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

Now these results, we can proudly present. Let me open this day on it. Thank you for coming here. Thank you for your interest being here in the audience or following us online from somewhere around the world. With me on the podium, we don't only inadvertently have Marcel Kucher, but also Anastasius Tschopp, our CEO of the Solutions company. Why so? Of course, there is a specific reason. It's the takeover of Fundamenta and growth inside the Solutions units in asset management. We thought it would only be appropriate for him to be here as well. And we're going to have a deep dive on asset management along the presentation. And since we are concluding the first half year, Marcel and I, we're going to have this deep dive in this growing second pillar. And for the question-and-answer session, we also have Mrs. Karin Voigt, our CPO of the Real Estate company here; and Mr. Urs Baumann, the CIO of the Real Estate company. So let's get started. What are the strategic milestones in the first half year of 2024? Specifically, there are two of them. I've touched upon the first one, the acquisition of Fundamenta, the Fundamenta Group. What does this bring us? A little more than CHF 4 billion of additional assets under management, but not only that, there are new products within Fundamenta. There is a listed company, FREN. And in addition to that, there is an investment vehicle and some promotion vehicles. That's the one thing. The second thing is we have additional investors. So we're going to be an interesting platform for real estate in Switzerland. And the third thing is it runs off our focus in asset management and our focus on residential in asset management because most of the use in the Fundamenta Group is residential. So this is one of the strategic milestones. The second one, which we have communicated already is transformation -- progress of transformation of the Jelmoli building. Planning application, as you know, was submitted December -- mid-December last year. We are expecting approval -- construction approval by the end of 2024. And it's always important if you do developments, and we often do developments, and we have internal objectives. We released construction cost money when at least 50% of the space has been let. So it's a good message to announce that we have achieved 50% by the rental agreement signed by Manor. Let me add to this. The question has been asked frequently. Why you're simply swapping Jelmoli for Manor or Manor for Jelmoli? We closed down Jelmoli, but Manor, first of all, uses 13,000 square meters, not 27,000. We always said there's too much retail for the city of Zurich in Jelmoli. And that's point number one. Point number two is we were totally on our own with Jelmoli. Manor has its network and can buy in more cheaply, and they can displace or transfer goods between stores. So it's not simply a swap. It's an entirely new situation. And of course, we're going to create office space, and I'll be coming back to this in a minute. Over on the portfolio side to a slightly higher value of CHF 13.1 billion, despite sales revaluations, a positive CHF 30 million, around CHF 30 million, primarily attributable to higher rents that we achieved, either new rents or renewals. Further highlights. We have 3 major development projects that are more or less completed. One is Paradiso-Lugano, I'll be coming back to this. And the second one is the four-finger docks, it's Stücki Park of Basel. And thirdly, JED, the new JED building at Schlieren, Zurich, apart from the converted former NZZ printing buildings. And then we have sales as of today, we sold for CHF 80 million. The CHF 50 million was on the 30th of June. Of course, we aim to sell a lot more in the second half year. Why haven't we done that yet? Every company sets up its budget. And in the budgeting phase concluded around November, December last year, we assumed internally that the first step, interest rate step would only be taken in June by the national banks. So the national bank took us by surprise as well with the step they took in March. And that's why we said we're going to shift our sales basically to the second part of 2024 as the interest rate step will have its effect. And we haven't come off of that. So we are expecting higher sales volume -- clearly, higher sales volume in the second half year. Now on operating performance. One highlight certainly is the increase in rental income by 6%, 3.7% like-for-like attributable to new projects that we've taken on in the portfolio, better rental and lower vacancies. So by midyear, we are at a record level of CHF 232 million of rental income. Vacancies, I've mentioned already. We have a record low of 3.6%. We are expecting 3.8% by the end of the year. I can tell you as early as now, there's going to be a slight increase towards the end of the year. And with a view to the future, we aim to get down to 3.0% at some point, which ought to be possible for our portfolio. Then major growth in Asset Management of CHF 12.7 billion in assets under management, driven by the purchase of Fundamenta, the acquisition of Fundamenta. And the interest rate steps show how important it is, capital increases of CHF 270 million as a result. CHF 220 million of that are cash contributions and CHF 50 million contributions in kind, which adds up to the CHF 270 million of capital increases for the various products. Significant increase here, on the one hand, in Asset Management income by 22%, but also in EBITDA growth, also 22%. Costs are under control. We are better and better getting them under control, and Marcel will give you more details about that, which boils down to FFO I increase. And let me repeat, FFO I is always without sales proceeds. It's recurring cash that is valued here. It's an increase by 5% to CHF 2.3 per share. For financing, I'll only mention the first point, marcel will give you more details on the others. LTV, it's not only our objective to bring it down to below 40% by the end of the year, and we're going to do it also. We will be below 40% by the end of the year. So it's a temporary situation, primarily attributable to the dividend payout, which, as you know, we complete in the first half year. Most important key figures. In summary, I already mentioned most of them. Rental income is the relevant figure. For top line, a plus of 6%, 3.7% like-for-like. Asset under management growth, up to CHF 2.7 billion. EBITDA now at CHF 204.7 million before revaluations, and profit at CHF 151.2 million, which boils down to the FFO of CHF 2.03. FFO, too, would be slightly higher if we had sold more. By the end of the year, it will be higher accordingly. And the only negative figure is EPRA NTA, which does not really reflect the Asset Management value. It's negative, but we've almost caught up. It's to do with devaluations in the second half year of 2023. That's the one factor. And the other is creating additional shares as the price of Fundamenta was covered in part by shares. A brief word about the market. We'll tell you more at the end of the year or beginning of the new year. But let me begin over on the right-hand side. The be all and end all here is the interest rates steps taken by the Central Bank, which leads to positive valuations. And for valuations, the plus of CHF 30 million that I mentioned before due to, in particular, higher rents. No lowering of the discount rate. The discount rate remains more or less as it was before. And you're all familiar with the valuation business. The most important figure is our transactions, completed transactions. And transactions, as the word says, are a thing of the past, are completed. So this goes back 6 months. What am I trying to say? We were expecting additional thrust for revaluations by the end of the year. The second step taken by the National Bank at the end of June has not had an impact yet. And for transactions, we're seeing that the transactions market is working again. The major institutional investors are reporting back to the market. It's a question that was asked to me a minute ago. We see that we're selling. We've been selling at good prices, 5% above value, which is a positive thing to note. And in addition, what is interesting for Asset Management, we're seeing willingness to do contributions in kind increasing. And why is it increasing? Because the real estate business is becoming easier fundamentally. And one of the other pension fund is asking whether they want to retain their own real estate portfolio and manage it with all the risks. Or wouldn't it be easier to contribute it to one of the products, that Anastasius Tschopp is going to present later on and have an indirect relationship to the former real estate. I think we've had these -- I think it's the sixth contribution in kind now, and I think this will go along -- go on along the same lines. As far as lettings is concerned, just look at our results. We've got very strong performance. Letting performance with regard to vacancies, 3.6% and very positively let at higher rents. So the prime locations, the central locations are very much at stake, very much at a premium. For office space, we continue to have excellent demand. What is certainly helpful is the lack of construction activity as the offer is not being widened. And if no building applications are made, there will not be any new surfaces, which means that existing surfaces are becoming more appealing. So much on the market. So let's get started now with the Real Estate portfolio. I don't think I have to repeat everything I've said before about the slides. Our properties are where they've always been, along the A1 and the A2 parts. In the Zurich area, we have 54%. And also we -- and Zug