Swiss Prime Site AG (SPSN) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and a cordial welcome to the annual results media conference. Unfortunately, we haven't been able to invite you physically. The last time this was possible is 1 year ago on February 27 in 2020, 1 day before the Tertianum closing. We hope that 0.5 year from now, we'll be able to meet physically, again. Reviewing last year, let me mention 5 highlights, which you will find in the documents. First of all, certainly, the sale of Tertianum; the second highlight last year was as a result of that, the reinforcement of our balance sheet; and thirdly, and of course, we need to talk about that is COVID-19 and the impact the pandemic had on our results; number four, despite COVID-19, we had a strong revaluation result; and number five, finally, is the good and appealing dividend yield of 3.9%. Now let's talk about the details. An increase in shareholders' equity, specifically triggered by the sale of Tertianum, up to CHF 6.1 billion now. In terms of percentage, that is 47.8%. So it's an increase by 3.4 percentage points on the equity ratio. At the same time, we managed to reduce leverage by 3.8 percentage points to now 41.9%. An increase to 95% of -- CHF 95 of the NAV per share. The Services segment is entered in this only at book value. Let me mention that once more. In terms of figures, other figures, profit or EBIT figures, you can see clear increases, primarily triggered by the sale of Tertianum. Again, on EBIT rose by 31.5% to CHF 559 million, and profit, again. Not including revaluation and deferred taxes, rose by 51% to CHF 477 million. Return on equity of 8.5%. This return on equity doesn't include revaluations and deferred taxes, again. And we have earnings per share of CHF 6.27. Let's move on to the Real Estate portfolio. There is growth of the portfolio from CHF 11.7 billion to CHF 12.3 billion, a reduction of rental income of 1.5%, down to CHF 431 million from CHF 437 million. And this, let me mention that, is not only to do with the rent relief due to COVID-19. This is really an annual performance. So the Real Estate rental income includes properties sold, properties added, the project development. So it's a blend of everything that ended up at a minus 1.5%. For revaluations, as I said, we have a strong revaluations result, and this is a real coincidence. And offer all, we're not an external assessor. It's exactly the same figure as the year before at CHF 203 million. And last but not least, you will remember, last year, at the half year point, we said we temporarily brought the vacancy rate to 5%, but we'll be able to lower that again, and we already have indication happening. By the end of the year, we were down to 5.1% from 5.4%. And our ambition for 2021 is to end up with a fall before the point. Now let me talk a little bit about COVID-19 and the impact the pandemic had on our results. Let me begin with the Real Estate company, closure of the retail spaces and restaurants and hotel RE and the reduction of frequency of footfall because this also had an impact on parking income, parking fees that will somehow guide us through the presentation. That's an important impact in Wincasa's result. And you were certainly aware that there was a dramatic decrease in travel and tourism, which had a direct impact on hotels and in the Real Estate company in the first lockdown, now this is the end of the second long term, but we're now going back to the first lockdown from March to May 2020 and following that period of time, with our employees, we had to process 500 requests for rental reliefs. We've completed all of them. There were restrictions on the transaction markets. I think everyone active in the real estate industry felt that in the first half year. Nothing was moving in that field, and we were able to catch up a little in the second half year. And the reletting of spaces, of rental space, was clearly more difficult due to the pandemic. Now we have around CHF 13 million of loss of rental income due to the COVID-19 pandemic. That's the figure. This figure was mentioned in various newspaper articles and I would like to put it into perspective, comparing it to our portfolio. We were also asked not only to provide rental relief or even rental waivers and just to give you a few figures. The CHF 13 million accounts for around 3% of rental income from the portfolio, and we deferred a little more than CHF 50 million. And if you take that and add it to the rental relief, this brings you to around 15% of all the rental income on the portfolio and if you break that down once more, we need to do that because what were the industries primarily affected? That was retail, it was restaurants and the event industry. Now if you take the sum of waivers and relief, we are talking about 33%, 1/3 that benefited from either deferral or waivers of rental or partial waivers of rent. How about the second wave? That's of interest, of course. The second wave brought us 170 new requests, 500 in the first wave, 170 up to now in the second wave. Maybe, this can go up as far as 200, but we're not expecting to go up to 500 again this time. So much about the Real Estate company. Now speaking about retail, let's directly address Jelmoli. Among our subsidiaries, Jelmoli was most strongly affected in particular by the lockdown in that first period from March -- mid-March to mid-May in 2020, when Jelmoli was fully closed. Within next to no time, within record time, within 1 week following the lockdown, we opened the food sector again. That was an important sign for the population of Zurich and for Jelmoli itself, Jelmoli staff that despite lockdown, you can be active. Of course, we had to save some costs with Jelmoli sales personnel and gastronomy personnel were sent on short working hours and got compensation for that, which is designed to make sure that you do not have to lay off personnel in times of crisis, but can keep them employed. Then, of course, through COVID-19, we were also hit at our new spaces in the airport. Airside was opened and closed, again, immediately. And ever since, we haven't been able to think of a reasonable opening. Let me recall to you the footfall at airport of Zurich. We're at a minus of 80% compared to the period before COVID, and at minus 80%, you cannot make any reasonable sales. Now there was also delay of our Circle project that was opened in November, rather than in spring or in early autumn. So we opened in November, and Sunday opening times were banned as soon as it opened. And the restaurants had to close down again, immediately following the opening. This had a direct impact on operating income of CHF 17.2 million -- a minus of CHF 17.2 million. Moving on to Swiss Prime Site Solutions. That did well in 2020. Got off to a slow start in the first half year due to the fact that there were hardly any transactions. These transactions were then compensated for in the second half of 2020, and we issued in the market 100 rent relief requests with the Swiss Prime Investment Foundation, were all processed. There was a slight slowdown of the launch of the new product. You will remember that the investment foundation decided to become active outside Switzerland. And Living+ was to be the first product. We launched an issuance, which was successful. And why was it not implemented after all? Living+ Europe is about senior citizen centers, care centers in Germany, and you can imagine that Germany with even more restrictive practice with regard to managing COVID-19 made it impossible for us to launch that. So we're not -- it was not possible for us to enable our investors to become active there, and we have now caught up with that. That's why the product was slowed down. Let's move on to Wincasa. Wincasa was working under difficult terms. When you're working from home or are in split-office mode, it's not always possible for your employees, Wincasa employees, think of home inspections, home approvals, you can't do that from home. We have to get this -- all this organized. Let alone the 500 requests that the Real Estate company processed or the 100 rent relief requests the Swiss Prime Site Solutions had, we had more than 2,000 requests in Wincasa, which caused a lot of additional work -- working hours, which were not compensated for, were not remunerated. And this had a negative result on -- negative impact on the result. Add to this, the loss of parking income. I mentioned that before. Among 90 shopping centers under management, 30 were entirely closed, 60 were partially closed. So the returns from parking fees have a direct impact on EBIT, and there was a strong decrease in them because if you don't have footfall, you have no cars to be parked. So much about the impact from COVID-19, the first tranche actually in 2020. Let's move on to the various units and begin with Real Estate. You saw a few figures already and I'm coming back to the new revaluation gain of CHF 203 million. CHF 39 million gratifyingly are from development projects and CHF 165 million are on existing properties. Apply the discount rate that went down from 3.06% to 2.91% this year, and we'll be coming back to talking about this under prospects. I'll tell you about expectations. Net property yield at 3.2%, and as far as vacancy rate is concerned, the trend is your friend. So the trend towards the end of the year is the right one, and we're convinced that we will be below 5% by the end of 2021. Now in Swiss Prime Site Real Estate company. Look at the first bullet point here. We did reletting successfully. We found new tenants, good new tenants, but below the line, first lettings