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

Great. Thank you. A warm welcome to all of those here at the Prime Tower and, of course, also to all of you who have joined us online from home or from another office. I would also like to welcome the colleagues from the Board who are here today. And I'm particularly pleased to introduce our new CFO, Marcel Kucher. Let me just start with a few highlights. What did we do in the first 6 months? Well, we were able to grow in Construction, 1.1% increase in the property portfolio and 6.7% for Swiss Prime Site Solutions, which has now led us to CHF 3.2 billion. And another important point is the decrease of vacancies, which was one of our objectives that we mentioned at the beginning of the year. We wanted to decrease below 5%, and we've achieved that. Our current vacancy rate is 4.7%, which is a decrease of 0.4% compared with the end of last year. Compared with mid-2020, we had -- when we had a vacancy rate of 5.4%, we have improved by 0.7%. In terms of square meters, that means that we have reduced vacancies of around 10,000 square meters. Financing. Well, we still have a very strong equity ratio of 47.3%. Don't forget the dividend payout of CHF 255 million, which took place in March. LTV is at 42%, with a tendency to move further south, so to speak. And that is also one of our medium-term objectives. The results are going to be presented in more detail by Marcel Kucher, including Tertianum and also excluding Tertianum. And these are 3 items that have changed considerably. The profit from the sale of Tertianum, which is not going to be incurred this year. That's one element that has changed. And then we also have the sales from Assisted Living, which is the care business, which has changed. And I think if you know our structure, you can quite easily understand the change here. And then there's been another change, which is rentals, rent income from Tertianum for the apartments for -- from older people who have rented apartments from Tertianum, which incurred rents that were also included in our top line before. So Marcel Kucher is going to explain how this now can be presented. So we're deducting those items. And then looking at the comparison of operative performance, we can see an increase of [ plus 36.6% ] to -- to CHF 212 million (sic) [ CHF 211 million ] and 42.3% to CHF 163.5 million in terms of profit. In 2021, we were still impacted by the COVID pandemic. And as we heard, we are not quite out of the woods here yet. We saw rent waivers of CHF 3.1 million in 2021, and also some sales decreases based on sales-related contracts from parking, which amounted to CHF 2.4 million, which brings us to a total of CHF 5.5 million. This was mainly based on hotels, particularly city hotels, which have sales-related components. The rent income in the first 6 months was very positive, 98% in rent collection, and that shows that the measures taken by the government have been successful and that our tenants were able to resort to a very strong internal balance. So that was the introduction on my part. I am going to come back later with an outlook. And now it's over to Marcel Kucher.

Thank you for the friendly welcome. I'm happy to be here in my new capacity as the CFO for the first year, presenting the first half year figures to you. I'm particularly pleased to see some well-known faces in the auditorium. We're looking back on very strong figures in the first half year, which I would like to give you some details about. René Zahnd mentioned it before. One of the key components is -- which makes like-for-like comparison a little difficult, and we want you to see the underlying operating development. So let's begin with the operating income. As René said before, we've got Assisted Living that didn't apply anymore in the first half year of 2021. And we have CHF 11 million of rent that Tertianum took in that is no longer there for -- on a like-for-like basis. We are based on operating income of around CHF 341 million on a like-for-like basis, and we increased it by a respectable 6.3% percent to around CHF 360 million. All components contributed to this. Letting, an increase of around 2% on a like-for-like basis from CHF 209 million to CHF 213 million. Development has been rather strong, especially with our project in Geneva. Real Estate services, more or less flat, bearing in mind that there is some seasonality depending on how you calculate the auxiliary costs. But the situation has remained relatively even and flat. Retail, very gratifying, an increase in excess of 5%. I'll say more about this later. Despite several weeks of lockdown for the entire retail business and gastronomy restaurants were affected for a longer period of time, which caused more loss, and yet we have growth of more than 5% and quite impressive growth of CHF 7.5 million in the asset management business, which is a plus of almost 60%. We'll give you more details about that in a minute. This positive increase on the revenue side was reflected very powerfully in EBIT and EBIT margin over on the right-hand side. Again, you need to adjust that the CHF 204 million of sales proceeds in the first half year of 2020 and for the 2 months of contribution from Tertianum. So on a like-for-like basis, we are around CHF 154.5 million, which was increased by almost 37% to CHF 211 million. Half of it, around half of it, is attributable to proceeds from sale, and the other half due to underlying or operating performance in the first half year. I'll show you more about this later on. Moving on to profit without revaluations and deferred taxes. The positive effect here is even larger, which is due to more favorable financing terms. Our financing rate went down from 1.1% to 0.9%. And the expenditure we had caused a more considerable increase. And finally, return on equity, a great leap there, especially on a like-for-like basis, bringing us to 8.5% (sic) [ 8.4% ]. Our guidance was between 6% and 8%. Due to our strong operating figures, we are at the upper end of our guidance range. And compared to the previous year, we had a strong operating improvement. These were some of the highlights. Let me hand it back to René for more details, and I'll be back in a minute.

