Investment and Financing Guidelines

1    Objective

The Investment and Financing Guidelines (the “Guidelines”) apply to Allreal Holding AG (the “Company”) and its subsidiaries. The Guidelines define the principles and criteria according to which investments are to be made.

2    Fundamentals and definitions

Investment real estate
Investment real estate refers to commercial real estate, residential real estate and investment real estate under construction acquired for investment reasons and held long-term with the aim of obtaining a regular yield. Investment real estate is assigned to the Real Estate division.

Commercial real estate refers to properties with existing commercial and/or trade buildings representing a share of more than 50 % of the property’s total rental income.

Residential real estate refers to properties with existing residential buildings representing a share of more than 50 % of the property’s total rental income.

Investment real estate under construction represents properties with a building project under construction that continue to be held by the company following completion.

Development real estate
Development reserves, buildings under construction, and completed buildings held for the purpose of resale to third parties or for own purposes (transfer to the portfolio of commercial buildings or of residential buildings). Development real estate is assigned to the Projects & Development division.

3    Investment principles

The company invests only in investment real estate in selected economic centres of Switzerland.

The choice of investment real estate is guided by portfolio diversification in order to obtain at least 20 % of total rental income from residential usage.

As a rule, commercial and residential properties are only acquired by the Company if the value of the property computed in accordance with Swiss GAAP FER is CHF 5 million or more.

4    Investment limitations

Federal legislation governing the acquisition of real estate by individuals residing abroad
In its investment decisions, the Company takes into consideration investment limitations resulting from federal legislation governing the acquisition of real estate by individuals residing abroad. The Company ensures that that the responsible authorities consider the Company to be Swiss-controlled.

Regional limitation
The Company only invests in real estate located in Switzerland.

Sectorial limitation
The Company does not invest in tourism-related real estate, such as hotels, holiday resorts or apartment hotels.

5    Financing

The Company may borrow funds on a short and long-term basis at the relevant lending rates in the aggregate amount of up to 60 % of its assets; financial ratios as set out below are to be complied with:

  • Equity must amount to at least 35 % of the total assets
  • Net gearing (ratio of net financial debt to equity) must not exceed 150 %
  • Interest coverage (ratio of EBITD excluding gains from revaluation of investment real estate to net finance expense) must not be lower than the factor 2.0
  • The balance sheet items Investment property and Development property may be refinanced using interest-bearing debt up to a maximum of 70 %.

The consolidated financial statement published half-yearly in accordance with the International Financial Reporting Standards (Swiss GAAP FER) is decisive for the calculation of financial performance ratios.

The Company is entitled to refinance by means of convertible loans and long-term bonds and debt secured by mortgage with banks, insurance companies and pension funds.

The Company is entitled to hedge its interest risks by using derivatives, especially swaps and forward contracts, for hedging purposes only.

6    Observation of guidelines

Each investment decision is verified by Group Management to conform with the present investment guidelines and explicitly reported to the Board of Directors.

7    Amendment of the Investment Guidelines

Amendments to these Investment Guidelines may be disclosed by the Board of Directors within the scope of the publication requirements as set out by SIX Swiss Exchange and in the Articles of Association of the Company. Any such amendments must be published by the Company in Schweizerisches Handelsamtsblatt no later than one month prior to their becoming effective.

8    Enactment

These guidelines were approved by the Board of Directors of Allreal Holding AG on 4 December 2018 and will become effective following official publication on 1 February 2019.