and relettings were relatively disappointing compared to previous years. We're at 85,000 plus square meters of let space, and we were at 128,000 2 years ago. And this was the standards we were going for. This is direct impact from COVID-19. We have about 1/3 of space placed in the market less in 2020 compared to previous years. We added space according to strategy, we grew in the logistics markets and achieved or maintained growth in the development pipeline and if you look at what we acquired, we have a fully let office building at Zollikofen. That's in agreement with our strategy. We've got a logistics property in Buchs fully let, within our strategy, and we've got a development plot at Uster. We sold condominiums at Plan-les-Ouates, I'll be coming back to this, and one property in Berne at the beginning of the year and one property in Zurich at Stadelhofen towards the end of the year. The Real Estate company was also successful in terms of building permits, which we received for Schlieren and for Stücki Park and also for Tertianum at Paradiso. And we completed a study on this site here, and we'll be coming back to this. And completed projects, of course, have to be taken over either in the portfolio or handed over to our investors in particular, we handed over 2 projects, redevelopment of the retail park at Oftringen, with Bauhaus being the anchor tenant, which will be reopened on March 1. And for Allianz Switzerland, we handed over Weltpost Park at Berne in the spring of 2020. Now this is a question that you always tend to put. How about maturities of rental agreements? We're doing very well here. We are convinced we have no cluster risk. And as you can see, for 1 year maturities, we have renegotiated to the tune of 80%. And for more than a year, we have renegotiated more than 50%. We have a good blend of short to long maturities, long maturities being more than 10 years. So total WAULT is a good 6 years. The main tenants here are Tertianum, Coop, Swisscom, just to mention the top 3. A quick glance at Swiss Prime Site Solutions. As I said before, Solutions really did an excellent job last year, because the pandemic impact was almost set off for the clients of the investment foundation. The first bullet point shows growth of assets under management. At the beginning of 2021, we are at CHF 3 billion of assets under management. Add to this a development pipeline for the SPI client of CHF 0.4 billion. Investment foundation grew by CHF 300 million, and there is an additional development pipeline of CHF 400 million. These are immoveris clients, which we merged with the foundation. These are 2 clients that contribute to the rise in asset management. If you add all this up, it brings us to CHF 3.4 billion within 5 years, including the project pipeline. So we're getting very close and put it into perspective, and it's very close to #4 of the Real Estate companies. We've already mentioned a successful issuance. There were 2 issuance, including a contribution in kind in the Real Estate Switzerland Group of this investment foundation. There was one for Living+ Europe, which we conducted. And what are our people currently doing? They are currently focused on maintaining or getting approval from FINMA. On the Capital Markets Day, we said we're going to submit in Q1 2021. We can confirm that we will file in March. That's next month. Let me say a few words about Wincasa. Assets under management were increased by -- to CHF 72 billion, and new customers, such as BLS, were added or IKEA. That's a brand you will certainly know. Turnover remained more or less stable. So what was the impact on Wincasa's results? I mentioned 2 things already. First of all, parking income that had direct impacts on EBIT and the loss of it; and additionally, human resources or manpower that was not compensated for due to the specific situation; and thirdly, a point I would like to mentioned this year, turnover is composed differently this year. What happened in the first lockdown? A lot of institutional clients decided to complete their pent-up projects, which generated additional turnover in Wincasa. However, in Construction & Facility Management, not in the management, property management unit, EBIT margins of 10% to 15% or 6% to 8%, respectively. And if you blend all this, at the end of the day, EBIT contribution will decrease and the EBIT margin inside Wincasa will decrease, although turnover remained more or less the same. I talked about rental relief requests already. We can certainly mention that we had an increase of 35% of turnover in streamnow, the tenant platform, a subsidiary of Wincasa, which is gratifying with regards to digitalization efforts taken by Wincasa. One or 2 things about Jelmoli. One thing I haven't mentioned under COVID-19 impact is the first bullet point. What was important with Jelmoli? In 2020, we launched -- 2 to 3 years ago, we launched a major project, the new ERP system, which is now in operation -- has been in operation since February 2021. And we're now going to have a relaunch of the online shop. It's a relaunch of the online shop in mid-March, within 2 weeks from now. And the omnichannel compatibility or functionality of Jelmoli is really crucial. We'll be coming back to this at a later point. So we took strategic decisions about Jelmoli, and we are very confident to end up with a balanced operating result by 2023. And finally, on Tertianum, which had a major impact on the results last year, you see it at the top, operating income of CHF 500 million we're going to lose and 35 -- CHF 34 million per annum of EBIT that we're going to lose. How do we want to compensate for that? By the development, of course, and by growth in asset management. There's an impact on the balance sheet, very positive one, goodwill of CHF 304 million, moving into shareholders' equity, and total cash inflow of CHF 600 million, plus EBIT contribution of CHF 204 million. I won't comment on the operating contribution. And Markus Meier, on Slide 30 of the presentation, will comment on that. But it's certainly interesting to see that we continue to believe in the field of assisted living and this confidence is confirmed by the fact that Tertianum is our largest tenant. We've got 19 properties of Tertianum on our portfolio, 4 of them are being developed. So that is not only a relevant issue for us, but also for the investment foundation, where we have a total of 9 properties operated by Tertianum and the 10th one is being added, or has been added, in 2021. The [indiscernible] in Berne, that's a cooperation with the new owner of Tertianum and us working very well. Now before you are going to ask that question of what happens when the assisted living business is going to get more difficult, what's going to happen to those properties? Aren't you afraid of vacancy? And the answer is no. We are convinced of Tertianum skills. We have worked with them for a long period of time. And secondly, all our investments are not invested in special use zones, but in cities. So in the worst case, these properties could be converted again and reused or converted into residential space and they could be sold as condominiums. So we can't identify any risk or danger for Tertianum's business model, in particular, not for our Real Estate portfolio. Now on the development projects and ESG, I think I'm going to keep it relatively brief this time. This is pipeline that you are all familiar with. We finished a lot of projects in the end of last year. So COVID-19 did not slow us down here considerably. Maybe a few weeks, but including JED I in Schlieren, we were able to complete construction as fast, to be honest, still under construction. And I would like to elaborate on that. As you may remember, we have 5 buildings here, logistics buildings. Practically, when you come into the city of Geneva, 2 of the buildings have already been sold to the Hans Wilsdorf Foundation, and the smallest is currently being sold. We have sold over 50% of the units in the second building. So this is very positive. And so now we have 2 buildings that haven't been sold yet, D and E. And as we already mentioned, we expect to be able to sell building E. So we are negotiating with various parties, and we hope that we will be able to communicate the news on that in 6 months' time. But before talking about rental income, well, this is already in the calculation that we're selling off building E. So we already calculated with selling one more building. And the other 2 buildings, Tertianum are still under construction. And Alto Pont-Rouge is also under construction and is still at floor level, so they haven't made great progress yet. We're expecting the building -- the construction to completed by 2023. In terms of projects, what's very positive is that we have received a building permit for Lugano. And as you can see here on the picture, this is a highly complex building. And also, using the lake water, which is a very sustainable way. But the construction is quite complex. We also have a legally valid design plan for the Tertianum building in Olten, which is important because Tertianum has another location next to Olten, which it has to vacate. So we need a new project here. JED II, in Schlieren, we have received the building permits but have not started construction yet. We still have to wait for building 2226. We'll talk about that. Also, we have building permits for Stücki Park II, and we are still negotiating the pre-letting status. And once that's happened, we will start construction. Müllerstrasse Zurich, we have submitted planning application. And maaglive, we are still in the process