Thank you. So that was the comparison of 2020 and 2021 half year results. And now we have some deep dives in our business. Let's start with Real Estate business. We spoke about vacancy rates earlier. We were able to reduce those by 10,000 square meters. And the total that we were able to let or re-let in the first half of 2021 was 47,000 square meters, some at higher rates. We've already communicated that Google is going to be the new anchor tenant of the redevelopment project at Müllerstrasse in Zurich. And we also have some successful rentals in Alto Pont-Rouge with CMS and Westhive as anchor tenants. And we also have some additional reservations and expressions of interest, which will lead us to a very high vacancy rates. And well, 10 days ago, we were able to sign a new rental contract with Lonza for our project in Stücki. So another building of the finger docks that we have been able to rent out. What about sales? We were able to purchase an attractive plot in Zurich for logistics use. We'll get back to that later. In terms of purchasing existing buildings, we are somewhat conservative at the moment. Just we recently made an offer for a property nearby. And we just wanted to pay half of what was eventually paid for the property. So if that would be -- a yield of 1.7% net. And needless to say that that's not interesting to us, and that is why we will continue to invest into our own developments. We have sold another property in Zurich Stadelhofen. It was, strictly speaking, 1 property that we sold in 2 parts. One was sold at the end of 2020. And now we have sold the second part, and that will be in the books of 2021. We've also sold another building in Plan-les-Ouates in Geneva, namely, Building E, which we sold to Hans Wilsdorf Foundation. Building A is currently now sold in condominium ownership, and we have a rate of 85% already. So now here is a bit of an overview because maybe it was a little confusing. And here, you can see 2017, Building C was sold to Hans Wilsdorf Foundation, C and D, in fact. And in March this year, we sold Building E. Building A is being sold in condominiums, and we have currently sold 85% of that. And Building B, at the center here, is going to be kept in our portfolio for letting. Now the property portfolio is summarized here. First of all, our like-for-like rental income has been increased, as Marcel mentioned earlier. And the revaluations, also interesting, not the CHF 144 million this year. But when we started a year ago, retail bashing, office bashing, all these things were happening. And there was a negative revaluation. And at the end of 2020, we were up at CHF 200 million again. So that was a difference of CHF 0.25 billion for the same portfolio over the space of just 6 months. That's just -- that goes to show how crazy the COVID situation was. And the market then recovered towards the end of the year. You may remember that in July or August, when we sold the lot center, retail building at an attractive rate. This gave some impetus to the transaction market and returned us to the pre-COVID level. Now comparing this with a second lockdown -- well, during the first lockdown, the market was in turmoil. There were no transactions. Nothing was happening. And during the second lockdown, however, there were no effects at all, transactions continued, some were even able to achieve higher prices. So the market adjusted and got used to the situation. There was no turmoil anymore. And this is also reflected in the revaluation of CHF 144 million. And of course, the net yield on property is very positive, which continues to be 3.2%. Despite the upward revaluation, the net yield remained the same. And this was due to the reduction of the discount rate, primarily from office buildings in prime locations. I think, once again, you can say location, location, location. The better the location, the higher the potential for a positive revaluation. I've already mentioned the vacancy rates. I'm not going to say any more about that now. It will come as no surprise that our properties are still in the same location as they were a year ago. But let me just remind you that, in the medium term, we wanted to make some changes to the use types. We wanted to shift retail to 20% by increasing office and logistics infrastructure. I'm showing this slide to show you that we have compensated already. Infrastructure has risen from 6% to 9%. And this also includes the Building E in Plan-les-Ouates, which is also a logistics building, even though it looks like an office building. West-Log is also a logistics building. So we are following our strategy and implementing our strategy towards more office and more logistics space. During COVID, we weren't able to sell retail space. I think that is obvious. Now let's take a look at the profile of rental contracts. The maturities, the medium maturity is 6 years. And these expiry dates are evenly distributed over the next few years, 8% to 2% were -- of those contracts are about to expire were extended already in 2021, and 31 of those due to expire in 2022 have also already been extended. So we are not going to have any big changes here. So we're certainly on track. So now I will talk about our development business a little later, but let me now concentrate on our Services and start by asset management. On the left-hand side, you can see very clearly the growth rates that we have achieved. This is due to the assets managed by Swiss Prime Site Solutions. We are currently at CHF 3.2 billion, CHF 2.8 billion, the main client is the Swiss Prime Investment Foundation, and the remaining assets are for smaller direct clients. We have a development pipeline here of approximately CHF 400 million. And now taking a look at the results of the foundation so far, I