In 2024, Allreal achieved the second-best result in the history of the company. What were the reasons behind that?
Marc Frei: Our net profit in 2024 was considerably higher, and came in at CHF 211.4 million including revaluation effect. This extremely positive development can be attributed to a stable operating performance and the higher valuation of the real estate portfolio. The revaluation is based on the low level of vacancies, the high quality of the buildings and the balanced mix of tenants, plus the favourable move in discount rates. Even more pleasing for me is the operating profit, i.e. excluding the revaluation effect, which was CHF 122.7 million – beating both last year’s figure by a small amount, and also our own expectations.

You say the revaluations played an important part in the very good result. Is this a trend that is sustainable?
It is definitely sustainable. Of course we won’t see revaluations on this scale every year. But the reappraisal will last. In the interests of good corporate governance, last year we went out to tender to appoint a new external expert. The portfolio was valued by Wüest Partner for the first time. As a result, apart from reflecting business events there were also some shifts in the appraisals of investment properties. The valuation underscores the quality of our portfolio. By modernising our investment properties on an ongoing basis and actively managing the portfolio, we ensure rental income will be stable over the long term, with low vacancies and top-grade tenants. The performance is correspondingly positive. Another factor in the revaluation of the portfolio is the favourable move in the discount rate, and in some cases also a reassessment of market rents. And last but not least, the change of expert has improved the comparability of the valuation of the portfolio with relevant competitors.

Rental income was stable and the vacancy rate fell again slightly year on year. What’s your view of the commercial property market?
For commercial space we see a functioning market with a relative vacant space. Only a few new properties will be coming on the market in the near future, which is definitely good for supply. There are two features which are particularly important if you want to do well in the market: location and building quality. We own high-quality commercial properties in locations with excellent transport links in Switzerland’s urban centres. Almost half of our space already has a sustainability certification, and our integrated business model means we are well placed along the entire value chain of a property to be able to meet demand for flexible floor plans and multi-tenant solutions quickly and easily from a single source.

What’s the picture like in residential?
Demand for residential space remains well ahead of supply, especially in the major cities. That’s the case for both rental apartments and buying. The fundamentals are also still positive. The high level of demand is being supported by the growing population and the strong economy. Unfortunately, supply is still far too tight. We would love to provide new homes more quickly, but the regulatory environment is a major obstacle. Residential property is a stabilising factor in our portfolio that contributes to a high level of income security.

Last year, Development & Realisation broke even. That result has improved considerably. Has Allreal seen the worst in this segment?
We are very confident that the improvement achieved in this segment can be sustained. Last year we considerably increased earnings from selling condominiums. In addition to the disposals in Spiserstrasse in Zurich, we managed good sales at our projects in French-speaking Switzerland in Avenue de l’Amandolier and Avenue du Curé-Baud. The next construction and marketing launches are already imminent in the new year, in the form of two projects: Panorama Eggen in Lucerne and Strubenacher Living in Zumikon. In Realisation we had fewer active projects last year. We also withdrew from the market for third-party realisation in French-speaking Switzerland. But volumes will recover. We are still working hard at acquiring third-party orders, and enjoyed success in this regard again last year. At the end of the year, our order backlog stood at CHF 667 million. Combining third-party and internal projects allows us to optimise utilisation and ensures we are competitive for the long term.

The good development pipeline meant that own projects accounted for a higher share of completed project volumes in 2024. How do prospects look from here on?
Own projects as a share of completed project volumes climbed almost to one-third. Apart from the projects mentioned in Lucerne and Zumikon, we expect positive news on the approval process for further projects over the course of this year. The simple development plan for the Baarermatte project became legally enforceable last year, and we are confident that planning permission for the project will also become legally enforceable in the first half. We have also submitted the planning applications for projects in Badenerstrasse and in Hohlgasse in Sünikon near Dielsdorf. So the prospects are very good.

“We have a well-diversified financing structure and will continue to pursue our strategy of secured and unsecured funding.”

Allreal sold properties from the portfolio once again in 2024. Does this mean the portfolio restructuring is over?
What we are engaged in is not portfolio restructuring – it’s active management. We review our properties regularly. If a property is no longer an ideal strategic fit for us or no longer has any potential for development, it’s a candidate for sale. Active management frees up funds that we can invest in our development pipeline or use to strengthen our balance sheet. We improved our key balance sheet figures last year. We have a well-diversified financing structure and will continue to pursue our strategy of secured and unsecured funding.

What is Allreal anticipating for the financial year 2025?
For the new financial year 2025, we expect net operating profit to be approximately at the same level as in the previous year and stable balance sheet figures. In the Real Estate segment, rental income temporarily decreases due to renovations and changes of tenant, and the one-off effects from the previous period will not recur. Over the medium term, this cyclical effect will be more than compensated by improved earnings power. In the Development & Realisation segment, we expect income from the sale of condominiums to rise due to the construction and marketing launches of various projects, as mentioned. Construction volumes overall will be slightly higher, and operating expenses lower.