is also included here, which is also driven by Zurich. And there's one dot in Ticino. This is the property of Tertianum, which has now become part of the portfolio. I'll get back to that later in a separate slide. And in terms of tenants, there haven't been much of a change. We still have Tertianum as the main tenant. You can see the top 5 here on the slide. Maybe we can say a few things about Globus because I know you're going to ask about it anyway. So yes, they have always paid their rent without any problems. And their most recent communication that you have probably read too are positive. So we are expecting that they will make a decision soon, and 100% of operative business will be taken over [ 5% ]. And now after the refurbishment of the Jelmoli business, we are now going to have an increase of -- to almost 50%. Retail is going to go down to almost 20%, and that's still the goal to reduce the retail share to approximately 20%. Now let's talk about the active portfolio management. So the red areas, I don't know if you can see it, those are the quadrants II and V. And those are the properties that are still part of the capital recycling process. That means they're going to be sold. And that's the CHF 13 billion. So that brings us to CHF 60 million. And we're going to sell them for approximately CHF 650 million. So what's the difference? What else are we going to sell? Well, there's another project that's going to be sold and -- from the fourth quarter. But we mainly sell those developments that are not suitable for the portfolio because they're residential projects. One example is shown here, that is the Buchs property, and that's a difference between the figures that I mentioned earlier, and this is per the end of July 2024. So the vacancy rate is 3.6%. That's a record low. And we have very interesting tenants that we've been able to renegotiate tenancy contracts or extend contracts. And so the WAULT is 4.9 years, and that is still an excellent situation to be in. So -- and this is once again the capital recycling slide. I would like to go into more detail here. So what do we do here? We sell properties that don't fit into our strategy anymore. We have sold CHF 1.2 billion over the last few years. And we cycled that, which means that we spent the money that we took for new development, some of them are listed here, to the tune of CHF 0.8 billion. So recycling is really not a very suitable thing because it's actually upcycling. It's upcycling because, of course, that means we change the mix. So you can see that what we sold from the mix, that's CHF 1.2 billion. A large part of that is retail space. And then there are new developments, and that's the lower circle in the middle, a lot of office space. So that's upcycling. Then also the locations have improved, and you've seen that in the quadrant. So these are locations in quadrants IV or I, and those are the interesting ones. And the buildings are new, which means that they're more sustainable and also easier and better to be marketed. So actually, it's not recycling, but it's upcycling. And so now let's talk about the developments. This is -- currently, we have CHF 740 million under construction, and I will show you more about that in the next few slides. And CHF 670 million have already been invested. And of course, the interesting question is how much will be earned back in terms of rents. And that's approximately CHF 38 million. Large parts of it are still in planning, in various stages of planning, approximately CHF 1.15 billion, with a target return of 4% to 5%. And next year, we are going to have 2 major projects: first of all, the Jelmoli redevelopment and also the YOND campus new build. Here, these are projects completed or under construction. The Alto Pont-Rouge in Geneva, we don't have the tenancy. The pre-letting rate actually is 80%. I always said that the objective was 90% by the end of the year. So we are on track. So at the moment that we take over the building, we're usually at approximately 80%. And then the last 2 spaces are let a little later. So Stücki, those are the 4-finger docks, the new builds in the Stücki Park. And here, we have completed construction, and it is now -- tenants are moving in, mainly laboratories. 3 of the 4 buildings are actually laboratory buildings, and only 1 is an office building. And the JED in Schlieren is a new build, in addition to the refurbishment of the former print building of NZZ. And that's going to be handed over by the middle of the year. And here, the pre-letting rate is -- sorry, Berne is 65%, the BERN 131. And we are also expecting 80% by the time we take it into our portfolio. So the yield on cost is 4.4% for Berne. That is a little less than for the other buildings because we didn't actually develop this building, but we bought it from Losinger Marazzi. And so if we do our own development, this yield and cost should be a little higher. But we did not have risk. We built -- we bought a building that was ready to go, and so that's why this yield on cost is totally acceptable. Now here, there are a selection of projects from our pipeline, Jelmoli, of course, and then the YOND Campus is the second property where we're going to start construction in the near future. The -- this is the second phase of the total construction project. And Grand Passage Geneva where we're going to start construction in 2026 at the earliest. And then there's another project that's going to be sold. That is Route de Meyrin in Geneva. A building that was used by Swisscom. And now there is one advantage in Geneva. Whenever you refurbish a building into -- and turn it into a residential space, then you don't have any losses in here. You can see that it's quite deep. You don't have to have any lights out or anything when you refurbish it and turn it into residential lettings. But it is really suitable for this transformation. Residential buildings are not our core competence, and that is why we are going to sell this project. And of course, there's going to be a CapEx. And so we will sell it as soon as we have the construction permit. And we are filing for the construction permit this year as well as for Steinenvorstadt Basel as well. And for maaglive in Zurich, we have received the building permit, but it's not legally valid yet. Now a quick snapshot at one of our projects, destination Jelmoli, Zurich. Because this is not just office space, but there's also going to be retail in the basement and the ground floor. And then there are going to be office spaces. We still also have homes placed as a tenant for the gastronomy and leisure. And we're now working on the roof terrace planning, where there's actually a tender ongoing as we speak. That's going to be in the second part. We're now waiting for planning permission for the refurbishment itself. And then in a second step, the rooftop terrace is going to be the place to be for the city of Zurich as soon as we've received. And it's also going to be part of the building permit. So those of you who remember Jelmoli, this is not where the restaurant is located now, but this is actually a space that has not been used at all right on top of the building. And that's also going to bring us, of course, additional rental income. Here is an image of Tertianum in Lugano. It's a residence, and this is going to be a high-priced residence, of course. This is right on the lake shore and has a spa area as well. spa is also the abbreviation of Swiss Prime Anlagestiftung, but this is spa as a wellness area where the residents can enjoy themselves. And so this is certainly a very interesting project, in particular, because -- well, I was asked what -- who the clients are going to be. And I thought, well, automatically people from the German-speaking part of Switzerland. But the answer was North Italians are going to be the residents, probably down to Milan or even Torino. So the largest part of people who are going to be clients here are going to be from Italy. And now here is the last slide before we go over to the finances. On the sustainability strategy, let me just mention three points. Our CO2 reduction path, it's always shown at the end of the year, that's why I haven't got it on this presentation, but we have almost 100% certifiable area now. And we have these various certification steps. We are doing very well with green leases. Many tenants ask about them now, are interested in them. So we now have 70%. The objective is 100% by the end of 2025. And here, we are really in line with the interest of our tenants. Many companies, large companies have to publish a sustainability report now. And that is why they're very much interested in working with us and getting these green leases. But of course, they also have demands. For example, they want data that we have to supply. One important one is air quality. So there are tenants who want to have an air quality report from inside the building once a day. We can supply that because we have been working on this field for 12 years now. Circular economy is another element of this -- our sustainability strategy. And circular economy is mainly based on using sustainable concrete, particularly for the JED new building. And that has to be the future, so that raw materials that were used once can be used again. We did that very successfully at Müllerstrasse. And here, it's still more of a recycling strategy. We took apart the facade, refurbished it and then reused it for the strips of the facade. But it's still downcycling. But the material should be reused at the same level because then you don't need additional gray energy. And I think that is the way to go for the building and construction industry. And now over to the details of the finances to Marcel.