would like to congratulate them, congratulate their asset managers. Reducing the vacancy rate to 3.3% is a record low, best results ever were communicated by the foundation. So that certainly is an excellent situation. Now taking a look across the border into the rest of Europe. The first product, SPIF Living+, has been very successful. This is assisted living abroad. It's the first international product of the foundation and more are in development. The second one is certainly going to be communicated in the second half of this year. I was hoping to be able to show you the FINMA document for the approval of the application of fund management and fund products. I haven't got it quite yet, but we have been told that it's underway, and that means that we will be able to start with the first product in the fourth quarter of this year. And we're confident it will be well received in the market. We've also managed to attract additional new clients. I can't mention the names yet, but these are clients who want to grow, who will bring in volume between CHF 600 million and CHF 1 billion. So asset management is the growth driver within the organization, and it's only just starting out. So now one more thing. You all know about Leuenhof in Switzerland, and it is the most beautiful building on Bahnhofstrasse, apart from the Jelmoli building. Of course, I need to say that. And well, before the foundation took over the building, the potential was CHF 10 million and then the total rental potential was labeled at CHF 12 million. And today, the asset management team has managed to bring that up by 16% above the potential. That is a great achievement. And by the way, they did that on their own without marketers. And so additional tenants were attracted. Rental contracts were signed for several years. Now the entire building has been rented out. So congratulations to the team. That was really an excellent job. So that's on asset management. You may have noticed that you don't have any information on Wincasa and Jelmoli in your documentation. Well, I'll say a few words about it. Well, Wincasa, as we already mentioned, is relatively flat. We are on budget, but let me tell you that we are now in the last major year of digital investments. And investments into digital infrastructure are going to lead to a digital Wincasa for the mass business, residential business. And it will lead to the concentration of management on commercial properties. The effect is going to be the following. Next year, we will be able to achieve an EBIT margin of 12%. I'm very positive about that. And that is the objective, 12% to 15% EBIT margin from managed Wincasa business. So we are on the same level as last year this year. That's the way it was planned. And then next year, we should be able to see the effects of the investments into the digital infrastructure backbone. And where Jelmoli is concerned, well, I already -- we already mentioned the higher sales despite the second lockdown. Well, don't forget, the second lockdown was shorter than the first one. That's not quite true. Fact is, the full lockdown is shorter, 6 weeks and not 8 weeks. But let's not forget that restaurants were closed for 10 weeks. So for them, the lockdown lasted longer. And this is important because there are 11 restaurants or gastronomy sites at Jelmoli which also attract visitors. And so the increase in sales is particularly impressive. And this was because we were able to increase the conversion rate. That means more customers coming to the shop are actually buying customers, not just trying to get out of the rain. And those customers who buy also buy more. So this is the sale per customer. And both of those items were increased. And they were not just higher than last year, but also higher than in 2019. And so we are optimistic that we are on the right track here with Jelmoli. I will talk about that a little more at the end of the year. So much about the Services. Now before talking about the projects, let me just briefly talk about ESG. Just the most important points. Stakeholders, well, we already mentioned rent waivers. And in September, we're going to have the third stakeholder dialogue that we're very much looking forward to. And we have invited [ Dmitry ]. We have invited the tenants, those tenants who are going to end up paying. And we look forward to the discussion with those tenants. And of course, one question is going to be how we're going to deal with sales-based rental rates and also whether there's any logical connection between this, whether maybe the -- as an owner, we could also have part of the sales via e-business. So these are very interesting questions and, of course, also very controversial. So we look forward to a lively discussion on that. We also did an employee survey in the first part of the year, with a very high rate of participation of approximately 80%. And we -- this has shown that our employees are very, very motivated in all areas. Finance, well, you know about the green bonds, which generated CHF 600 million from -- within 8 weeks until February 2021, with a very interesting coupon. So that is to show that sustainability is a topic that is going to stay, not just here to stay and maybe even become more important. I think we're very well positioned for that. We are ready. We have already communicated our objective to have a carbon-neutral portfolio by 2040, and we're going to achieve that. Of course, that is going to require certain investments, as you will see in the CapEx requirements that we've entered into the portfolio. But carbon neutrality is not just Scope 1 and 3, but 1, 2, 3. So please compare this with other Scope 1, Scope 2 or Scope 3, we are going for scopes 1, 2, 3. And another topic is the increase of deployment