Projects & Development division

The Projects & Development division’s area of activity includes the development and realisation of construction projects for third parties, for Allreal’s own portfolio and for the sale of development properties. The earnings produced from general contracting in the 2015 financial year amount to CHF 78.8 million (2014: CHF 102.8 million).

Despite higher fees and profits from construction activity, earnings from business activity in general contracting are reported clearly below the comparable value the previous year. The previous year’s value was significantly influenced by profits from the sale of a larger residential and commercial building to an institutional investor.

Owing to the low number of own projects compared to 2014, the corresponding fees (capitalised company-produced assets) also remained clearly below the comparable value the previous year.

Despite a lower workforce, operating expenses of CHF 61.1 million for 2015 are shown as CHF 1.2 million above the comparable value the previous year. This is due to an expense of CHF 1.5 million connected with accounting standard IAS 19 (staff pension obligation). In the 2014 financial year, owing to the application of IAS 19, a one-time positive effect of CHF 4.5 million had become effective. This resulted in normalised personnel expenses for 2015 of CHF 6.0 million below those for the previous year.

Earnings from operations in the Projects & Development division in 2015 amounted to CHF 78.8 million, of which CHF 29.5 million apply to own projects and CHF 49.3 million to third-party projects (2014: CHF 56.1 million/CHF 46.7 million). With operating expenses of CHF 61.3 million, earnings before interest and taxes (EBIT) reached CHF 21.4 million (2014: CHF 46.2 million).

The operating margin reported by the Projects & Development division for the 2015 financial year amounted to 27.4% (2014: 44.9%). Net profit for the period under review is reported as CHF 13.6 million (2014: CHF 30.9 million).

Project development

In the period under review, the Project Development department worked on projects with a potential order volume of over CHF 1.0 billion. In addition to projects for the own portfolio and for sale to private and institutional investors (development real estate), the department increasingly performed work on behalf of third parties.

The Bülachguss site development, which is of significance to Allreal, was successfully advanced in the period under review. In Bülach ZH, on two plots of land measuring 55 300 square metres in total, Allreal is planning a new urban quarter comprising 490 residential units plus commercial space for offices and trade. The public layout design effective for Bülach-Nord was finally approved in 2015. A private layout design required for the realisation of the planned site was submitted to the Bülach town council in November 2015.

The Bülachguss site development is based on the urban planning design carried out by the Diener & Diener firm of architects. The design includes the restoration of an existing commercial building and the construction of 20 new buildings comprising 420 rental apartments and 70 condominiums. A large central park and other green spaces provide a high quality of living.

The projects, which will be implemented in eight construction sectors, are intended for sale to institutional investors and for Allreal’s own portfolio. The entire project will require an investment volume amounting to CHF 300 million. Should the current approval and planning procedure proceed without delays, construction start is expected for autumn 2016.

The planned modernisation and higher utilisation of Allreal’s Grünhof yield-producing property in Zurich Aussersihl has taken a significant step forward thanks to the building application submitted end 2015. Owing to the demanding approval procedure and legal parameters, construction start is expected for 2018 or 2019. The estimated total investment volume amounts to about CHF 75 million.

In October 2015, Allreal acquired the Neuwisen site in close proximity to Dielsdorf railway station and measuring some 46 000 square metres. The acquisition provides Allreal with further land ideally suited for the development and realisation of residential units for rent and ownership at an estimated investment volume of about CHF 175 million.

Further important development projects taken up, significantly proceeded with or completed in 2015 include:

GE: Regional development

AE: Site development

PE: Project development

* On behalf of third party

Development projects finalised in 2015 and transferred to external clients or to the Realisation department include:

GE: Regional development

AE: Site development

PE: Project development

* On behalf of third party

Realisation

The project volume finalised by the Realisation department in the financial year under review amounted to CHF 612.9 million. This value, which is 29.6% below that of the previous year, reflects Allreal’s consistent limitation to working on projects with foreseeable risk as well as the clearly lower number of own and development projects compared to the previous year. Allreal expects the processed order volume in the coming years to remain in the range of CHF 500–700 million.