of the architecture competition. And Rheinstrasse in Augst, we are still in the process of getting the zone plan authorized. And so here, we have taken some first steps towards getting the first zone plan, the next zone plan authorized in order to start planning in 2024, '25. And now this is the highlight of the day. The first images of the new project for maaglive. This is the winning design by Sauerbruch Hutton, architect from Berlin. Let me just say a few things about this. We have a second slide to show you the boldness of the project. Well, we still have some reserves here on this property, and we want to use this potential as efficiently and effectively as possible. And so we have decided to not leave it here on this, we also want to see whether we could get residential properties here on this area and -- but you can see that we have some problems here with noise from the hard bridge. It was an exciting project. These are 8 interesting projects in total with different ideas. And it was very interesting to see how the architects dealt with it. And this is the design that won us over. First of all, about using the reserves that's important. That means that we will have mixed usage, so residential properties will be possible here, particularly in the tower. The reddish brown building that you can see is going to be largely a residential building. Then the building next to it is going to be for cultural events. Also as a service building, so it's going to be a multipurpose building. And this corresponds with our vision of creating room for living and space for living. And it's not just about buildings and the different use cases, but it is also about the external space, and that was important in this project. It might seem strange to talk about the external space, but I think that's what makes an area worth living in. I think the external space is absolutely vital to make a neighborhood attractive. And of course, Prime Tower looks great, but on the whole, we still are lacking a certain atmosphere. And so the -- this is all about how the ground floors are going to be designed, how pedestrians are going to move across the area. What happens when you leave the Prime Tower? What will you see outside? And that's what this project is addressing. So here, are some images to give you a bit of an idea. I think there's no point of trying to use the pointer. So I'm going to try and do it as well as I can. At the center, in the middle, you can see the Prime Tower. And so the area that we're now talking about is that green triangles. And within the green triangles, there's one existing building, building K. That's the image that you can see in the bottom right-hand corner. That's the existing building, and the architect projects are the other 3 buildings. And as you can see here, there are going to be -- there's going to be a new community plaza in -- at the center, which is going to be -- there are going to be trees planted. We are going to make sure that we start by planting large trees already. So that we'd have to wait 20 years for them to grow. And also, this is to create a cooler atmosphere because this is an area which is currently very much dominated by traffic, and that's what we want to change. And then from pulse 5, you can get to this area. It's going to allow looking through it, walking through it and cycling through it. So it's going to be attractive. So we look forward to putting this into practice of implementing this project. Let me just go back to the previous slide to talk about the timing. So today, now being the announcement of the project, and we would now like to also present the 8 exciting projects here in this -- on this this area. I hope that's going to be possible in May or June. And then we're going to have a special publication in the architecture magazine Hochparterre, and then we're going to start the project, the preliminary project. And oh, it looks finished. When you look at these renderings, you think that everything's already been done. But we are now at the stage of the architecture competition. So we've done the feasibility study, but now we have to decide on usage, on who is going to live here, what the apartments should look like. And then we're going to go on to a more detailed planning, and construction can start in 2023 and be completed in 2025. So that's the development. And this may be the slide that you've all been waiting for because here, you can see the CHF 83 million additional rental income from developments business. As always, splits according to buildings under construction that are going to be transferred into the portfolio shortly, projects under development, reserves. And the net income is 4.5% net yield. And another important piece of information is that the CHF 83 million don't correspond to everything, but you can see the CHF 600 million are additional reserves within our portfolio that we will be able to enter into development as we go along. So these were the development projects. Now another topic that's very close to our heart is ESG. So E is for -- stands for environment. What is it that we want to achieve? We want to be carbon neutral by 2040. You all know the targets of the Paris Climate Summit, and you know the Strategy 2050 of the Swiss government. Well, we could have said that we would 2050 just like the government says, but we want to be faster because the effect that our buildings have is important and is a relevant topic. So we want to speed things up here to achieve carbon neutrality by the end of 2040. And let me say this makes our task more difficult, but only if we do it, will we be complete, this is about Scope 1, 2 and 3. I'm not going to go into too much detail, but Scope 3 means that we also include the end user, in other words, the tenants in our plans. And this has effects on the rental contracts, too, that we have to negotiate with our tenants. So by 2040, we are going to be carbon neutral, including Scope 1, 2 and 3. These are the most important facts for you. Sustainable financing is going to be discussed by Markus in a moment with green bonds. And now just a few words about what we've already achieved. It already looks very positive. Since 2018, we have managed to reduce the CO2 intensity of our portfolio by 24%. Well, you may say that if we continue like this, we'll be on 0 in 5 years. Of course, it's not like that because, of course, we started with the easier tasks. It's all about heating energy and electrical energy. And first of all, we're going to get away from oil, replacing oil by district heating, wherever we can, if possible, powered by renewable energy. The second part is getting away from natural gas. And then a switch over to PV installations. We already have some in place, and we also want to generate electricity with hydropower. And we are very pleased that our Supervisory Board is support these targets in terms of CO2 reductions. And now let's talk about the social sphere. This is about the rent reduction applications. We already discussed that earlier in with COVID-19. And our Supervisory Board has also decided to create a pool of CHF 450,000. So what was it -- is it used for? it is used for our employees working for Jelmoli, who had to go into furlough, and we want to make sure that we could help those in need here, and we all hope that it helped. And we are glad that we were able to provide some support. The second part is here dated 1st of January, 2021, but of course, we've been negotiating this for a while. So how can we create sponsoring as a win-win situation for the party receiving and the party donating the money? So we have agreed an interesting deal with the SOS Kinderdorf. This is a project that we are supporting, which is to give ourasset managers additional motivation to rent out space because for each square meter rented out, we donate CHF 1 to the SOS Kinderdorf. And we hope that we will be able to contribute to the motivation of our sales staff here. And another point you may have read about in the press. Next to YOND, the former Siemens site, we have some older buildings. Some of them are being used by tenants, and one of those tenants is a foundation which -- for children with rare diseases, and we then had the idea of creating a vaccination center. And of course, we were very much enthusiastic about this project. And the foundation has now already been negotiating with the Canton of Zürich. However, the Canton of Zürich is somewhat reluctant at the moment to approve this vaccination center, but we are still trying to get this to open and maybe in the next step to also set have a mobile vaccination center. Now the G is for governance. These are not all new faces, but we want to look back at 2020 and therefore, be complete on the left-hand side. This is our Chairman, Ton Büchner; and our new member of the Board, Barbara Knoflach. We look forward to her joining. And we are sure that the annual general meeting will approve this on the 23rd of March. And these are also familiar faces, Nina Müller, who started on the 1st of April. We can't even imagine life without her anymore. It's been less than a year. And Martin Kaleja, who's replacing Peter Lehmann. And Anastasius Tschopp, CEO for Swiss Prime Site Solutions because it's such a central topic. And as you have been able to read from our press release today, as of the 1st of July, we're going to have a new CFO, Marcel Kucher, who is going to present himself at the annual meeting. And this -- at the semi-annual press conference, and he's also going to present the finances then. So that was my part. And now over to Markus for the financial part.