of photovoltaic systems on our roofs ideally across 40 sites in our portfolio. Infrastructure is, of course, also related to ecology. We've already mentioned Müllerstrasse and the Google project. Well, Müllerstrasse is about the circular economy. It's about the idea of the circular economy. And the idea is that all materials that are used are documented in a list, and this material has a price and a value. And this has to be included when you build a building. You have to make sure that you don't use foam because you can't dismantle that at the end of the building's life. But we want to have everything recyclable in terms of a circular economy. That means that we will never again have to pay for demolitions. So of course, we won't have to pay demolition companies because they will be able to use the material and reuse the material that comes from these demolitions. This is a great idea for the environment. And it also means that construction technology has to change a little, and the value of a property at the end of its life cycle will also be affected by this. And then the last bullet point here, innovation. Let me just mention new work and also healthy buildings. These are 2 programs that we've introduced. Tenants now not -- don't just want secure buildings with secure access, but they also want healthy buildings. For example, in terms of ventilation, as maybe just when you came up on the lift here today, we have that here. So that's something that's certainly going to increase in importance. And so all of that -- I don't have to mention everything here, but we are also rolling out our e-charging stations. And now we're rolling out photovoltaic systems. And we are also are going to go for 2 certifications, the SNBS, that's the standard for sustainable building in Switzerland. It's a very interesting standard. And we are also going to apply for the BREEAM certificate, which is an international certificate, which will help us in valuations and be evaluated in terms of sustainability. So now 3 more slides on projects. I have already mentioned that we are going to continue to concentrate on our own developments and because this is where you can achieve the yield. So we're very pleased with our projects here. Let me start with those under construction. They're all on schedule and with a high occupancy rate. The first one on the left is the Tertianum building in Monthey. And then you can see on the time axis and how this changes a little bit. And the end date, the project execution, is the year where we will take over the building. Stücki Park I and II. Compared with our previous presentations, we only had Stücki Park I under construction. But now due to the additional rental contract with Lonza, we have been able to start construction on 2 more buildings, 1 is almost finished and 2 is now under construction. Alto Pont-Rouge, this is an office building directly on the new CEVA line. We have 21% already under rental contracts and we also have reservations of 50%. This is just on ground -- the construction is now on ground level, so we still have a couple of years left to -- for the remaining 50% rental contracts. And then we also have Paradiso and Zurich Müllerstrasse. So those were our projects under construction. Now on to the planned projects, which is only part of our portfolio. On the left-hand side, you can -- JED II, the new build. It hasn't started yet. We are currently -- it's currently being marketed and the -- we're planning to start next year. So you can see here that it is in building and zoning regulations, so we can plan without having to apply for special development approvals. Next one is Tertianum in Olten. We now have the design plan, the final design plan, and the building application has been submitted. So we are expecting to get approval within the month, which will be valid immediately. And so we may even be able to start construction a little sooner than shown here on the table. Maaglive in Zurich, we spoke about that last -- at the end of last year. The project is on schedule. Saarstahl is the CHF 8 million property that we bought this year. And those of you who know Zurich will know that the pink building to the left of it is the new ZSC stadium. And then we also -- the West-Log logistics building is just right to the Saarstahl. So obviously, this is also going to be another logistics building. Rheinstrasse in Augst in Basel-Land. Here, we have already received authorization of the zone plan and 2-stage study commission is in progress. This is -- we received the approval for building from the Merian Foundation. It's a very interesting project. And we are expecting CHF 11.5 million rental income for Dreispitz in Münchenstein. So those are our planned projects. Now on to the slide that we are particularly proud of. Let's start with the column in the middle. Now of the projects that we announced a few years ago, we have already quite a lot of them as part of our portfolio. And we had a pipeline of CHF 2 million then, and we still have a pipeline of CHF 2 million. How do we do that? Those are projects that primarily come from our own properties or buildings that we already own. We only bought one project, Saarstahl, as I just mentioned, at CHF 18 million. But until now, we've always said that we have -- we now have CHF 104 million additional rental [ potential ]. And so we have now CHF 1.46 billion in the development pipeline, CHF 560 million are still in the reserves. That means that we have -- that simply means that we haven't started the project in any concrete terms. So this has always been our objective. We have generated additional developments from our own portfolio, which will also generate, of course, additional rental income. So now back to the figures with Marcel.

