Outlook

As the economy in the euro-zone remains sluggish and the exchange rate of the Swiss franc continues to be high, it is generally expected that economic growth will persist at a low rate. Although in Switzerland, the domestic market has so far remained surprisingly robust and exports were gratifyingly stable, numerous signs point toward an economic downturn. Far-reaching transformations to be implemented in the financial industry and restructuring activity necessary in numerous companies to maintain their export capability can be implemented only with tough implications for the labour market.

Population growth of 1% per annum accentuated by the immigration of a generally well-educated workforce will continue to support both consumption and the construction industry. Although building investments seem to be levelling off, Allreal anticipates construction activity to remain buoyant at a high level.

Continuing low interest rates, a negligible danger of inflation and population growth coupled with rising demands will probably result in a stable situation in both the construction industry and real estate. Furthermore, in Switzerland, the continuing low ownership rate and proven high need for replacement of real estate support and strengthen the construction industry. On the other hand, it is difficult to assess the effects of a more restrictive mortgage policy introduced by banks.

As long as a heavy slump in the economy can be averted and the other parameters remain fundamentally unchanged, Allreal will continue to be very well positioned owing to its proven combination of a stable-income real-estate portfolio combined with the activity of a general contractor focussed on Switzerland’s economic centres.

In 2013, Allianz Headquarters in Wallisellen – a significant own project – will be completed and transferred to the portfolio of income-producing real estate. The subsequent expansion of the real-estate portfolio will result in higher rental revenue and a lower vacancy rate. General contracting is working at full capacity on projects for Allreal’s own portfolio and for customers, and the gratifying order intake proves the division’s competitiveness. Furthermore, the completion of several own projects for the sale of residential ownership is expected. The company’s sound and secured financing guarantees the completion of ongoing projects. Moreover, the loan capacity of approximately CHF 1.3 billion available on the cut-off date creates favourable conditions for further growth through the financing of own projects and taking advantage of opportunities.

The Board of Directors and Group Management remain carefully optimistic for the near future despite the anticipated downturn in economic growth and the connected accentuation of competition. Consequently, for the 2013 financial year, Allreal expects higher operating results for both divisions compared to the period under review.