Projects & Development division

The Projects & Development division reported a result from business activity in the 2012 financial year of CHF 115.8 million. The result is 1.4% below that of the previous year, owing to a lower number of completed projects and transfers of residential ownership as well as lower profits from awarding contracts.

To meet the demands of the significantly larger project volume compared to 2011, Allreal further increased its workforce in 2012. The acquisition of the Hammer Retex Group with 55 employees accentuated the development. On the cut-off date, Allreal provided work for a total of 409 employees at its locations in Basel, Bern, Cham, St. Gallen and Zurich. As a consequence, the number of full-time positions grew by 81 within the period of one year. Due to the connected higher expenses which will affect the earnings side only at a later stage, operating profit (EBIT) decreased by about 16% compared to the previous year to CHF 54.7 million.

The net profit of CHF 36.0 million reported for the 2012 financial year by the Projects & Development division was achieved with the three departments, namely Project Development, Realisation, and Acquisition/Sales, and corresponds to a respectable return on equity of 13.2% despite clearly higher expenses.

Project Development

Third-party projects and own projects implemented by the Project Development department in the period under review correspond to a consistently high potential order volume not shown in the declared order volume for the downstream Realisation department of more than CHF 1 billion. In today’s high regulatory and legislator density, it is an extremely complex and demanding task to advance a project to construction stage. The expertise and specialised knowledge available in the department is, therefore, a significant success factor of the company. On the one hand, the Project Development department generates project volume to be implemented, and on the other hand, projects for sale to third parties or for inclusion in Allreal’s own real estate portfolio. Outside customers also benefit from Allreal’s outstanding market knowledge and level of experience in terms of high-quality and convincing urban construction projects.

An important customer order at the planning stage in 2012 refers to the development of a 90 000 square-metre property in the Zurich suburb of Adliswil. Allreal developed an utilisation and an implementation concept for the three owners of the property located in a reserve zone. From these two concepts, an urban planning competition was arranged to provide the basis for the local authority and the canton of Zurich to implement the required rezoning procedures for the property. The concepts foresee mixed usage with 430 apartments, office and commercial areas and a school.

The Project Development department worked on several own projects connected with implementing the development strategy for the Escher-Wyss site in Zurich-West which joined Allreal’s portfolio in 2002. The projects include the construction of two buildings and the addition of two floors to an existing building.

Planning application was submitted in the second quarter of 2012 for the construction of a residential and commercial building including 23 rental apartments and commercial space on the street level and first floor.

Allreal developed a commercial and services building with a useful space of some 15 000 square metres on land ready for construction in 2014. It is expected that the layout plan submitted to the authorities in 2012 will be approved in the course of 2013. The addition of a complete floor and a penthouse floor to an existing warehouse building has been advanced to the planning application stage. Construction of the two additional floors is scheduled for the first quarter of 2013 and will provide an area of 2 750 square metres reserved for MAN Diesel & Turbo Schweiz AG.

At the beginning of 2012, Allreal commissioned six firms of architects to each submit a project design for the 20 000 square-metre “Guggach” site in Zurich-Unterstrass acquired in 2011. By means of this procedure, Allreal emphasized its intention to implement a development of high-quality and convincing architecture. The project chosen by the jury includes 197 upmarket condominium apartments spread across four buildings grouped around a central court yard. Planning permission for the project meeting the Minergie standards was submitted during the period under review. Construction start will depend on the planning permission authorisation, which is expected for the second quarter of 2013.

Allreal signed a long-term lease contract in the first quarter of 2012 with UPC Cablecom, a cable network operator, for the Richtiring office building currently under construction in Wallisellen. Construction of the building developed by Allreal began in May 2011 on the Richti-Areal located between Glatt shopping centre and Wallisellen railway station. The office block with some 20 000 square metres on four upper levels provides space for about 1 400 workplaces. The building meets Minergie standards and is scheduled for completion in the summer of 2014.