Thank you, René. Ladies and gentlemen, I'll guide you through the key figures of the 2020 annual accounts. The aspects you're seeing here will be with us on this tour of the figures. The sale of Tertianum brought a great deal to us in terms of cash and profit contribution, but also for the resilience of our balance sheet, the strengthening of our balance sheet. We heard a lot about COVID-19 from René in terms of loss of rental income, a reduction of rental income. But as we will see, there was also an impact on the turnover by Jelmoli, the taxes is more of a technical matter. If we compare with the year 2019, the situation was that the Swiss people approved the referendum on tax reform and financing of social security, which led to dramatic reduction of tax rates, and CHF 172.5 million deferred tax provisions were reversed so that we ended up with tax income rather than tax expenses. Now let's get started with the most essential source of income, rental income. The effect of the sale of Tertianum led to minus CHF 54.4 million. This is, of course, the rental income on additionally leased properties, not on properties on the Swiss Prime Site portfolio. As you know, Tertianum is currently the largest anchor -- or the largest tenant of Swiss Prime Site. We're very about that in terms of portfolio diversification. So the CHF 54 million is the net loss. At the end of the day, it's around CHF 65 million. Tertianum was on the books for 2 months in 2020 and generated about CHF 10 million of rental income. But nevertheless, the net rental income is CHF 432.4 million. And for reconciliation with 2020, we have changed -- changes on the portfolio of properties, a good result in this setting. We did well. As we heard, we had strong letting results and have been able to maintain rent levels. We excluded the CHF 12.7 million of effective debt collection losses, CHF 9.5 million of which were granted loss, and then we had loss due to COVID on sales-based rents and parking fees. Yes, we still have sales-based rents, to preempt on a question that you may have. And we still have sales-based rents on the books. Then we have divestments as well, which we do on a regular basis to realize gains from ordinary portfolio management. So as a result of that, we're losing rental income, which in this particular case, was compensated in the same year. We even overcompensated for this, in this case, by completed projects, minus CHF 6.2 million is mainly attributable to the sale of properties in the previous year, in 2019, and CHF 1.2 million was the outflow along with the sale of Tertianum, the 3 properties that were already on the books of Tertianum because it wasn't reasonable to hold these peripheral properties on Swiss Prime Site's portfolio. Completed projects. The loss of rental income that we overcompensated that's highly gratifying. This is the main projects that were completed last year. Schönburg at Berne, a mixed residential, retail and hotel property; and then YOND in Zurich; Albisrieden; and A1, the retail park at Oftringen. On to purchases. We purchased an office property at Zollikofen, a logistics property at Buchs. And in 2019, the previous year, we had 2 commercial logistics properties in Münchenstein Basel. And all of those are properties that in future may show development potential. Moving on to the development of operating income divided in 2 segments, with -- showing major swings here triggered primarily by the sale or deconsolidation of Tertianum. There'll be a slide on that to give you more precise information of the outflow. In the middle, you can see EBIT in the segments, Real Estate EBIT, slightly lower than in the previous year. The main reason being the impact from the COVID-19 pandemic. And Services EBIT that rose, primarily due to the CHF 204 million gain from the sale of Tertianum. Real Estate EBIT, as you can see on the left-hand side, the dark pillar -- the pillar in dark blue, that was a decrease, which is -- isn't really dramatic. In spring last year, a development property was completed for a third-party buyer, Weltpost Park, 3 residential buildings that were handed over to the buyer, to the investor, generating little development income in the year under review. And here, we also see as the second difference, the impact from COVID-19 in terms of Real Estate revenue in the reporting of the Real Estate segment. Now this is the reconciliation from operating expenses and operating income beginning in 2019. Over on the left-hand side, you can see the figure that we communicated, that we published. Then you have the impact from deconsolidation, 12 months in 2019, of Tertianum. And then we've got a continued operations view, sort of showing operating income and operating expenses excluding Tertianum in 2019. And in 2020, for operating income, you can again see the lower percentage of completion return, the development return on our books but also the influence of lower retail turnover achieved by Jelmoli. If you have lower development return, you also have lower development expenses, which you can see under operating expenses that decreased on a like-for-like basis. However, this decrease is partially compensated by a larger investment in digitalization and business transformation at Wincasa, higher shares of cost among owners due to the slightly increased vacancies and the pandemic. And a novel thing in 2020, we have clearly higher equity, or shareholders' equity tax, to be paid on the holding company that is not posted on the tax expenses, but administrative expenses. This is why it is included in the operating expenses for 2020. And then we're moving again to publication towards publication in 2020 with the various items due to deconsolidation. These are similar, the same items that we saw before, mainly rental income. The year before, it was CHF 65 million, and this year, we're down to CHF 11 million due to the 2 months of consolidation. Then turnover from assisted living, CHF 73 million this year. And some expense items, primarily personnel costs, this is a highly labor-intensive business, and together with the rest of the expenses and depreciation from the previous year, further expenses for Real Estate, these are the third-party tenants of Tertianum. Tertianum paid for third-party properties and the additional maintenance cost. Moving on to the income statement of the group. In the upper block we've got the EBIT operating income. And in the lower part, the operating expenses, presenting the swings that we provided the details of a minute ago. Then revaluations, highly markable CHF 203 million, precisely at the level of the previous year, which is really astonishing and impressive. Midyear, we had a loss of revaluation, CHF 47 million due to pandemic. Then the market of Real Estate transaction met with powerful demand for Prime Sites. So by the end of the year, for a 12-month period in 2020, we were back to previous year's level of revaluation gains. Revaluation gains are primarily accounted for by Prime office buildings, particularly in Zurich here on the Maag site, including the Prime Tower and in Zurich North at Oerlikon Cityport next to the train station, the headquarters of Zurich, Switzerland and CDB Zurich here, with Beethovenstrasse. Prime retail locations also contributed well, in particular, Rue du Rhône in Geneva. And what is gratifying is that all of our developments made a positive contribution to revaluation gains. Beyond JED here in Zurich, Tourbillon, Plan-les-Ouates in Geneva. Pont-Rouge in Geneva as well also made a positive contribution as well as Stücki Park with its lab offices in Basel. Revaluation loss was considerable as well, primarily on retail properties and city hotel properties in Basel, Zurich, Geneva and [indiscernible]. The average nominal discount rate decreased to 3.42% and the real discount rate to 2.91% by 15 basis points. Moving on in the income statement, we can see profit from the sale of properties, CHF 22 million. That's Laupenstrasse in Bern, and 1 property here at Stadelhoferstrasse in Zurich, add to this CHF 13.8 million profit on real estate developments. We touch upon that CHF 13.8 million, as I said before. And results from the sale of participations. That's Tertianum, accounting for CHF 204 million, CHF 158 million of equity value, CHF 70 million of net assets was outflow, deconsolidated from the transaction. And around CHF 300 million would recycled from the shareholders' equity. That's the goodwill item that we directly calculated when we made the transition from IFRS to Swiss GAAP FER. We have a good position in the low interest rate field. As far as financing cost and income tax is concerned, we're back to a normal level compared to 2019 where we had the effect from the tax reform referendum, and showing a major tax income. And here, you can see the performance of the property portfolio, CHF 557 million plus to CHF 12.3 billion, revaluation gains had a specific impact there. But then there was also growth from projects with considerable additional profit and major investments that contributed to this increase. And then the purchases, some of which we've already seen under rental income. Let me also mention that Zollikofen and Uster and Buchs, those properties are included here. And the divestments relate to Laupenstrasse in Bern, Stadelhoferstrasse in Zurich and the 3 properties that went away with the sale of Tertianum. Development of shareholders' equity to 48%, a solid 48% in this difficult year. We used all the opportunities to massively increase shareholders' equity and make our balance sheet more resilient. We can see profit of CHF 610 million. And the recycled goodwill positions from Tertianum of CHF 303.5 million. Then for financing, we primarily maintained our financing structure. And the blend of financing was shifted from noncollateralized to lower collateralized and mortgage-based funding. At the beginning of the year, in these more turbulent financial phases, we were cautious in the capital market, CHF 600 million cash that we got from the sale of Tertianum was used to secure the CHF 230 million bond in October. And at the end of the year, we entered the field again with a green bond. And at the end of the day, total financial liabilities was slightly reduced. And we also reduced loan-to-value to 41.9%, which is a massive improvement of our financial strength. Green bonds last year in December, we issued second one. And this year, in February, we paid into our sustainability strategy. The green bond is based on a green bond framework in agreement with the International Capital Markets Association requirements. And the second-party opinion from the ISS ESG, and the paper is available on our website. Apart from the second party opinion, we also have regulations of processes and definition of eligible assets. With these 2 bonds, we fund properties with high-quality labels. That's the one thing we are doing. Second thing is the CO2 reduction path that we are going to feed with green bond proceeds. We will also report on the use of those resources, which will be audited by our auditors. So that's the essentials of our financial figures, let me hand it back to René at this point.