Thank you very much, René, and welcome to the screens, those around the world, and welcome to everyone here at Prime Tower. As René said, I'll take a few minutes to dive into the world of figures in the first half year. This is the first chart, we'll begin with top line income. As René mentioned, we had growth of rental income up to CHF 232 million, CHF 13 million in absolute terms, plus 6%. And this, despite preceding sales, so it's really organic growth or by commissioning developments of ours. We've grown by CHF 19 million, so almost 9%. And it goes to show just how powerful our portfolio is. Like-for-like, 3.7% plus, and I'll give you more details later on. In Asset Management, we've got the major step from around 22% to now CHF 27 million -- CHF 22 million to CHF 27 million. I'll show you more details later on. In retail, a decrease. As you can see, this is the Jelmoli business, as René outlined, in its final year of business for around 100 days more until the end of the year, driven by reduced footfall that you see at Bahnhofstrasse in general probably and due to higher discounts we had to give in the final business year. And you can see that on the cost side that we've compensated for it primarily. A total of 3.2% plus of total operating income. Now moving on to costs in the next chart. The first thing that would strike you is that the largest block or one-off cost block is real estate costs that we lead by almost 1%. You will remember, 6% higher top line, 1% lower cost. That goes to show two things. I think on the one hand that we focus on efficient management of our real estate, we have taken quite a few measures in the second half year, and that clearly lowered our costs. And it's a result of capital recycling as well, focusing on newer properties. And the ones in better locations, that can be efficiently managed. Cost of goods sold. Jelmoli, more or less, reduced along the line of our top line. It reduced slightly lower. That's why the reduction -- we have the reduction of the margin that I mentioned a minute ago in the first half year. Personnel costs remained stable. Those who look into the financial report will have seen that it has really remained stable, down to very small figures. And this is really including integration of Fundamenta, the Fundamenta Group, which was closed mid-April, so about 3 months of Fundamenta in that. That's about CHF 2.7 million of additional personnel costs due to operations in Zug and in Germany. So -- and you can see in the existing business, we have lowered our personnel costs further and been more efficient. And then other operating expenses, looks like an increase there. But this includes one-off acquisition costs due to Fundamenta. Advisory fees, due diligence, it's about CHF 1 million included here. And if you exclude this one-off effect, you can see around -- a reduction of around CHF 0.5 million in the first half year. Below the line, this adds up to 3% less cost, more or less 3%, not surprising if you have 3% more income and 3% less cost. What remains below the line goes up powerfully. We've summarized it here. The sales proceeds, if we exclude them because they're not recurring, they're one-off. You can see an adjusted EBITDA of around 7.5% plus, which is a strong operating performance, I think, in the first year -- first half year. Going further to the FFO per share, it's a small print here. I hope you can read it. The adjusted EBITDA at 7.5% -- plus 7.5%. And the interest rate expenses, that clearly went up by 26% in the first half year based on better operating performance, slightly higher taxes. And the total -- the sum total is around plus 4.9% of FFO. And if you break it down to shares, we concluded a small capital increase for the funding of the acquisition of Fundamenta. There is still a nice increase of around 4.6%. I think that's the decisive figure after tax, after interest rates, is the one that we have to pay. And that will be available for dividend payment or further investment. Let me focus on another figure, somewhat lower down in the smaller print. We are now reporting the FFO per segment. As you can see in both segments, we achieved a clear increase in the first half year. FFO return is the return on equity used, equity employed, which rose to 5% in Real Estate, up from 4.6%. And particularly interesting, it rose to 25%, up from 23.9%. Why is this remarkable? Well, we only have 1 quarter of Fundamenta in there. And as I said before, we performed a capital increase that we attributed fully to the Asset Management segment. So the acquisition is already accretive in the first half year, which is not even a complete half year and use -- led to higher FFO return on capital employed. NTA, as René mentioned before, a minus of 1.4% reduction, driven by 3 things: slightly higher number of shares, which accounts for about 0.6%; and the second thing is the acquisition of Fundamenta. There's no value for asset management in the NTA, but additional liability is reflected here. And the devaluation in the second half year of 2023, we are positive that we will have a positive number by the end of the year. Let me now briefly show you one chart each for the two segments, giving you a little more detail, beginning with Real Estate segment. These are the details here. The development of rental income, as I mentioned before, for around CHF 6 million -- we've sold for around CHF 6 million of rental income in the capital recycling strategies, sales in the second half year of 2023 and the first half year of 2024 having an impact on these figures. And then you see the higher rental income from the existing portfolio and, in particular, in this half year, the additional rental income due to the opening of developments, which gave us a total of 6% growth. Over on the right-hand side, we additionally report like-for-like growth and its composition. Compare it to the half year in 2023, we're at 3.4% like-for-like growth. So the like-for-like growth was increased once more. And this, although the inflation rate compared to the previous year clearly declined. You can see in the breakdown here. Indexing accounts for around 1/3, 1.3%, not surprising at an inflation rate of currently around 1.3% and 100% of indexation, more or less. And 2/3 are attributable to operating improvements, especially better rents that we have achieved, 1.8% -- rents account for 1.8% of the like-for-like growth, which speaks for our operating capabilities and for how close our people are to tenants and for the locations that are, of course, at a premium among our tenants. Then I'll give you a chart on Asset Management. The Asset Management segment, for the first time, we are giving more details, and we're going to give them in the future as well on the composition of return in Asset Management. Of the CHF 27 million, just under half are management fees, AUM basis. Typically, management fees are calculated on an AUM basis. And the rest is additional services. The largest share of it certainly is construction and development. We are managing a portfolio of around CHF 13 billion. So we have a number of opportunities for developments, for redevelopments and refurbishments and repositionings of buildings. I think there is great value to be generated for our portfolios and -- which means certain income for us. And then there is the nonrecurring income such as transaction fees or sales or capital increases that account for a smaller share. As you can see here, on the cost side, we've been very efficient. As I said before, the personnel costs increased primarily due to the integration of Fundamenta and -- which added CHF 2.7 million of personnel costs. And for the other operating expenses, they were clearly reduced by about 1/3, so below the line. Compared to the previous year, the EBITDA margin was maintained at around 54%, a clear increase of EBITDA by a good 22%. Now some more comments on the balance sheet. This is the development of assets. For the Real Estate part, we got started at CHF 13.075 billion. Proceed to sales is more than CHF 50 million, as I -- as we mentioned before. Then the acquisitions, investments that clearly exceeded that and more than CHF 30 million of valuation results, which adds up now to CHF 13.147 billion of -- worth of portfolio. But what about revaluation? What is important is that the discount rate has remained the same, down to 2 digits behind the dot, behind the point. And revaluation is primarily driven by a better, higher rents, 1.8%, and reduction of vacancies and also by a reduction of costs. We had -- so we've self-generated. It's not driven by the market. Just a quick comment on financing. You see the figures here. They're relatively unchanged compared to the prior year. We are at around 86% of unsecured, unencumbered, 14% mortgages with insurance companies. We like that market, and the insurance companies cannot do anything else for regulatory reasons. But clearly, more than 80% is unencumbered, of which around 87% is with fixed interest, about 30% are floating. So we can benefit from lower interest rates very directly, so not only indirectly, through a new issuance. And René mentioned the LTV already, 40.9% for the half year. As he said, we will have it below 40% by the end of the year. So we're very confident about that. Interest rate rounded to 1.2%. Looks the same. If you go down one step in the figure, it rose from 1.17 to -- decreased from 1.17 to 1.16, which might be small, but seems to show that we've achieved the peak -- reached the peak. And the average interest rates since the half year, the swap rates have clearly decreased again. So it's likely that slowly but surely, we have reached the peak. Maybe not reached it to 100% everywhere, but primarily reached the peak there. In conclusion, let me talk about maturities and liquidity. We currently have access to secure credit lines of CHF 840 million. So our liquidity is secured for many years. And you can see the maturities here, most of them being financed. This year, the market is very -- has very great absorption capacity. On average, our issuance were oversubscribed by more than CHF 100 million. We went out with a CHF 150 billion bond -- CHF 150 million bond in the spring, one for CHF 100 million in July and concluded at CHF 185 million. So we have great access to the capital market of CHF 435 million that we placed at continuously improved terms. Now this is it as far as I'm concerned. Let me hand over to Anastasius for Asset Management. Thank you.

