completely carbon neutral across our portfolio of yield-producing properties by 2050 at the latest. It’s very ambitious, but also achievable. Our declared interim target is to halve the share of fossil fuels in our energy consumption by 2030. This, too, is achievable. In the short term, however, we need to complete a consumption inventory of our yield-producing properties. This is crucial for our future decision-making so that we know how they work. In addition, Allreal is launching a broad-based drive to install solar power systems. In the next three years, we’re investing some CHF 7 million in solar power systems at 36 properties. This is another contribution that we can make in the area of ESG. In order to meet our carbon reduction targets, however, we’ll need to partially offset our CO2 emissions. That means that we’ll need to purchase carbon credits. However, our stated aim is to be in a position to remove this contribution from the operational part as quickly as possible. At the same time, we’re thinking about how we can better manage our tenants’ behaviour. This includes green leases, as well as thoughts about how we can create financial incentives to promote sustainable behaviour on the part of our tenants. This is also the time to promote e-mobility. In respect of our activity as a general contractor, it’s really important that we hold detailed discussions concerning the use of reusable materials in order to safeguard the whole life cycle of the materials. We’ll start with our own projects as soon as possible.

“Our declared interim target is to halve the share of fossil fuels in our energy consumption by 2030.”

Roger Herzog

Is the new strategy focusing exclusively on the topic of the environment?
Roger Herzog: As part of the new strategy, we’ve also set ambitious and specific targets in the areas of social and governance. It was clear to us that we’d need our own sustainability team to efficiently promote the various ESG measures within the organisation. Delegating wouldn’t be enough. We’d need a separate team. From May 2022, Allreal will therefore have a head of sustainability, who will build a team by the end of the year. Together, the team will develop the necessary strength to do justice to the topic of sustainability. The Head of Sustainability will report directly to me. This shows that the issue really is being addressed by company management.

Ralph-Thomas Honegger: The Board of Directors attaches a lot of importance to the continuous development of Governance. Specifically, in the past year, we have already made the remuneration of Group Management also dependent on meeting ESG targets. This should put a stronger emphasis on the fact that business activity is focused on the long term and geared towards sustainability. As part of its medium-term planning, the Board of Directors is also pursuing the goal of increasing the proportion of women.

One highlight of the financial year 2021 was the expansion of business activities in Western Switzerland. What does Allreal expect to gain from this move?
Alain Paratte: We have acquired a number of real estate companies in Western Switzerland from Immosynergies Holding. As a result, we increased our portfolio of yield-producing properties by around CHF 500 million. We have also improved our geographical diversification in Western Switzerland and our mix of uses in favour of residential use thanks to the higher share of residential properties in the portfolio. We have also purchased development real estate. This project pipeline will allow us to cover a good portion of our in-house projects in the next few years and add these properties to the portfolio. There are 20 development properties, generating an investment volume of over CHF 700 million. And, in Roof SA, we have acquired a highly professional general contractor. Its construction expertise will allow us to expand the roll-out of our business model from German-speaking Switzerland into Western Switzerland. In other words, we can develop and build properties and, once finished, incorporate them into our portfolio.

Roger Herzog: Western Switzerland in particular is in need of high-quality residential space. We can benefit greatly from this demand. The Real Estate and Projects & Development divisions will both benefit from the expansion of these activities. This will revolve around three pillars: growth, residential and Western Switzerland. In doing so, we’ll be building value for all our stakeholders.

“It’s hugely important to us when integrating our activities in Western Switzerland that a high degree of independence will be retained.”

Alain Paratte

Will the various companies be fully integrated or remain independent?
Alain Paratte: It’s hugely important to us when integrating our activities in Western Switzerland that they retain a high degree of independence. We would like to make use of the knowledge and network that our employees in Geneva have. In doing so, they should continue to work independently and as flexibly as possible. Anne-Marie Loeillet took charge of Allreal’s business activities in Geneva at the beginning of February. She will drive the integration further forward. She will report directly to our CEO, Roger Herzog. As the market in Western Switzerland works differently to that in German-speaking Switzerland in many respects, it is particularly important that we have expertise in planning and execution available to us there. Our employees in Geneva know the market best and are very well connected.

The economic outlook is fundamentally positive and Allreal is well equipped for the future. What are you expecting for the financial year 2022?
Roger Herzog: The outlook for the financial year 2022 remains positive. With regard to the pandemic, we are expecting normality to return for the economy and the company. The low interest rates are helping the real estate and construction sector. We believe that interest rates will tend to go up more than they go down, but at a level that won’t affect the attractiveness of our markets. We’re therefore looking forward with confidence to the financial year 2022. Demand for residential real estate is likely to remain high, while the competitive environment in the market for office space will be dynamic. I believe that in both the short and medium term the vacancy rates in Allreal’s portfolio will remain at an extremely low level. Meanwhile, the outlook for the Projects & Development division remains challenging, which is adding to the uncertainty surrounding the future performance. However, I’m confident that the division will do well, given the high order backlog and work beginning on the construction of many new in-house projects. For Allreal specifically, the integration and further development of activities in Western Switzerland will take centre stage in 2022. This will tie up management capacity – which is actually no bad thing, as it means that added value will be created for our stakeholders. I therefore expect our operating result for the financial year 2022 to even be higher than for 2021.

“The outlook for the financial year 2022 remains positive.”

Ralph-Thomas Honegger

Will shareholders also benefit from the pleasing results achieved in the financial year 2021?
Ralph-Thomas Honegger: Because business went well in 2021, the Board of Directors will propose a profit distribution of CHF 7.00 per share at the annual general meeting scheduled for 8 April 2022, an increase of CHF 0.25 compared to the previous year. That corresponds to an attractive cash yield of 3.5% based on the closing price of the share at the end of the year. I’m particularly pleased that, in Anja Wyden Guelpa, we will be putting forward an extremely competent woman from Western Switzerland for election at the annual general meeting on 8 April 2022. She will be the ideal addition to the Board.