Dear shareholders

The Swiss economy was stable in the first half of 2024. Accordingly, demand for commercial space in the Swiss property market was robust. Demand for housing is rising faster than supply, partly as a result of ever lengthier procedures. Consequently, vacancy rates remain low and absorption is good in the case of new-build projects. In the construction sector, the market continues to be defined by high construction costs as a result of the ongoing shortage of skilled workers and a reluctance to invest. The Swiss National Bank provided support to the economy with two further interest rate cuts in the first half of 2024, and its optimistic outlook injected security into the interest rate environment. As a result, property has be­­come more attractive as an asset class.

“At CHF 67.2 million, Allreal’s net profit (incl. revaluation effect) was higher in the first half of 2024 than in the previous year.”

Operating profit stable

At CHF 67.2 million, Allreal’s net profit (incl. revaluation effect) was higher in the first half of 2024 than in the previous year. Rental income increased by 2.3%. It benefited from the indexation of commercial rents and an increase in the reference interest rate in the case of residential rents. It was more than enough to make up for the rental income no longer received after the sales in the previous year. At 1.5% on the balance sheet date, the vacancy rate was again slightly lower than at the end of the year and the net yield amounted to 3.9%. The revaluation of our properties was positive at CHF 6.7 million. Excluding the revaluation effect, net profit amounted to CHF 60.5 million.

Earnings from Development & Realisation rose in the first half of the year to CHF 21.3 million. This was thanks to higher income from sales resulting from the Spiserstrasse in Zurich, Avenue de l’Amandolier in Geneva and Avenue du Curé Baud in Grand-Lancy GE projects. Several projects from our own pipeline of developments are about to be executed. We expect construction in Eggen in the city of Lucerne to begin in the first half of 2025. We are also confident that we will be able to start building at Strubenacher in Zumikon ZH, Badenerstrasse in Zurich and Baarermatte near Zug shortly.

In Bern, renovation work on our commercial building on Freiburgstrasse is in full swing. The property is being totally refurbished and adapted for use by several tenants. Once the work has been completed next year, BLS will move in as the anchor tenant. The numerous other construction projects for our own portfolio and for third-party customers are likewise going according to plan.

We sold two commercial properties in Basel for more than the book value after the balance sheet date at the end of June. The funds released have strengthened our balance sheet and will be used for investment in the project pipeline.

Sustainability is an integral part of our business operations. Based on the materiality matrix drawn up last year, the ESG targets for the new 2025–2028 strategy period are currently being defined with an even stronger focus on the circular economy and social factors in real estate activities.

We are on track to meet the existing targets. We will halve the share of fossil fuels in our energy consumption by 2030 and meet our net zero target across our portfolio by 2050. Furthermore, we are now showing our CO₂ reduction path in relation to the energy reference area, thereby making it easier to compare us with our competitors.

Taking sustainability criteria into consideration is very important to us in all the new projects being developed, with ambitious targets in terms of the labels being aimed for and CO₂ emissions. The Baarermatte project, which is about to enter the execution phase, is pioneering in this respect. We also continued along our chosen path in financing. In spring, we successfully placed another green bond on the market, receiving CHF 150 million.

“Being involved in ­ownership, development and implementation means we cover the ­value chain along the entire life cycle of a property.”

Outlook for 2024 as a whole confirmed

Being involved in ownership, development and implementation means we cover the value chain along the entire life cycle of a property. Our carefully selected and managed portfolio of high-quality commercial properties at key transport hubs and modern living in the metropolitan region of Zurich and the Lake Geneva area forms a very secure investment with an attractive and stable distribution. Our integrated development and construction expertise allows us to generate additional income and get maximum value from the portfolio.

Owing to the long-term financing, net financial expense will increase slightly, even after this year’s interest rate cuts. It will thereby continue to place a burden on net operating profit. We therefore still assume net operating profit will be slightly down from the previous year.

Overall, though, we are optimistic about our potential in terms of value creation and profit distribution. Real estate offers reliable protection against inflation thanks to the indexation of commercial rents and the fact that residential rents are linked to the reference interest rate. Demand for apartments in the urban centres remains very high and modern commercial premises in attractive positions are being re-let in a functioning market. Our extensive pipeline of developments also gives us long-term growth potential which we have the ability to control ourselves in terms of when investments have to be made.