Outlook

It is difficult to estimate the form and the strength with which the European debt crisis and the high level of the Swiss franc will impact economic development in Switzerland. In view of declining exports and growing reservations shown by companies concerning capital investments, it is expected that the rate of growth of gross domestic product will continue to slow down or even slide toward the negative. Moreover, a rise in the unemployment rate will probably be inevitable.

In contrast, there are signs that both private consumption and building investments may remain stable. A trend reversal in residential construction, especially, is unlikely as in the period under review this segment demonstrated healthier growth than in previous years. Thanks to the banks’ adherence to realistic financing guidelines, the threat of a housing bubble is very small. Allreal’s positive assessment is based on the high number of applications for planning permission, the below average rate of home ownership by European standards, and the low mortgage rates favouring the purchase of residential property.

Moreover, the Greater Zurich Area, in which Allreal enjoys a significant presence and is well positioned, remains highly desirable as a corporate and a residential location. A comparable development can be observed in the Geneva-Lausanne region.

Thanks to its proven business model and sound financing, Allreal enjoys a high degree of flexibility and considerable investment scope to take advantage of opportunities, either by means of acquiring or selling real estate or through developing and realising projects without outside investors. As a Swiss controlled company, Allreal is subject to no legal restrictions concerning the ownership of real estate in Switzerland, as non-Swiss companies are, which is considered an added competitive advantage.

The significant growth of investment real estate under construction reported in the 2011 financial year will ensure continuously increasing rental income in the future. In this regard, the Toni Areal in Zurich-West and the head-office for Allianz Suisse in Wallisellen will become income relevant from the second half of 2013. Moreover, own projects to be transferred to Allreal’s real estate portfolio following completion ensure basic utilisation at a consistently high level for the Projects & Development division. The high order backlog of more than CHF 2.1 billion and a project volume of more than CHF 400 million acquired on the third-party market and with intact earnings potential underline Allreal’s positive outlook for the near future.

Despite many imponderables, Allreal is carefully optimistic concerning the short term and the medium term and expects operating results for 2012 reported only slightly below those of the 2011 financial year.