The most important project developments started, with construction significantly continued or completed in the 2012 financial year, include:

[GE]:Site development

[AE]:Urban development

[PE]:Project development

[*]:Third-party order

Realisation

In the period under review, the project volume consisting of new buildings and refurbishment projects showed a clear growth to CHF 939.6 million or 26.4% compared to the previous year. The significantly higher project volume compelled the Realisation department, which is working at capacity limit, to increase its workforce by 24.

Accentuated by two large projects, namely Toni-Areal in Zurich and Richti-Areal in Wallisellen, the share of own projects in the total volume grew from 41.6% to 44.4%.

With the start of construction work on the Favrehof residential building in the first quarter of 2012, all of the six sub-projects on the 72 000 square-metre Richti-Areal in Wallisellen were under execution in the period under review. The complex, which is designed for some 1 200 residents and 3 000 workplaces, represents the first complex in Switzerland that complies with the objectives set out by the 2000-Watt society. The investment volume of the 499 residential units for ownership and rental and the office and commercial areas amounts to about CHF 750 million. The first buildings will be ready for occupation in mid-2013. Completion of the entire project is expected for the second half of 2014.

Construction of two office buildings in the Zurich Metropolitan Area began in the second half of 2012. The two own projects refer to the second stage of an office complex in Zurich-Altstetten with a floor space of some 11 000 square metres, and to a new building in the Glattpark development area in Opfikon in close proximity to Zurich Airport with a floor space of some 12 000 square metres. A part of the space, which will be ready for occupation in the summer of 2014, was rented before the start of construction.

Allreal is implementing a residential complex with 80 rental and 51 condominium apartments in Horgen, canton Zurich, for a private owner. The project on former industrial land measuring 32 000 square metres comprises five buildings. The street levels provide space for a supermarket, a nursery school, medical offices, restaurants and other trade. The contract sum for this significant project amounts to some CHF 75 million.

In mid-2012, Allreal began on comprehensive refurbishment of the Webermühle complex in Neuenhof near Baden. The complex was constructed in the 1970s and comprises four buildings with a total of 380 rental units. The contract sum for the project implemented in two stages and to be completed by the end of 2013 amounts to CHF 48 million. Thanks to meticulous planning, refurbishment of the complex is possible with the apartments remaining occupied.

In Steinen, Canton Schwyz, Hammer Retex began work on its first own project since being acquired by Allreal. The CHF 15 million project includes two buildings comprising a total of 18 units for rent and ownership.

The most important projects embarked on in the 2012 financial year, in addition to those mentioned above, include:

Projects completed and transferred to owners during the period under review include:

As at 31 December, the Realisation department worked on over 110 projects. Of the total project volume, 55.6% related to third-party projects and 44.4% to own projects. The share of new buildings remained at 86.9%, while refurbishment projects and conversions represented 13.3%. Secured orders on the cut-off date of CHF 1.7 billion guarantee full utilisation of the department’s available capacity for about two years. Owing to the very high capacity utilisation, Allreal limits itself to the acquisition of projects with favourable margins and realistic profit expectations.

Acquisition/Sale of real estate

With the sale of 167 residential units from Allreal’s own development and realisation, the Acquisition/Sale department again achieved a very good result and made a significant contribution to the division’s convincing result. The sale of affordable condominium apartments in the Richti complex, in Bülach and in Mönchaltorf, especially, advanced most gratifyingly. By contrast, the sale of high-price residential units proved to be more difficult as saturation in this segment can be observed in the Zurich Metropolitan Area. As a result, marketing efforts have increased while the units remained unsold for longer. As at 31 December, 218 residential units were for sale.

Residential units were available in the following buildings:

Following on-schedule completion of construction work, ownership of Markthalle Basel was transferred to an institutional investor in spring 2012.

The acquisition of two parcels of land suitable for development and construction of residential ownership in Mettmenstetten (canton Zurich) and Steinen (canton Schwyz) represented the only land acquired by the department in the period under review. On the cut-off date, Allreal therefore owned development reserves including secured land with an estimated investment volume of about 739 million.

In 2012, the Project & Development division’s contribution toward net profit excluding revaluation effect reported represents a share of 33.3%.