Thank you, Marcel. Ladies and gentlemen, a warm welcome from me. I'm going to spend a few slides talking to you about facts and figures on also Swiss Prime Site Solutions. We have CHF 13 billion assets under management, which makes us the largest real estate asset manager in Switzerland, an independent one. And why did we purchase Fundamenta? Well, first of all, we have established structures in Germany, 20 people working in Munich on the ground and 2 products in the area. We're also able to gain a strong team in Switzerland with 40 staff, and this is a listed product called FREN, Fundamenta Real Estate, and also residential. So we have now a very wide range. Currently, we have sent the request to FINMA to integrate Fundamenta. And so we've prepared this well, and it's all looking hopeful. And now this is the second pillar of Swiss Prime Site. And what's the foundation of that pillar? Well, there are 3 pillars. On the left-hand side, the funds business, fund management with approximately CHF 4 billion; and the Asset Management with CHF 6.2 billion; and real estate advisory with CHF 2.5 billion. And all 3 pillars have grown compared with 2023. And let me also mention that the transaction volume in the first 6 months was approximately CHF 600 million across the 3 pillars. And I also mentioned that in the first 6 months, new funds, CHF 200 million, that was more than we were able to issue in 2023. And we are optimistic that we are going to have more emissions in the second half and also have a wide range of -- a wide pipeline with a great distribution of contributions in kind. And here, these are distributed across the 2 pillars and how we invested into the use. All 3 pillars show that residential income accounts for 50% or 60%. And of course, size is not all, but it's also about the position and the performance of the products in the market. And this slide shows this very well. On the left-hand side, Here, this is the CHF 4 billion of the Swiss Prime Site Foundation and the CHF 2.8 billion. And both have a cash flow yield of 2% to 2.3%. And here, you can also see our new product on the right-hand side that we've been offering for more than 2 years, where we invest in anticyclical commercial. And this shows that our products performed well in a difficult market, remained stable and were able to generate new cash. And in detail, the Investment Fund Commercial, or IFC, which is a product of the left-hand pillar in the funds business, here, we do anticyclical investments into B locations in Switzerland. The micro position is very good. And the cash flow yield of 5 point -- cash flow return of 5.5% is excellent. And we have 0.9% vacancies. And so when we hear that there is no need for office or real -- retail space, you can see that despite that, we have the lowest vacancy rate in that sector, as in all other sectors as well. Now here, the Akara Swiss Diversity Property Fund PK, it also is set for growth. We are now approaching CHF 3 billion with this product. And here, we have a cash flow return of almost 3%, and the half year results look excellent. We're going to communicate them in the next couple of weeks. The focus is on residential, and 60% is in residential, as 65% is the maximum that we're allowed. And so here, we also have some elements of retail and office space. And then the large -- last project I would like to talk about, which is also part of the fund pillar, and that means that here we manage it ourselves and decide on capital increases, purchases, et cetera. And here, so this is -- where here we acquired Fundamenta Germany and acquired fund with CHF 700 million asset under management in 7 top cities in Germany with a focus on metropolitan areas. And this is institutional investor, 75% from Switzerland, 25% from Germany. And that means that we've not only been able to extend our range of products and offer anything to customers that they want from 100% commercial and 100% residential, but we also have listed products, foreign products, German products. And so the range of investors is not just institutional, but we also have 2,500 new investors that we've acquired through this acquisition. So thank you very much for your attention. And it's now back over to René Zahnd.