Thank you very much, Markus. Well, as you were able to read today, Markus decided after having worked for this group for 20 years and directing to leave in the summer, it's been wonderful working with you. I have spent 5 years working closely with you with some excellent road shows. It's always been fun. It's always been great. And I think there's nothing better for a CEO to be able to rely on the CFO totally. The figures were always correct, and we always had the cash available when we wanted to buy a property. So I think we've been -- we've made a great team, and I really enjoyed working with you for the last 5 years. On that note, thank you very much, Markus, also on behalf of the Supervisory Board and the Management Board. Well, the outlook, I think, we'll skip this slide, but it's more important -- or more interesting to look at the market. So mainly about the view about our main usage types. So who have been the winners of the pandemic, in terms of usage types in 2020. Those were residential, living and logistics, closely tied with e-commerce, and orders via small or large platforms. So logistics is an interesting product, which has moved from being a niche product to a more central product. And residential living has become more important. I think during the lockdown, everyone realized how important it can be to have a room to live, which maybe also has some outdoor space such as a terrace or a balcony or a garden. So logistics and residential living have been the winners of the year. And now our main usage types, office space. And I want to do away with the rumor that I often hear, particularly from people abroad, the question of working from home. We hear a lot of people who say that people will be working from home forever, and people won't be returning to the offices. And -- but here are our 8 reasons why we firmly believe, and I'm speaking about Switzerland here, in particular, that in Switzerland, we will not have everyone working from home. Firstly, within Europe, we have the shortest commutes. I think it's a different story if you have to commute for an hour or 1.5 hours from outside of the center of Paris to work in the center. So via very full underground train and all that kind of thing. And I think those kind of people will prefer working from home. But we believe that short commute times will mean that working from home won't be so attractive in Switzerland. Half an hour is the average. Also, we have excellent public transport, and it is not underground, but it's overground. And I think the psychological aspect of using overground means of transport is incredibly important, particularly in these times of pandemics. And another point is that we don't have any mega cities. And the fourth point, we don't have mega buildings either. The Prime Tower is a large building, but it is still very far away from buildings that you find in other European or maybe even other continent cities. And another point is that today, part-time work is particularly prevalent in Switzerland. So people work maybe 70%. That's something that a lot of people do, a lot more than in other countries. And 0.6 -- when planning offices, we made sure, a long time ago that we would factor 0.6 to 0.8 workstations. So only 60% to 80% of employees actually have a fixed workstation. Because at other times, they either work from home or from other places. And so these are 6 very important points. And now from the point of view of people working in offices, they will need additional surface areas in future. I think that in future, people won't rent more offices, but they will use the offices that they have to give people more space. So that people either have bigger desks or bigger -- or also their own rooms. And also in communal areas, there is going to be more space per employee. And we also firmly believe that there's one thing that cannot be done during -- when we all work from home, communication, cooperation, collaboration are difficult. And the true DNA of a company cannot be -- really be absorbed by the people working in the company. And I'm talking about Prime properties and our Prime sites. It may be different in a C or D location, but we don't have any warning lights on here at all. One thing that is going to change, however, is that we will want more space per employee. So we have to rethink this -- when building offices, we have to make them more attractive than the working space at home. And that means that companies have to invest into making their offices attractive. This is a change that's going to happen over the next few years. And another new aspect, which has partly been triggered by the pandemic is the people are looking for a safe place to work. For example, in terms of air filters or automatic doors, so that people don't have to touch door handle. So all of these are aspects that we now have to take into account when planning offices in the future. I just mentioned that tenants don't want to reduce office surfaces. Well, we are the largest company offering office space, and we have not had a single request from tenants to reduce their office space size. And another thing that's very interesting there is a large-scale survey of the institute of the German industry, which found that only 6.5% of companies are looking to reduce their office sizes in the near future. This was published on the 5th of February 2021. This refers to Germany, but I think it still shows us that offices are still going to be important topics. Now let's talk about retail. Of course, retail, you can say, has been a disaster, but this may sound a little strange. If we look at the use types, which were truly affected by COVID-19, that's been retail, hotels, event spaces and gastronomy. And now out of all of those, retail was still the least affected because retail is not just fashion, it's also food and -- near food. And I think you've been able to see the figures that the 2 large companies in Switzerland have published. They have had immense growth. And there's also been growth in DIY stores and sports shops. So retail is not dead by any means. And so we think that there is actually a positive development. And even in Jelmoli, without the lockdown, we would have been at least on the previous year's levels, maybe even exceeded it. And once lockdown was lifted, people wanted to go back to the shops and to maybe treat themselves. There was almost like an over compensation, and that applied to Jelmoli and other shops as well. So Jelmoli will still be around tomorrow. However, the combination between retail trade and e-commerce is going to be more important in the future. And lots of retailers are going to start with this omnichannel strategy. And this brings other interesting questions with it. Many have just been working in e-commerce to who are now looking for retail space in inner cities. And there are also tenants such as IKEA, who are now looking to go into the city centers. That's totally different from what they've been doing in the past. And for us, it's going to be interesting. As Markus mentioned, we will have to think about how to look into turnover and rent ratios. So for example, if a company has both retail space and e-commerce, what is the turnover of the e-commerce that is attributable to the retail space. Of course, that's difficult to say, these are also legal questions that we're going to have to answer in the near future. So retail did take a bit of a hit, but amongst the industries that were most hit, it was the least affected. And so all we have to do now is to just keep going, and we have deferred some rents. Hotels are suffering. And Zurich airport, minus 87% of -- in terms of passengers in January 2021. Of course, that cannot be compensated. And of course, city hotels are all suffering. There is no doubt about it. But we shouldn't panic because the contracts that we have with the hotels are all very solid. And maybe if the hotels have 1 or 2 bad years, that doesn't