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

[Interpreted] Good morning, and welcome either here at our offices in the Prime Tower or maybe online from the rest of the world here at our company's media conference. I'm going to start by saying thank you, [ Frank Vontobel ], who wrote it's a good day to be an SPS shareholder. That's because we have excellent results and able to increase the dividend. I'm assuming that the Annual General Meeting will pass this and we're also a completely new company, stronger, more focused, and profitable. And let me start on that. This is the first balance sheet media conference of a new company. So [ Mr. Foster ] already mentioned this in his report. We sell the long tail when we sell and that's always those properties that don't suit our portfolio and then we reinvest that money into project developments. And this is actually the company's history. Not going to start talking about 1999, don't worry. But there is a long tail here, which is Tertianum, Wincasa, Jelmoli. And they are now a thing of the past. And now we're in this new world and that's why we're starting in 2015 we're the first foot in asset management when we started the -- when we set up the asset foundation. And now you can see that we're totally new position in 2019 at the end of the year, we were able to announce the sale of Tertianum. And you can see how the yields were distributed at the time, only 1/2 came from real estate, 1/3 from Tertianum and 10% from Jelmoli and the Wincasa operating business. And today it's a completely different picture. Now we have almost 100% from real estate, 87% from SPS-I and the rest, the 13% in asset management. And when I say profitable, I mean profitable. You can see that from the EBITDA margin in 2019, it was 52% and last year in 2024 without Jelmoli 79%. That's because real estate is much more profitable than retail, for example. And so welcome to a new company. Now let's start with this year's highlights, or rather, last year's highlights, 2024, with the valuations. As I'm not going to read out everything on the slide, but the discount rates have remained unchanged across the portfolio and it's important to say that because the increase in valuation come from better tenancy contracts and also from development projects that were added to the portfolio. We were able to save costs, because we have fewer properties and are much more efficient now and also we've been able to reduce the vacancy rates. And so you may remember at the end of 2023, minus CHF 250 million. And now at the end of 2024, plus CHF 113 million. So -- and now if we take out the IFRS -- that's CHF 270 million within 12 months. That's astounding. And the valuation is a fair one. And you can see that in our sales, we are selling the long tail, as I said. And here, we still have 33% above profit. So the valuation must have been quite good. And now on transactions, where they have increased or they increased in 2024, particularly in the second half of the year. You may all remember the decision of the National Bank to reduce interest rates and that helped us. It helped us to be able to invest. And we also saw that there are a lot of institutional investors in the transaction market, which wasn't the case for a long time. We saw more private investors and now institutional investors are coming back in. And one point that we like to mention is that our market is becoming more complex, more complicated. It's more difficult to get building permits and to fulfill sustainability criteria and that is why some pension insurances decide to make an investment and that means that one of them goes into asset management and you're no longer a direct owner, but still have a participation as an owner -- as an investor. And we're also seeing that as a lot of sale and leaseback market. And that means that some companies in Switzerland are more affected by the geopolitical situation than our market. And so people are turning to the real estate market, selling properties, and renting it back. We've seen that too. In lettings, we've had a very good year. I will talk about the figures a little later. So the location is excellent, we still have high demand for our space, commercial spaces. And we're still looking for -- we also have larger spaces within our portfolio, and we've been able to get better leases for them than in the past. So this is a positive outlook on 2025. I can already say that we can't have an effect on the geopolitical situation, but I can't imagine that it's going to be a bad year for real estate, a very good year, in fact, both for direct real estate here in the new valuation side and also for asset management. And so strategic development, I already mentioned that we now have direct portfolio and asset management, [ CHF 13.1 million ] -- and CHF 113.7 million on one side and CHF 13.1 billion on the other. And here are our medium-term goals that can be confirmed, which is to reach CHF 500 million in the real estate in 2028 when the Jelmoli building is part of our portfolio again. And in asset management, the medium-term goal is CHF 16 million to CHF 17 million assets under management and an EBIT contribution of approximately CHF 75 million. And this is consistent with our strategy towards a more focused real estate company. Jelmoli transaction or the transformation, I'll get back to that later. And on the portfolio side, we have a value of