2013 Half-year Report: Financial report
11   Investment real estate

The changes in the first half-year of 2013 can be summarised as follows:

Value-enhancing investments in yield-producing properties

Within the commercial real estate portfolio, value-enhancing investments were made in the office building Hohlstrasse 600, Zurich (CHF 0.4 million), and in the Escher-Wyss-Areal Zurich (CHF 0.8 million). In connection with the refurbishment of a residential development in Bülach, capitalisable investments of CHF 1.1 million were made.

Disposals of yield-producing properties

[1]CP = commercial property, RP = residential property

In the case of the commercial property at Neugutstrasse 2–6/Bahnhofplatz 2/Bahnhofstrasse 25 in Wallisellen, construction and project costs amounting to CHF 0.5 million stated under acquisition costs were derecognised through income and booked as a disposal as these expenses were no longer incurred.

Reclassifications

Reclassifications of investment real estate under construction (CHF 276.3 million) relate to the transfer of the Allianz office building in Wallisellen and Neunbrunnenstrasse 47–53 Zurich to yield-producing properties. On the other hand, the projects Lilienthal-Boulevard Opfikon (CHF 19.9 million) and Schiffbau-/Hardstrasse Zurich (CHF 0.9 million), previously reported under development real estate, were reclassified as investment costs.

Largest tenants, commercial real estate

Share in total rental income from commercial real estate:

In the first half-year of 2013, the five largest tenants account for 34% of rental income from commercial real estate. The ten largest tenants generate 48% of rental income from commercial real estate.

The five largest tenants’ share of total rental income from all yield-producing properties (commercial and residential) declined to 28% in the first half-year of 2013 (1st half-year 2012: 26%).

The weighted remaining term of fixed-term rental contracts is 6.0 years (31.12.2012: 6.4 years).

Eikenøtt, Gland

New-build residential development comprising 65 rental apartments and 66 parking spaces, with an aggregate net living area of 4 958 square metres in Gland, Canton Vaud. The project is being built by Losinger Construction SA and, upon completion, will be transferred in stages in 2013 and 2014 to the portfolio of yield-producing properties. For the market valuation as at the balance sheet cut-off date, nominal discount and capitalisation rates of 4.60% were applied (31.12.2012: 4.90%).

Lilienthal-Boulevard, Opfikon

New-build six-floor office building with conference facilities and cafeteria on the ground floor, total lettable floor space of 13 131 square metres and 124 parking spaces. A ten-year rental agreement has been signed with Mondelez International (Kraft Foods Europe GmbH) for 6 960 square metres of floor space. The project is being built by the Projects & Development division and, upon completion in 2014, will be reported under the portfolio of yield-producing properties. For the first-time market valuation as at the balance sheet cut-off date, nominal discount and capitalisation rates of 5.00% were applied.

Favrehof, Wallisellen

New-build residential development comprising 118 rental apartments and 116 parking spaces. Together with the 1 173 square metres of lettable floor space for offices and retail outlets, this equates to total floor space of 13 815 square metres. The project is being built by the Projects & Development division and, upon
completion in 2014, will be reported under the portfolio of yield-producing properties. For the market valuation as at the balance sheet cut-off date, nominal discount and capitalisation rates of 4.80% were applied (31.12.2012: 4.90%).

Escher-Terrassen, Zurich

19-floor residential high-rise comprising 51 rental apartments with an aggregate net living area of 6 091 square metres, rehearsal facilities for the opera house and a 35-space basement car park on the Escher-Wyss-Areal in Zurich-West. The project is being built by the Projects & Development division and, upon completion in 2014, will be transferred to the portfolio of yield-producing properties. For the market valuation as at the balance sheet cut-off date, nominal discount and capitalisation rates of 4.90% were applied (31.12.2012: 5.00%).

Toni-Areal, Zurich

University of applied sciences (Fachhochschule) development for some 5 000 students, lecturers and employees, including events venues, commercial premises and 100 rental apartments in Zurich-West, built by the Projects & Development division. The lettable floor space, including housing, totals around 87 500 square metres, of which at least 73100 square metres will be occupied by Canton Zurich/Zurich University of Applied Sciences (on a 20-year rental contract). The aggregate net living area of the 100 rental apartments runs to 9 992 square metres. Of the annual CHF 28.7 million in target rental income after completion, CHF 6.9 million is attributable to the amortisation of tenant fit-outs prefinanced by Allreal, which are to be repaid over a term of 20 years. Upon completion in 2014, the Toni-Areal will be transferred to the portfolio of yield-producing properties. For the purposes of calculating the market value as at the balance sheet cut-off date, nominal discount and capitalisation rates of 4.70% were applied (31.12.2012: 4.80%).

All investment real estate properties under construction are 100% solely owned by Allreal.

Yield-producing properties (CHF 2 784.4 million) and investment real estate under construction (CHF 569.4 million) are recognised as at 30 June 2013 at fair values according to category 3. No adjustments were made to valuation techniques or processes during the period under review.