mean that these are bad businesses or unattractive businesses because they are going to recover, provided the concept is right, and we assume that it is with our inner city hotels. So what we have to do here is to stick it out and to just wait for better times and the same goes for gastronomy. And so the retail bashing that happened last year is not something that we would subscribe to. But we already mentioned during the last press conference that, of course, hospitality in general is affected. So much on the market and our market outlook. Now let's take a look at the midterm goals. Of course, these are the goals that we already mentioned and communicated during the Capital Market Day in October, but let me just remind you. In real estate, the portfolio is going to be stable around CHF 12 million. And of course, if we are above the CHF 12 million doesn't mean that we have to sell off what's left over immediately, but the portfolio was CHF 10 billion when I started. And we decided to grow up to CHF 12 billion. And so this is -- now we want to strengthen our balance sheet. And so the stable volume of around CHF 12 million is what we want. Vacancies. We're going to achieve 4-point figure, and we are sure that our portfolio has the quality that will allow us to keep vacancy rates down, around 4%. And also I mentioned they reduced retail in B and C locations. This is going to stay on the agenda. And we also want to strengthen the use types logistics. And asset management, we want to achieve CHF 7 billion. Including project pipeline, we are already at CHF 3.4 billion. It's a realistic target. I know that a lot of analysts thought that it was ambitious or overambitious, but I think that it's realistic. And we have around CHF 30 million EBIT contribution to the group until 2025. And the idea here was that this had to compensate the loss of the EBIT contribution of Tertianum. Assets under management of Wincasa, CHF 75 billion. And of course, this is -- assets under management are interesting because we have some interesting clients here. But what's really important is the EBIT margin here. And here, our guidance is still 12% to 15%. And we have been below that for the reasons already mentioned, Jelmoli already has been mentioned. We have here quite a stable result, expected until 2023. So now here's our guidance for 2021. We've communicated this often, and Markus mentioned it, too. Over the last couple of years, we had some special effects that are not going to be repeated. We can't sell Tertianum twice. Of course, it would be nice, but we can't. So in 2019, we had some one-off tax effects. And in 2020, we had the profit from the sale of Tertianum. And so both of these are not effects that are going to be repeated. So we'll be back at the 2018 level on revaluations. And this is an interesting question. You saw what happened in 2020, and you start at minus 50 and then end up with plus 200 at the end of the year. And this shows what can happen during the pandemic. As a matter of principle, I believe that in CBD we still have some additional potential for yield compression, that the discount rate can be lowered, which will increase the value of the property. This can affect the portfolio. Markus already mentioned the main properties. So that's the positive side. And then the other positive side, the positive revaluation effect to be expected from our project development pipeline. Those projects are going to be completed in 2021. And so what can happen on the negative side. Particularly where our portfolio is concerned, you can see we had minus 50 at -- after 6 months. Everyone thought -- was under the impression of the first lockdown, people thought that retail space and offices were no longer interesting at all. And you know with all of those properties, there are some that are around 0 for revaluation, some that are plus and some are minus. And if we had another lockdown, and these properties or rather these usage types were seen in a different light again. This would be -- of course, this could happen, and that's why it's difficult to make a real -- or have a real forecast here. And so the basis here is as of today, also in connection with COVID-19, we -- so included everything we know as of today, we think that the restaurants are not going to open until the end of March or April, but retail will reopen next week. And so if we did have another lockdown, of course, that wouldn't be quite the same. But we are expecting an increase in rental income due to the project development pipeline. And we also mentioned several times that we want to reduce the vacancy rate below 5%. 4% is the medium term goal, but of course, we'll have to start with 4 point something or other. And then the dividend policy is going to be just -- will be 80% to 100% of the adjusted earnings per registered share. And maybe the title is not quite right here on this slide because it should be dividend 2021 and dividend policy. Because if we have tried to apply the dividend policy to the dividend in 2021, that wouldn't have been the same. So the dividend is now CHF 3.35. And at the closing in 2020 with an attractive yield of 3.9%. This is made even more attractive by the possibility of the distribution of an ordinary dividend of 50% or withholding tax-exempt distribution from capital contribution reserves. So I think we're going to have a question about this. And so let me answer it now. The basis of the calculation is going to be one that is going to rise slowly in the future, and that is why we have set some medium-term goals. So if you have done your calculations, just the sale of Tertianum has lost 20 [indiscernible] per dividend -- for the dividend, and in terms of the dividend per share. And so we wanted to include a certainty. We want to strengthen the balance sheet. And if we want to strengthen the balance sheet, we have to be cautious. And particularly -- in particular, in relation with COVID-19. Well, you know our figures. 33%, 26% retail and hotels. So we try to do some simulations in order to find out how much we might lose, worst case. And the worst case could be another wave of insolvencies, which would mean that we have rental contract, but the tenant is no longer able to pay. So that is why we set the basis for the dividend to CHF 3.35. For the future, our dividend policy is going to be according to adjusted EPRA earnings per share. This includes the rental income, so the recurring rental income. And on top of that, the sales profit of CHF 30 million. The CHF 30 million is not something that we just came up with out of thin air. But looking back at the last few years, we always managed to generate around CHF 30 million or even more in terms of sales profits. And this can be constituted from existing properties, but also from our development pipelines. And our development properties are going to be attractive this year. We are expecting to be able to sell Plan-les-Ouates Building E this year. And a large part of the sales profits of 2021 will come from sales from the development portfolio. And the positive effect of that is that we won't be losing rental income at the same time. So these are recurring CHF 30 million from sales profits that we have always been able to generate in the past. And then we also have the EBIT contributions of the other group companies Wincasa and Jelmoli. So what is the target range? The target range is 80% to 100% of the adjusted EPRA earnings per share. We want to achieve this target range unless some really unexpected circumstances arise. So that's all from me. And now we'll go to questions and answers. So please join us for your questions. Maybe just one bit of information. Our colleagues from the group companies, Markus -- Martin Kaleja, Anastasius Tschopp and Hofmann and Nina Müller are all online. And so you can give us your questions, and I will be able to then pass them on to this respective specialists. So that's the question-and-answer session.