Thank you very much. I'll be pleased to show you more about the positive developments that René mentioned and their impact on key figures. You saw these figures before. I won't dwell on them any longer. It's the same figures. I'll give you more details about individual components of them. Let's begin with operating income. There are 4 components worth mentioning. On the one hand, we've got the impact of COVID at CHF 3.1 million, which is rather modest for us. Almost all our tenant inquiries were brought to a positive settlement. We were confronted with around 250 requests and found agreements with those tenants that led to rent waivers in the amount of CHF 3.1 million. René mentioned it before. After this, an estimated loss of turnover rents of CHF 2.4 million compared to 2019, primarily due to loss of car park income because there was less frequency and, of course, less frequency in restaurants, not in retail, where sales was very good. Rental income grew by 2.2% as a like-for-like growth of 0.5%. EPRA figures are slightly different. EPRA is without COVID. And the like-for-like is always going back 2 years, so the properties that were transferred to our portfolio are excluded here. EPRA only accounts for around 80% of our portfolio. And as René showed you before, we transferred some of the properties into our portfolio in recent years. So like-for-like is only short term, and positive growth is 0.5%, driven by the reduction of vacancies from 0.4% to 0.7% and from 5.4% to 4.7% year-on-year. Asset management, we mentioned that before. Strong performance in asset management with a plus of 56% on income and an even stronger impact of plus 85% in EBIT. This is a strong growth business that generates great revenue and disproportionately high profit. And René mentioned, we are assuming that this will be the same in the future. This was only the beginning, as you have just heard. And to conclude, with retail, we have positive trends there, plus 5.3% on income despite the lockdown. René mentioned that on a like-for-like basis for July in Jelmoli, without the additional sales of the airport, we have growth of 8% compared to 2019, which impressively shows that retail in prime locations is doing well, is working well even in times of COVID-19. Wincasa is not in there, not because we need to report anything badly but it's been constant, and that's why we're not showing it here. Now going into the details of like-for-like and rental income, in particular, you can see here the reconciliation we had from 2020 to 2021. First of all, the difference of CHF 11 million, which we mentioned before. These are the components that were dropped with the sale of Tertianum and accounted for CHF 11 million. Then the sales that you see here, the strong impact from modifications and modernizations and completion of projects, and the CHF 3.1 million of COVID-19 related impact. The CHF 1.1 billion is really the 0.5% of like-for-like. This is the change on the portfolio. But I have to give you a CFO chart with lots of figures, of course. I won't go into the details of all of them. You have the 3 columns reported in 2020 there like-for-like, excluding Tertianum for 2020 and our first half year in 2021. Going down from operating income to profit. The first figure I'd like to highlight is revaluation of CHF 144.5 million compared to the CHF 47 million in the last half year in first half year in 2020. From the point of view of the CFO, let me mention that the CHF 145 million of revaluation were achieved at a constant net yield of 3.2%. In other words, we earned that ourselves because we increased revenue adjusted for cost and net yield remained constant. Then we've got profit from sale of investment properties, which we communicated, the Espace Tourbillon as René mentioned, with the one building and the one at Stadelhofen of around CHF 36 million. And finally, a figure I would like to comment on is operating expenditure on a like-for-like basis of CHF 193 million ended up at CHF 188 million. Two components are responsible for that, the strong cost focus we had and the constant cost base on which we generated additional revenue. And on the other hand, this also includes depreciation we had in last year on expected loss of rents, which were not in the top line, not all of them. The first half year of 2020, we had provisions for losses, which we don't require anymore. So we have completed all the requests, and everything has gone down to the -- into the revenue. A final comment on this page is on financial expenditure. You can see the figures here, a reduction by CHF 6 million from CHF 29 million to CHF 23 million on the basis of better refinancing achieved in the market and lower interest rates on them -- on these amounts. Moving on to the balance sheet. The assets, the largest item there is our Real Estate portfolio. Obviously, you can see how it performed in the first half year based on the fair value at the end of 2020. Moving on to the fair value, at the end of the first half year of 2021, you will recall the last Capital Markets Day when we said we're going to focus on profit densification rather than growth of our portfolio. And you can see nicely what this means in practice. Looking at the 2 figures, CHF 140 million of sales and then investments, and if you add this up, the order of magnitude of around CHF 140 million, you can see that the portfolio has more or less remained the same. But at CHF 36 million of sales proceeds that we generated, because with our own developments we were able to maintain the portfolio, thus we're able to streamline the portfolio at appealing sales proceeds. So this gives us capital recycling that is shown here impressively in the first half year. I mentioned already the rest of it, 3.2% of net yields on our investment properties. Moving on to the other side of the balance sheet. Financing, you can see that we've remained constant by below the line as far as financing structure is concerned. There was a slight shift towards more unsecured components, in particular bonds, which I think is a shift that will perhaps be a little stronger, a little more powerful in the future with more flexibility. We are going to take out financing in the capital markets, and you can see that we issued a green bond and increased 2 bonds in the first half year at 0.375% of interest compared to 0.9% as a -- on borrowed capital. So there is a huge potential there. As you can see, at 5.1 years of duration, we are on the positive side. We've got good certainty and visibility in terms of financing. Going down to the equity ratio on the balance sheet. The development has been flat. As you can see here, we're slightly above the year-end figure, but we have paid out the dividend in the first half year, CHF 255 million, and earned everything back with the CHF 275 million of profit, which made sure our return on equity has remained flat. At 47%, 48%, very stable and exceeding the objective that we set for ourselves. Return on equity at 8.4%, I've mentioned that before. Like-for-like, excluding the unique sales proceeds, this is a strong increase in excess of 6 percentage points and exceeding the range that we have communicated. And finally, 2 EPRA figures. Adjusted EPRA EPS, on the one hand, adjusted because that's what EPRA wants. If developments are part of your operating business, you need to show that. We are showing adjusted EPRA EPS primarily with a great increase of 19% over the previous year. And I would like to introduce a figure that is not very usual, very standard in Switzerland, but I've seen that in many analysts' report, funds from operations, FFO, which is fairly standard in a European setting, just to show you what the cash profit is. And I'm showing it here at CHF 1.90 per share. Of course, we can discuss about its composition in detail, but this goes to show you how much cash we generate as a company that does not include sales, FFO 1 that is, without sales of properties, but including the normal developing business, which we consider part of our regular business. In conclusion, EPRA NTA. It's one of the figures that shows in many reports as a benchmark for the intrinsic value of the stock. We increased that by 1% from CHF 95 to a little more than 96% (sic) [ CHF 96 ]. So this is the basis we can expect for performance, share price performance in Switzerland. You probably have to add 10% of a positive component. So I think SPS stocks have a great potential. Let me hand it back to René for some expectations and our outlook.