Thank you, Anastasius. I have two more charts for you, but before I talk about them, let's get back to Asset Management. It hasn't really been mentioned, but look at Page -- or Chart 28. I want to stress that specifically. On Chart 28, you can see that we have management fees of CHF 15.2 million. These are recurring. And after this, the construction and development fees, which we do each portfolio, every piece has to grow. So it's really recurring things, does not include all transactions or issues. That's a nonrecurring fees. But if you add all this, we are at CHF 21.6 million, and that's fees that simply coming in because the products are there, because the assets are there, and personnel costs and costs for others is 12.2%. And that really makes this business highly interesting. That's the message for you to take along. This difference, without any single transaction, without collecting any money on issuance, you have this difference already. It's even more interesting than the relationship between recurring and nonrecurring. It's the effective figures. And this really stands out in this segment. Now as I said, I have 2 charts on the outlook by the end of the year, beginning with the LTV. We mentioned it several times, we'll be landing below 40% by the end of the year. We've got an improved FFO I without the sales. There will be more sales in the second half year than in the first half year. FFO I of CHF 4.10 to CHF 4.15 in the past, now CHF 4.15 to CHF 4.20. Current objective, vacancy is around 3.8%. And assets under management, we're currently at CHF 2.7 billion, and we assume that we will approach the CHF 13 billion threshold by the end of 2024. Now what's the medium term outlook? We've got a chart for medium-term targets here for the 2 pillars, beginning with the Real Estate portfolio. By the end of 2028, so let me say at this point, this is organic. These are organic medium-term targets, not including external purchases. So again, Real Estate portfolio by the end of 2028, rental income in excess of CHF 500 million and low cost of below 16%. Why end of 2028? Well, it's very simple. Jelmoli is going to reopen 2027. But in 2027, we're not going to have the full rent as it will accrue. So we have set the objective for 2028. And over on the right-hand side for Asset Management, we expect in excess of CHF 16 billion of assets under management. Again, this is organic. And the CHF 13 million that we will have -- CHF 30 billion that we'll have by the end of the year, it's relatively easy. CHF 1 billion of growth per year, that's feasible and at the level of EBITDA, will be around CHF 75 million to CHF 80 million. So more than CHF 75 million. So this business will be in a range where you can say 20% of the total EBIT, approximate 20% is generated by Asset Management. And this will then be the moment to do the sum of the parts calculation and attribute to Asset Management the value it deserves. That's it for me. So let's get started with question-and-answer session. Let me repeat, one question at a time. We won't take the microphone from you. We'll get started with questions here in the hall, and we'll then go to any external questions or online questions. And we have simultaneous interpretation. So please, one question at a time. Microphones will be handed around. Who is going to do that?