First question on the phone from Pasco Boll.

And congratulations on the results. And your initial efforts in reducing vacancy. I have a question on the dividend first, the EBIT contribution this year from the services segment is bloated due to the sale of Tertianum, and the other segments clearly underperformed compared to previous years. Are you foreseeing a clear stabilization for 2021? And what effect will that have on the dividend? Will there be a rising path? Or can we expect that?

Well, maybe let me answer this question right away. Because otherwise, I will have forgotten by the time you asked the next question. Well, to the end of your first question, well, we've defined a new basis for the dividend. And this is our personal claim, the claim from the management and the Board of Directors. We don't want to reduce the CHF 3.35 again. We don't want to go below a CHF 3.35, but this is meant to be the basis for growth over time. How about the various segments in the services sector? Well, that's why we presented the midterm objectives. We believe in the CHF 30 million that will come from asset management. This year, we were around CHF 7.5 million. I can tell you, very close to the budgeted figure. And we do believe in an EBIT margin with Wincasa, and we're convinced that the 2 together, asset management plus Wincasa, will, in the medium term, generate CHF 50 million of EBIT. We have the CHF 50 million once communicated as a midterm objective between Tertianum and Wincasa at the time. So we're very confident that between asset management and Wincasa, we're going to get there as well. And this year is going to be a year of transition. But that was only the first question. I hope I've answered it.