Thank you, Marcel. Let me take you back to the chart that we showed you in presenting the figures of 2020. The guidance was for an increase in rental income on a like-for-like basis and a reduction of the vacancy rate, and we then introduced a new dividend calculation. Where do we stand today? What can we say on that? Where do we stand in terms of outlook? Well, for the second half of the year, by the end of 2021, we expect further growth of assets under management, AUM. There's no specific guidance on that, though. And then we expect stable development of vacancy. We don't want to go down to 4.7%, to go back up to 5% again. We assume that vacancies will remain below 5% in the long run and that it will be stable between 4.6% and 4.8%. So we're not doing badly with the 4.7% that apply currently. I think 4% is feasible. We shouldn't rest on our laurels. There's potential in vacancies that we need to skim off in the long run. In terms of financing, we certainly want to have more unencumbered assets, which is one of our medium-term objectives, which we're going to pursue, in particular, with Marcel Kucher. We expect further revaluation gains by the end of the year. Yes, we do expect that in the amount of -- well, not a lot of profit, but I would assume that the CHF 100 million would be feasible. It could be more than that, always assuming that we won't have another lockdown, which would surprise me. So under the proviso of not having another lockdown, of things remaining the same as they are today, there'll be more revaluation gains. By the end of the year, COVID-19 impact will be rather moderate if there's no further lockdown. And you all heard about the ruling in the first instance where a tenant filed a complaint about the rent that was not owed -- his rent that was not owed, and the ruling was against it. So that would help us if there's another lockdown because it's always a risk tradeoff whether you can win a case or not. And I think the ruling is well founded. It didn't refer only specifically to the COVID-19 situation, but to Roman law, rebus sic stantibus. In other words, can you ask for a reduction of rent if external circumstances have changed dramatically? And the court looked into the matter and said the lockdown situation was rather moderate, which would not mean that there was a strong discrepancy between the agreement -- rental agreement made and the current situation, and that ought to help us. Now whether this will stand through all the instances of legislation, we don't know -- of jurisdiction, we don't really know. Before I move on to further outlook, in particular, about office and retail space, let me mention one point I would like to correct. It wouldn't really be ambitions -- I have AVP here, and they wrote about the Services segment that in the medium term, the -- an EBIT contribution from Services was expected to be at CHF 30 million. That's wrong. CHF 50 million is the correct figure, just to mention that. CHF 30 million from asset management and CHF 20 million from Wincasa and a flat result from Jelmoli, that's the expectations we have and I personally have for the Services segment of 2025. Now just a few words on the outlook. I talked about office space already. But working from home, that's, of course, a day-to-day subject matter in the headlines. And what we believe is that Switzerland will not be the same as some of the surrounding countries. The Switzerland has the shortest commuters' times in Europe. We do not have mega cities. We do not have mega buildings. We have part-time work. We are familiar with part-time work, which is important psychologically. We're used to having people work part-time. So when planning for office space, we've been planning with an occupancy rate of 0.7%. A maximum of 0.7% of the workforce actually has a fixed workplace. So we've always assumed that some people will work from home even before COVID-19 and that mobile work is admissible. Mobile work means you can work from home or on the road, and we do expect compensation of surface area. Those who will go to work will expect to get a little more surface area and also to withdraw to with -- inside a building. And sorry to say so, but most people expect to have a sexy office. It's got -- the office has got to offer something appealing and space for interaction with colleagues. And of course, good locations will be helpful. They will be POI, point of interest. People -- employees will expect when moving the building that there's something going on around the building. So these locations will remain appealing. They will be further upgraded. So when you have office space somewhere out in the sticks, it may be a little difficult, but we are very positive as far as the office space market is concerned. Employees like to go back to the office for an exchange with other employees. And there's many things you can't do working from home. This especially applies for new joiners. And I'm firmly convinced and I'm not all that old, but you can tell me what you like. Working from home is not efficient in the long run. Full stop. In the first lockdown, everyone was pleased to simply be able to log on. But that's not efficient yet. So I'm convinced in terms of Switzerland that good office locations will not suffer from the trend towards working from home in the long run. And that trend will not be as market as in other countries. On retail, stationary retail, brick-and-mortar retail is not dead. As we have seen, of course, there's increasing pressure from online retail, which will not decrease but rather increase. But there's also the situation that brick-and-mortar retail will be able to generate more sales. As we're seeing in the case of Jelmoli, more and more offices -- more and more businesses want to move to cities. Lidl, for instance, is doing so in Bern. Things you wouldn't have thought possible a short time ago. We're the first Lidl in the city. That was us, by the way. It looks a little nicer here than in Bern. Then there is IKEA suddenly wants to be in the city. We saw it outside in Lyssach, in Spreitenbach, always high-frequency locations. High-frequency locations always have a future. So we are positive on that. And with the people we have on the team, we can manage almost everything. So my outlook is certainly positive as far as the remaining months in this year is concerned. So let's take a breath now. We're at the end of our presentation. Let's begin with the questions. Can we get it organized as such? We have -- we may have questions coming in through the phone. I don't want to have chaos here. So let's begin with questions from the audience here, and I will pass on the questions to colleagues who are here should they refer to details I cannot answer. And we will then, following that, take questions coming in through the phone. Yes, begin -- let's begin here in the hall.