The staff reduction resulting from the lower project volume was effected by means of natural fluctuation.

Of the project volume processed in the 2015 financial year amounting to CHF 612.9 million, 76.2% applied to third-party projects, 12.3% to own projects, and 11.5% to development projects for sale to third parties. The share of new construction projects in the period under review represented 67.6% and that of renovation and conversion projects 32.4%.

During the period under review, Allreal pursued an average of some 100 projects. Secured order backlog as at 31 December 2015 amounting to CHF 815 million corresponds to a capacity utilisation of clearly above twelve months.

Projects completed in the 2015 financial year

Allreal realised the seven-storey Superblock office building in Winterthur for the AXA insurance company with a surface area of some 47 000 square metres. The project with a construction sum of about CHF 230 million provides workspace for more than 2 300 employees, a staff restaurant, a day nursery and 18 rental apartments. The building is used by both AXA Winterthur and the City of Winterthur. The on-schedule transfer of the building on which construction was started end 2011 took place in March 2015.

Further projects completed in the period under review include:

* On behalf of third parties

Current Projects

Construction of a large project comprising 800 rental apartments, 200 rooms for student accommodation plus office, trade and gastronomy space in Zurich Albisrieden for Zürcher Freilager AG is proceeding according to plan. The project with a construction volume of some CHF 345 million comprises ten new buildings and the renovation and extension of two existing buildings.

Extension and conversion of the Balgrist University Clinic in Zurich Riesbach which was begun at the end of 2013 includes a new entrance and reception area and additional therapy rooms, extension of the treatment wing plus conversion and modernisation of the lecture and teaching building. The project is extremely complex and demanding as the work is accomplished while day-to-day hospital operations continue. The construction sum amounts to over CHF 50 million.

Projects started in 2015

Construction work on a five-storey office building on Schiffbauplatz in Zurich-West began end April 2015. The project, which is for Allreal’s own portfolio, comprises 13 143 square metres of useful space at an investment volume of some CHF 73 million. A large share of the space was let when construction commenced. Following completion at the end of 2017, the building will be transferred to Allreal’s portfolio of yield-producing properties.

Further projects taken up in the period under review:

* On behalf of third parties

Sale of development real estate

Owing to tighter financing conditions implemented by lending banks and the large supply of residential units for sale, marketing of residential ownership in the period under review proved demanding and costly.

Allreal reported a sales profit of CHF 18.0 million from the sale of 86 residential units (2014: 84 units) amounting to CHF 126.3 million in total.

From end of November 2015 until the cut-off date, 66 of 161 sold apartments in the Guggach project in Zurich were transferred. The project consists of mostly medium-priced apartments and was well accepted by the market from the start of sales activities.

In the period under review, the last ownership transfers were carried out for the Stockenstrasse project in Kilchberg ZH and sales activities began for the Kirschblütenweg project in Basel and the Stauffacher project in Steinen SZ. Consequently, on the cut-off date, a total of 87 apartments in 8 projects remained for sale, of which 28 were ready for occupation (31.12.2014: 143/53). These projects include:

Number of apartments

Of which
sold by
end 2015

Of which
transferred by end 2015

Ready for
occupancy

Meilen ZH

23

22

22

Q4 2012

Wallisellen ZH

122

119

118

Q3 2013

Erlenbach ZH

39

32

27

Q1 2014

Bülach ZH

82

65

62

Q2 2014

Zurich Unterstrass

197

161

66

Q1 2016

Mettmenstetten ZH

35

25

0

Q2 2016

Steinen SZ

18

10

0

Q1 2017

Basel

12

7

0

open

In 2015, the Project & Development division’s contribution toward net profit excluding revaluation effect represents a share of 12.5%.


Charts Projects & Development division

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