Yes. Second question is about the service EBIT split. You presented it last year. So one might assume that your thinking -- we cannot take the shock of the EBIT loss with Jelmoli. Could you perhaps provide more insight in this regard?

Well, the shock that you were to suffer. That's one thing. We can take that. But no, it's about the following. At the end of the day, Jelmoli is having a bad year. Let's face it. We have a double-digit loss, which can be deducted from the loss of income at 13.4% of the CHF 17 million that we suffered. Well, we said basically, the services business has medium-term objectives, which we communicated and we don't want to focus on Jelmoli's EBIT as a subject matter in a year suffering from the pandemic. We didn't want to -- for this figure to be discussed. And I gave you a guideline for the assets management. We were at CHF 7.5 million at budget level. Now if you compare this to the previous year, it's fair to say that -- and I mentioned it already once before. I hope you remember that in 2019 was actually too good a year. So we didn't do any worse in asset management. We did better. 2019 was good because we had a major transaction of the portfolio with -- signing all the expenditure wherein in the 2018 results and closing was, if I remember properly, on the 3rd of January in 2019. So the comparison doesn't really work. With CHF 6.5 million in 2019. That was really the basis. If you do a like-for-like comparison, and that brings you to the CHF 7.5 million. Now the EBIT margin, Wincasa is at 10%, not at the 12% to 15%. So we're below the objective due to the pandemic, lack of parking fee income and direct impact on EBIT, and the huge effort to process the tenant request, which was not compensated for. And last but not least, the change of the business mix this year. A lot of institutional investors decided, well, what to do during the lockdown? Let's do some conversions and modernizations, which we carried out. That is why the turnover volume increased, but at a lower margin. Again, the margin in this business is between 6% and 8% of EBIT margin. So the margin mix is not the same.

Great. I have a question on solutions. SPS solutions. You launched the new product. The issue volume was at CHF 38 million. Are you happy with this volume? Or doesn't it really express the cautiousness of pension funds for real estate investments in the EU territory?

Well, let me say that we're launching the 2 issues today. But I would like to hand it over to Anastasius for more details. Anastasius, please.

Well, thank you for the question. We are very happy with the issue. Continue to raise almost 40 million in a time where the lockdown is on in a country where the houses cannot be visited, especially the retirement homes, is, of course, a very good result. But it is, as René mentioned, we have planned further issues, and we will certainly be able to complete them to an extent. And then the first investment can be accomplished in April, May. And Pascal, maybe I can add something, which is not related directly to the issues that you have mentioned. But I think you had asked a similar question, 0.5 years ago already. How do you get from CHF 7.5 million actually to relatively CHF 30 million of contribution? Do not forget, now the asset management had the investment of a large customer, and there will be then several customers in the future. Also with the fund created, and at the end, the money will be earned [indiscernible]. Money with the management fees, the running fees on the product, but primarily with transaction issuance fees for new products. And that's where you have the main growth lever, not only in the fundamental management fees that, but of course, have to cover cost of probably a little more. That's better, but with additional fees.

Okay. Got it. Final question on the Alto Pont-Rouge project. The letting or pre-letting status is currently at 20%, usually you're going for 50% of pre-letting. And I think construction has started already. So how do you see the risk currently of being stuck with vacancy for a longer period of time?

Well, I could give you a very cautious answer, Pascal, saying, well, yes, maybe, I don't know. But this location, this site is so excellent. Alto Pont-Rouge directly connected to the new railway line between Annemasse and Geneva, and it's in operation already. There are new buildings that are pre-let, so for a change. Otherwise, we usually demand 50% pre-letting status. But for a change, we believe that we will be there by the end of the year so -- when it will be completed. It will only be completed by 2023. And so do not miss the right point in time. That's always important. We need to be able to show something to potential clients. It's not a project that will be there one day it's in construction already. You were right. We're still underground, but it's being constructed already. And we are making an exception there because I think it will be similar to [indiscernible] to District Number 5 here in Zurich. There will be additional growth, very adjacent to the project. We have the largest development potential, the cantons city of Geneva, PVA -- Praille-Acacias-Vernets or PAV, where we also secured plots and the building is adjacent to it. It's the entrance to this new site. So we are absolutely certain that we can let that, and it will be let when it is completed. So I'm taking a risk saying that. But that's what I think.

I have one more question on your figures. You only referred to the first lockdown of processing rental requests. How much is left for the -- covering the old year? And what are you expecting in terms of rental reduction?

Well, we're doing well in the rental collection. We were at more than 95%. So we've almost completed the last year and then the new year in the second wave. And that's what I mentioned before. I believe we've got 170 requests compared to the 500. That's when I said it will maybe go up to 200. Well, what do we think of the rest of the year? I think it will be not dissimilar to last year. In the last 2 months of almost full lockdown, almost 6 we had in 2019. This time, we're having around 6 weeks of almost full lockdown and the impact of our result as of today, assuming there won't be any further lockdowns, we believe, will be more or less the same as 2021.

Next question. Ken Kagerer, Zurich Kantonalbank.

I have 2 questions. First question is about the adjusted EPRA EPS. Can you please give us the exact formula of reconciliation with EPRA EPS to adjusted EPRA EPS? How can you extrapolate from CHF 2.81 to CHF 3.55 (sic) [ CHF 3.35 ] in 2021?