Pascal Boll from Stifel. You spoke about upwards valuation where -- have there been any downwards revaluations in the portfolio? And the second question. On Espace Solutions, you were very optimistic about the growth this year and next year. You are now at CHF 1.2 billion. You mentioned CHF 4 billion by the end of the year during the Capital Markets Day. Is that objective still achievable? Are you still going for it? And then on Espace Tourbillon, the sale of Building A, would that be an option? And a comment on your capital recycling approach. It sounds a little like everything is going very well. All the properties which may become a problem in terms of sustainability can be solved at a profit or as valuation increase in order to finance newer sustainable projects, but is that a sustainable model? Currently, buyers are looking for investments, but you are selling those buildings for a reason, either because the -- they are valued too low or whether that be of because there is no future prospects for the property.

So those were four questions. One, Espace Tourbillon, Building B -- Building A is condominium, Building B, can we imagine to sell it? Well, you should never say never. If the price is right, maybe. As you can see, we have been able to replenish our development pipeline from our own portfolio. So it's -- today, the Building B is included in the rental income as it stands. If we were to sell it, we would, of course, deduct the rental income. But then, of course, we would have the sale proceeds. It's not impossible. And now the question on capital recycling, would you like to answer that, Marcel?

Yes. A pleasure. Yes, we feel that it's sustainable. We can see that our yield is much higher. Based on our developments, you can see that our valuations are higher from -- when they come from developments. And so they grew in line with the development. And you can also see the kind of scope we're talking about here whereas CHF 140 million in the first half year based on the portfolio of CHF 12.5 billion, that's certainly sustainable.