Well, you can always give him the microphone. He's always the first one.

I have four questions, two are very quick ones, two for Real Estate and two on Asset Management. The first question concerns the yield of the sales and the objectives for the planned sales in the second half of the year on average, so that we can get an idea of how the portfolio is going to change.

Well, we want to of course improve, and that's why we do the capital recycling and improve locations. So you can expect that our yields are going to be slightly higher than the average. Yes, of course, also the risk has to be included in the price. And if you sell a retail space in the Valais canton, then the yield is not going to be 3% or 4%, but a little higher.

Well, I think the quantification is interesting. The second question, you mentioned that PRADA been let now. And so what is the rent price per square meter? Or what's the increase anyway?

In percentage, it's 20% more.

We heard something similar from SP -- from PSP in prime locations. Now the question on Asset Management. You said that CHF 270 million was raised in the first half, and the objective is CHF 1 billion per year. So does that mean that we have to expect CHF 740 million in the second half? Can you quantify the growth?

Yes, your numbers seem to be right. But of course, we can also leverage. And we expect that we will raise CHF 300 million in the second half. But -- so leverage is 1/3. So you can then calculate the CHF 600 million, 1/3 and mix CHF 900 million.

And then the second question on Asset Management. In terms of the integration of Akara of SPSS, so how is that working in terms of merging the cultures? And I also saw that personnel costs have grown from CHF 8 million to CHF 11 million. So can we expect some reductions in personnel costs? And if yes, by how much?

Thank you for the question. The integration is going very well as we saw in these first two integrations that we had with Jelmoli and Akara. And now we are doing the same. We are -- the offices is going to move from Hardstrasse to Poststrasse. And so we're very happy.

