Editorial

• Pleasing net profit
• Significant sales profits generated by Real Estate division
• Projects & Development with record-high project volume
• Continued sound and advantageous financing
• Proposal for unchanged distribution of CHF 5.50 per share

Allreal reports pleasing net profit excluding revaluation gains of CHF 116.1 million for the 2013 financial year, or 11% above that of the previous year. Higher rental income, profits deriving from the sale of income-producing properties and residential property as well as low financial expenses contributed to this gratifying result.

Growth in rental income in the Real Estate division and the repeatedly and clearly higher project volume in the Projects & Development division resulted in a total operating performance of CHF 1 242.3 million, 14.4% above that of 2012.

As at 31 December 2013, Allreal employed a total of 388 employees at its locations in Zurich, Basel, Bern, Cham and St. Gallen. The number of full-time positions on the cut-off date amounted to 371.

Net profit including revaluation gains of CHF 121.8 million is reported 24.9% above that of the previous year, reflecting mainly the valuation gains credited to residential properties.

Allreal share with 4.5% distribution yield

The Allreal share closed on 31 December 2013 at CHF 123.50, or 12.5% below the year-end price recorded the previous year. The negative price development, with which all larger real estate companies listed on the SIX Swiss Exchange are confronted with, and the distribution in April 2013 for the 2012 financial year resulted in an overall performance of –8.6%.

At the Shareholders’ Meeting scheduled for 28 March 2014, and based on the good results reported for the 2013 financial year, the Board of Directors will propose a pay-out of CHF 5.50 per share. Related to the year-end share price, the pay-out corresponds to a cash yield of 4.5%. As the necessary means for the proposed pay-out will be generated from capital reserves, the distributed amount is considered tax-free for private investors.

High-income Real Estate division

In combination with a lower vacancy-related loss of income, rental income grew by 4.5% to CHF 148.5 million. At slightly higher real-estate expenses, the portfolio’s yield is again reported at a respectable 4.8%.

In the first half of 2013, the portfolio of yield-producing buildings was extended by the reclassified residential building on Neunbrunnenstrasse in Zurich Oerlikon and the office buildings located at Richti-Areal in Wallisellen leased to Allianz Suisse. Both additions became fully income relevant in the second half of 2013.

The divestments represent two residential and four commercial buildings amounting to a total of CHF 217 million. The sum of the sales resulted in a gratifying profit before tax of CHF 20 million.

On the cut-off date, the entire portfolio of yield-producing real estate included 42 commercial and 18 residential buildings.

In the period under review, investment real estate under construction experienced the addition of three commercial buildings and the reclassification of a residential and a commercial building each to yield-producing real estate. Consequently, compared to the cut-off date the previous year, the portfolio grew by one building to a total of seven buildings under construction, all of which were completed in 2014.

Valuation of investment real estate by an external real estate valuer resulted in the higher valuation of the entire portfolio by CHF 8.1 million. The positive change in value was due mainly to revaluation gains in investment residential real estate and real estate under construction and the IFRS 13 accounting standards introduced with effect from 1 January 2013.

When taking into consideration changes of ownership, reclassifications and revaluations, total value of the investment real estate on the cut-off date amounted to CHF 3.44 billion. Compared to the previous year this corresponds to a 9.1% increase in value. Compared to the market value of the total portfolio, the share of yield-producing real estate amounted to CHF 2 610.2 million, or 75.8%, and that of investment real estate under construction to CHF 835.6 million or 24.2%.

Project & Development division with significantly higher project volume

Earnings from operations for the Projects & Development division in the 2013 financial year amounted to CHF 110.7 million. Despite demanding parameters, the division’s results are reported only slightly below those of the previous year. The good result can be especially attributed to the successful sale of condominiums from own development and realisation.

The operating result in the period under review amounted to CHF 45.2 million. Essentially, clearly higher personnel expenses as well as lower profits and fees obtained from contract awarding to sub-contractors represent the main reason for the 16.5% decrease compared to the previous year.

Project volume grew by 15.7% compared to the previous year to a record-high CHF 1 087 million. Completion or imminent completion of several projects connected with a focus on intact profit expectations will in the short to medium term lead to a desired lower project volume.

On the cut-off date, the secured order backlog amounted to CHF 1.4 billion. This value is below that of previous year and represents a desired utilisation of existing capacity for a period of about 18 months.

Sound financing guarantees scope of action

On the cut-off date, the average interest rate for outside capital amounted to a low 2.13% at an average term to maturity of 56 months. Allreal’s financing consequently remains extremely favourable and sound.

Thanks to the successful issue in the third quarter of a CHF 150 million bond loan 2013–2020 at 2.00%, Allreal is in a position in the short-term to invest sufficient funds secured at a low interest level.

With an equity share of 49.3% and an immediately available credit line of more than CHF 650 million, Allreal’s short-term debt capacity on the cut-off date amounted to CHF 1.4 billion.

Cautious outlook on the 2014 financial year

Allreal assumes that the expected excess supply of office space and continued pressure on margins in the Projects & Development division will have a noticeable effect on the company’s business operations. Higher real estate expenses budgeted for 2014 and lower profit contributions from the sale of real estate will show a negative effect on results. As a result, the company expects operating results for the 2014 financial year at a level seen in previous years but below that period under review.

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