And what about those buildings that you are selling? From what I understand, you are including the better buildings into your portfolio and older buildings of -- as well, the first -- are probably not those, I'd say, you want to keep within your portfolio.

Well, I can answer that. Well, that has nothing to do with sustainability. It has to do with the size of the buildings. These are rather small buildings by comparison, and we wouldn't buy them anymore. And that's why it made sense to divest here. And of course, new buildings have to be extra sustainable. They should not just use -- produce CO2, but actually they should be plus energy buildings, producing more energy than they consume. That's the objective. And in terms of existing buildings, it would be easy to sell everything that's negative and, therefore, have a good climate balance sheet, but we have started replacing gas and oil heating and such like. And now let me stick with AMs and then our objective is in the medium term to have CHF 7 billion with an EBIT of CHF 30 million. That's the objective. We are going to achieve it. At the Capital Markets Day, we already included the project development pipeline, that's CHF 400 million, because we said that we don't have to buy that. We just haven't developed it yet, but it's in the pipeline. And that's why we arrived at that figure. But Anastasius can maybe say a few more words about it.

Yes. The CHF 4 billion, well, we have growth projected for SPI Swiss. There's going to be another issuance and many clients and new clients. Assets are expected. We have also launched our international business. And of course, we can't have an effect on -- we can't influence FINMA as we heard that we still have to wait a few days, and then we can launch that, too. So we can expect the portfolio to be -- our portfolios, which will bring us to the CHF 4 billion or maybe even beyond by the end of the year.

Thank you very much, Anastasius. Now I will -- let me just add, it is not our intention to transfer real estate solutions. That was just a onetime project. That was the starting portfolio, but we're not -- we have additional properties that we've been able to acquire, but that was unique. That's not going to happen again in the future. It is possible that maybe individual portfolios will also be offered. And now a question about the negative revaluations. Yes. Let me just add, maybe just first about the positive revaluations, which include the CapEx measures that we have taken and that we are planning, yes, there have been some negative revaluations in terms of points, but these were small retail B or C locations.

I also have four questions just like the previous speaker. The first one on the maturity profile. We heard another real estate company yesterday who said that they have an imminent extension of maturities for 2023, 50% by 50%. What about you? Have you -- are there any problems projected for 2023? Any potential vacancies? You spoke about the medium-term goal of 4% vacancies. Can you exclude going beyond the 5% in the next couple of years?

Okay. So that's just one question for now. Martin?

We are currently working on that strategy. What we can say today is that we expect that there won't be any major vacancies for 2023. There are renewals of contracts and new contracts, but everything that we've included in the strategy means that as -- that's going to be as shown earlier.

My second question is a little more detailed. The valuation on Jelmoli House of Brands as a real estate, can you say anything about how this developed over the course of the pandemic?

Actually, positive. It's been a positive valuation. And this just shows our prime locations are always seen as positive. I think it was CHF 10 million, right?

Yes.

So it wasn't any of the properties that I mentioned earlier. Those were the C locations. But in the A locations, there was actually a positive revaluation of properties.

The third question concerns COVID. What is to be expected for the second half of 2021 based on what we know today? And have you switched any of the rental contracts to sales-based ones?

No, we haven't. We haven't changed the structure. And what to expect for the second half of the year? Always on the -- working on the assumption that there won't be another lockdown, I would say on top of the CHF 5.5 million, now another CHF 3 million, that would be the expectation.

And last question on the strategy. Tertianum has now been sold. Can we expect additional streamlining of this portfolio? Or is that not what you're going for?

Well, anything is conceivable, but the strategic decision has to be not to do so. So we can see -- well, in '20, we stand by the Services segment and -- conceivable? Well, anything is conceivable, but the strategy says no. Are there any questions, additional questions from the room?

First of all, on the like-for-like development of rental income is a little negative, and it's the same with most of your competitors. So based on current negotiations, what are your expectations for the future here?