And let me also add, well, you know our objectives. We want to go by CHF 16 million, and we can do that with the headcount we have at the moment. And so there's not going to be a cost reduction in personnel. Well, of course, it's going to be a cost reduction because if you apply the same staff to the CHF 16 million, of course, that's going to be much more efficient. And of course, like with any integration, it's going well. But of course, there are always some who don't want to come along, and those are not going to be replaced. But so -- but in the medium term, because we have this portfolio, we want to grow. And that's why we are also going to need the staff. Are there any more questions from the room?

Another question on Asset Management. So you expect that the transactions are going to increase in the second half of the year. You're not the only ones. Does that mean that the share of nonrecurring fees in Asset Management is going to increase?

Yes, it does.

And does that -- has that share changed with the integration of Fundamenta? Or is it the same share?

It's remained stable, and you can see that if you do a year-on-year comparison. Because in 2023, it was without Fundamenta, in 2024, with Fundamenta.

And can you quantify the nonrecurring share on average?

Well, we want to have -- more than 2/3 of recurring, but it depends on what's happening in the transaction market, too. So maybe 70% -- 70% to 80%.

Well, I've tried to reactivate the recurring and nonrecurring assets. That's an interesting figure because if you have great years with lots of issues, then you do more transactions, you buy more. And that will increase in nonrecurring part. And that is why I use the actual figures between how much do we earn and how much in yields in terms -- in comparison with costs. And that's irrespective of the relationship between recurring and nonrecurring. Because if you need transactions and issues to maintain the structure, then you have a problem. And that's not where we want to go.

And another follow-up question. In the medium term, you want a vacancy rate of 3.0%.

Yes, that's the objective we set ourselves. Well, there are always some strategic vacancies, and a small vacancy can sometimes be beneficial. But in the medium term, we want to achieve the 3%, and it's feasible with our portfolio.

By when do you want to achieve that?

Well, that's a more difficult question actually. So medium term, Karin, do you want to tell them what medium term means? She says no.

So -- and that's a result of portfolio optimization.

Well, we sell the less favorable locations and smaller buildings, and that makes us very efficient in terms of costs because we have larger buildings. And you have to understand that operational costs are not low for small buildings, and that also has an effect. So we try to be -- to sell the B locations, so that we only have A locations, and then that will increase the -- or decrease the vacancy rate. But there are some worries in commercial real estate that may be also in prime locations, that may be a problem. I don't know if what you're talking about here is a prime location. But of course, anyway, there's going to be more space in the market. Well, yes, we are very optimistic. But without naming names, there are also other real estate companies who said that renting our office space is difficult. But that depends on the location. If you're in a smaller city, that may be the case. And I totally agree with our main competitors here that office space is going really well where we are, and that's in the center of large cities. And so this -- that is why when we talk about the favorable situation of office space, that refers to those prime locations.

I have a few questions on FFO I development. With the integration of Fundamenta, it's doing well according to plan. It was once said that they're going to contribute CHF 0.20. And can you talk about expectations for this year?

Well, the CHF 0.20 are after complete integration on an annual basis and after synergies. So I would assume that for 2025 or some overlap in 2026, we can expect that. As well as you heard before, we're working on the integration and on capitalizing on synergies. We're giving our power offices in Zug. We are merging IT. This is going to happen in September. And you can see the synergy effect only in 2025 in full as we are currently using them in -- from September. So we'll see them in 2025. And the CHF 0.20 are really calculated on the basis of that period, not on 2024. We also have CHF 1 million of transaction costs and one-off costs.

And how about without synergies?

Well, we said about 2/3 is what we put, and 1/3 is synergies.

So the CHF 0.05 are from Fundamenta. Or is there an adjustment -- downward adjustment?

No, there won't be a downward adjustment. On the contrary, Fundamenta plus good performance here, as you saw on the basis of the low vacancies and cost discipline and higher rents. Well, CHF 2.04 FFO I for the first half -- CHF 2.03, HF 2.03. And last year, CHF 2.01 at the first half year.

So why this adjustment?

That's on a like-for-like basis, what we're showing here, and it's due to Wincasa. Wincasa contributed the difference there. And that, of course, did not apply this year. So we're only showing like-for-like figures as in -- we do in the financial report on the basis of IFRS 5.

On the Grand Passage project in Geneva, at the beginning of the year, you said you would assume that 2024 to '26. Now you're saying from 2026. Why the delay?

Well, the delay is due to Globus being one of the main tenants there, and that's due to the -- that's the reason of the delay. We are not making a rental agreement with a counterparty that is only 50% known. We need to wait for the central group to buy in. Maybe they will see things differently, but we can make different use of the building. More office space, for instance. Currently, we are planning for Globus to remain there. If the central group approves that, it will be okay. And otherwise, we'll need more time to make the switch from more retail to more office space. That's the reason for the delay, the postponement.

Final question on JED in Schlieren, Zurich. There were also changes compared to the beginning of the year. I think you said you talked about CHF 105 million of investments. Now it's CHF 110 million, and there was a plus of CHF 300,000 of rental income. Why that?

