Editorial

• Results reflect sales growth and lower portfolio valuation
• Consistently stable income-producing properties
• Projects & Development division with full utilisation
• High financial power permitted further investments
• Proposal for unchanged payment of CHF 5.50 per share

Net profit including revaluation gains reported by Allreal for the 2012 financial year amounted to CHF 98.0 million. The main reason for the lower result compared to the previous year refers to the temporary lower valuation of the Toni-Areal in Zurich-West owing to its delayed completion by one year. It is however expected that the market value determined by an external real-estate valuator will exceed capital expenditure. Valuation gains are therefore expected for the subsequent periods. The rental agreement with Canton of Zurich will become effective from 1 July 2014, and the 20-year lease duration will remain unaffected.

The total operating performance generated in the period under review by the two divisions, Projects & Development and Real Estate, grew by a considerable 22.6% to CHF 1 086 million. The completed project volume, which was again reported considerably higher and amounted to some CHF 940 million, made a significant contribution to this result.

Net profit excluding revaluation gains amounted to CHF 105.1 million, or 8.6% below that of the previous year. Operating results were characterised especially by higher project-related labour costs in the Projects & Development division. While rental income remained practically unchanged, profits from contract awarding and the number of ownership transfers remained below that of the previous year, as expected.

The acquisition of the Hammer Retex Group provides Allreal with the pre-requisite for geographic expansion of its general contracting activities into the Zug metropolitan area. Furthermore, Allreal is now capable of managing selected yield-producing properties itself.

Sound and attractive share

Allreal’s share closed at CHF 141.10 on the cut-off date. The year-end price was therefore 3.4% above that of the previous year. The positive share-price development, the pay-out for the 2011 financial year, and the subscription rights connected with the capital increase resulted in an overall performance of a considerable 9.2%.

The capital increase with subscription rights successfully carried out in May 2012 resulted in net proceeds of CHF 265 million. The additional means will be used to finance on-going and scheduled own projects.

At the Shareholders’ Meeting of Allreal Holding AG scheduled for 5th April 2013, the Board of Directors will propose the pay-out of CHF 5.50 per share. As the necessary means for this pay-out will be generated from capital reserves, the paid out amount is considered tax-free for private investors. Related to the year-end share price, the pay-out corresponds to a cash yield of 3.9%.

Stable progress of the Real Estate division

Of the yield-producing properties, only one was sold in the period under review, namely a smaller commercial building in Muttenz.

Taking into consideration the single divestment, the portfolio of yield-producing buildings at 31 December 2012 consisted of 45 commercial and 19 residential properties at an average market value of CHF 39.5 million.

In the period under review, the only addition to the portfolio of investment real estate under construction refers to the Favrehof residential building on the Richti-Areal in Wallisellen. On the cut-off date the portfolio therefore consisted of six properties.

Toni-Areal in Zurich-West, a highly complex conversion and construction project in terms of planning, construction and logistics, will not be completed on schedule. Tenancy by the Zurich University of Applied Sciences (ZHAW) and the Zurich University of the Arts (ZHdK) will consequently be delayed by one year. The higher cost of production and the later date of occupancy resulted in a downward valuation of the property. Consequently, the valuation of the entire portfolio of investment real estate was reduced by CHF 8.2 million, or 0.3% of the portfolio’s market value.

On the cut-off date the entire portfolio was valued at CHF 3.16 billion; yield-producing real estate represented CHF 2.53 billion and investment real estate under construction CHF 628 million.

As expected, the vacancy rate in the year under review increased to 5.0%, owing especially to a commercial building in Zurich that has remained vacant since March 2012. The value continues to remain far below the average market value, thanks not least to the successful extension of existing leases and marketing activities for the rental of spaces becoming vacant.

Despite slightly higher real estate expenses, net yield of the yield-producing properties is reported at a favourable 4.9%.

Significantly higher project volume for the Projects & Development division

Earnings from operations of CHF 115.8 million for the Projects & Development division remained 1.4% below the previous year’s value. This was due to the lower number of completed projects and fewer transfers of residential ownership compared to 2011 and to lower profits obtained from contract awarding to sub-contractors.

As operating expenses grew significantly in the period under review, operating profit of CHF 54.7 million remained below that of the previous year.

Completed project volume grew by 26.4% to CHF 939.6 million due to substantial demand and numerous large projects intended both for third parties and for the own portfolio. This in turn led to a substantial growth in staff.

Order backlog on the cut-off date amounted to some CHF 1.7 billion, representing full utilisation for a period of about two years. The declared order backlog includes only secured projects with sound margins and profit expectations.

Scope of action thanks to well-secured financing

Compared to the previous year, Allreal’s financing in 2012 continued to remain extremely favourable owing to a slightly lower average interest rate on debt of 2.13% and a term to maturity of 54 months.

The capital increase successfully implemented in the year under review resulted in a market capitalisation growth of 20.7% to CHF 2.2 billion and a rise in equity ratio to 48.7%. Thanks to additional equity capital of CHF 265 million, Allreal’s debt capacity on the cut-off date amounted to about CHF 1.3 billion, providing outstanding conditions for further growth.

Carefully optimistic outlook

Despite an anticipated downturn in economic growth and increased competition in a consistently demanding market environment, the Board of Directors and Group Management remain carefully optimistic concerning the 2013 financial year.

Allreal expects the operating result for 2013 to exceed that of the period under review due to its proven business model, the growth of its stable-income real-estate portfolio, good capacity utilisation of the Projects & Development division with third-party orders and own projects, and its sound and well secured financing.

The Board of Directors and Group Management wish to take this opportunity to thank all staff members for their contribution toward the outstanding financial results and our shareholders for their trust and support.