Well, this is due to the constructions by tenants that will be -- we'll pay off over time.

Thank you very much. More questions from the audience here. Yes, please, perhaps at the very end of the room.

About your CO2 reduction path structure. My question is, you are leaving the path for 2034 and do not believe in net zero 2040. So what will be the incentive? What's possible? What do you think is possible for CO2 reduction?

Well, in the appendix, you can see that 2040 will be a zero CO2. That's certainly feasible. Now looking into this appendix, maybe not every one of you will have it on hand. But every single dot of the line is a real estate, and we exactly know what we're doing when. But there is a difference there. There are certain things that are unclear about district heating, what's the quality of district heating for particular buildings. So that will certainly all be settled by 2040. We're very confident to go down to 0 by 2040. But it's, of course, a thing that you have to talk about with every municipality. In my private home, I have a connection to district heating, but I have to check what's in it. And we update it once a year by the end of the year because it takes a lot of effort putting it into figures. Thank you for the question anyway. More questions. Did you want -- Ken, do you want to come in first?

A quick question on the financing situation. We are hearing that UBS from various sources that following the merger with Credit Suisse will be less willing to grant credits. And if so, at high yields for the bank, of course, at less favorable terms for lenders -- for borrowers. What effect does that have on the SPS Group? And how are you trying to cope with this new setting?

Well, I think we're in a good situation. We have a consortia credit that is going on for 4 years, 4.5 years with a renewal -- option renewal for 1 year. We would assume that UBS will comply with the agreement and to perform the renewal. So we're secured for -- funded for the next 5, 5.5 years. And otherwise, we work in good agreement with UBS. We work with them very closely at various levels for SPS, but also for solutions in the various vehicles.

Thank you. Tommaso from UBS, I could have passed on Ken's question to you directly, but we haven't done that.

Well, I can stay with the matter. UBS quickly -- recently announced that they want to close their commercial -- international commercial real estate fund. There are signs that similar thing is going to happen in Switzerland. What would that be -- what effect would that have for you in Switzerland?

Well, in the world of funds, I'm not seeing any closures in Switzerland. I haven't heard about that. Our commercial fund, the IFC, is performing very well. And the market sentiment is turning, we believe, and fund product becoming very interesting again. We had great investor talks in the past 2.5 years. The excess yield you're getting is not risk adjusted. We know there's too much risk in there for the disproportionate yield profile you're getting.

And what about market shares, are you winning market shares?

Well, looking at what we did last year, we grew by -- organically by CHF 800 million, more or less. And when we see what we did with the products in the first half year, we're gaining -- slightly gaining market share.

Follow-up question on vacancies. In the short term, you are expecting a higher vacancy by the end of the year.

Yes. But this is due to Pont-Rouge we're taking over. Because the others are fully let, and Pont-Rouge has a pre-letting status of 80%. So there's a slight increase of 0.15, I think. That's why we have approximately 3.8. But that will even out again. If it's fully let, we'll be at 3.6 again.

About Pont-Rouge, any news about FlowBank?

Who wants to take that? Karin, perhaps?

Well, there are no news. We're secured for some period of time. There won't be any damage we're going to take, and I think we will be able to rent it out after that. So we're not seeing any risk given the contracts we have. No financial risks on -- as far as rental income is concerned. We will be able to relet the rooms. But of course, it's not a nice thing. If you have a tenant in that situation, for one thing. And apart from that, you don't get up to 100% quickly enough with a new tenant if you have to replace a tenant. But it will throw us back perhaps for 3 months to get back to 100%. That's not terrible.

More questions? Cedric?

I have a question on Asset Management. In Switzerland, you have a very comprehensive product range. Does that mean that the focus on organic and inorganic market is more -- will be more on international markets or more potential for consolidation in Switzerland?

Well, the latter applies. Foreign market, Cedric, has not been released by the Board of Directors. By the way, with the Fundamenta acquisition, it's yes, Germany, yes. And we have a small unit through the investment foundation operating in Germany. But strategically, the international market has not been released. So we're going to continue to consolidate in Switzerland, in particular, through contributions in kind, which is some way of consolidation.

I have a brief question on the EBITDA of the Asset Management. What's your expectation for 2025, '26?

Well, I can tell you about 2027, anyway. No, we haven't issued a guidance here.

Maybe do we have a question from the room? One last question from the room, perhaps? If that's not the case, maybe we have some from the outside.

There's one question from [indiscernible] from Kampen, new question.

One question actually on the Asset Management business and looking at investments from commercial, and I note that the LTV is 43%. How do you look at that? And as far as I'm aware, for [indiscernible], there is a cap at 33. So why is this one [indiscernible]?

Thank you for the question. Well, the LTV is at 43%. And the pre-contract allows 50% during the 5-year initial period. And then we're going to reduce it slowly. And -- but still, at the moment, a benefit from the leverage. Is there another question from the external line? [ Flora ]?

No, there are no further questions.

Well, in that case, I don't want to keep you. As always, you are cordially invited to join us for an apéritif, which is going to be held on the 33rd floor. That's one floor below. Thank you for being here. Thank you for being loyal to share, and I look forward to toasting the first half of the year. [Statements in English on this transcript were spoken by an interpreter present on the live call.]