property portfolio of CHF 13.1 billion, despite the CHF 45 million that we sold. And we're still at the same value as at the end of 2023. Sustainability is also something that I'll touch upon later. And now this is an overview of the operative performance, a significant increase of rental income to CHF 464 million by almost 6%. That's a record high. And don't forget that we sold CHF 45 million worth of real estate and this also meant that we lost some rental income, 6%, the CHF 25 million of additional rental income that had still needed to compensate the CHF 10 million. So that's actually a growth of 9% in terms of rental income and that is an excellent result. And vacancies, I already mentioned this, 3.8%, down 0.2% at the end of last year. And now asset management, this -- we have excellent growth in yields of 42.5%. And in particular, in the second half of the year, we were able to have capital increases and contribution in kind of over CHF 600 million. And of that, CHF 50 million were contribution in kind and the rest was new money that was -- we had an influx last year. So that's -- we now have CHF 450 million in terms of EBITDA. That's a plus of 6.5%. But despite Jelmoli, which had a loss of minus CHF 6.9 million EBITDA, but we -- nevertheless, if you now go from a medium to high-price segment and have different goods and you will have different customers. But I think we can still -- we were still able to conclude the business by the end of last year in dignity. And so this is basically the remaining sale. So that's still a positive result because we didn't know how this was going to affect the bottom line. On the right-hand side, just 3 comments, LTV is now at 38.3%. That gives us a little headroom, so that's positive and liquidity will cover maturities for the next 24 months without any problems in the next 2 years. And as I already mentioned, we will propose a dividend of CHF 3.45, an increase of CHF 5 to the Annual General Meeting. And now here, the key figures, rental income, CHF 463.5 million like-for-like growth, 3.3%. So this is actually a net 9% growth because we have to compensate the sales. Assets under management, CHF 13.3 billion and EBITDA before revaluation and deferred taxes, CHF 415 million and CHF 313.5 million in profit. And the important figure here, of course, for all shareholders is the cash, the FFO I. And we -- our guidance in the middle of the year was CHF 4.15 to CHF 4.20, and we now reach CHF 4.22. And that is an important figure because it is the basis for the dividend, the CHF 3.45 that I just mentioned. So that's the introduction for you. And now Marcel with more figures.

[Interpreted] Thank you very much, and welcome. I'll be pleased to take a few minutes to provide more figures and tell you why it's a good day for you as shareholders of Swiss Prime Site. Let me begin with the P&L, the income statement. Some of the figures have been mentioned already. Let's get started with the key figure at the top, rental income of plus of 5.7% last year. Let's highlight on 2 components, 3.3% like-for-like growth, which was a little less than the previous year due to indexation. But in real terms, it's the same high growth that we achieved as in the previous year. This shows 2 things. We are in the right places and we're doing the right job as far as new rentals are concerned to have that strong growth in like-for-like. Add to this, the new developments that went online, Mullerstrasse, which has been on the portfolio for the entire year. Alto Pont-Rouge was added Stucki Park. And this year, we're going to include the JED and Bern 131. The second thing I would like to touch upon is asset management. Rene Zahnd mentioned it briefly, high growth in excess of 40% to CHF 71 million. And I'll be providing more details later on about the composition of the CHF 71 million, but that's one of the components I would like to mention. The third thing, although it's a negative figure of minus 1.7% is retail turnover. It wasn't a simple year for retail last year in general terms and in this setting, I think this minus of 1.7% is fair enough. We remained almost the same, although we gave clear discounts, especially in the final months of last year. One figure shows how much we've transformed Jelmoli at the end of 2023. We had stocks of around CHF 36 million worth. And at the end of 2024, we were at around CHF 6 million. So we massively reduced inventories there in the run-up to the closure at the end of February this year. In total, growth of 0.7%. We're showing for the first time this year, the new SPS once transformation has been concluded. I'm giving you pro forma figures now. If we exclude all the one-off components such as developments that we sold and/or things we sold off. And the other part is the Jelmoli. This shows the underlying performance that we are achieving with SPS, and you see it in the lower line, from CHF 488 million, we went up to around CHF 535 million. This is an impressive growth rate of 9.4%, driven by the 2 segments. Now over to the cost side. I would like to highlight on 3 things. Let's begin with real estate costs. You may remember that we have just 6% growth of top line, direct real estate costs, 2% growth. So we've become more efficient as a result. You can see that for the EPRA cost ratio, which is 1 percentage point down last year. Why so? There are 2 things I'd like to mention. One is how we're doing things. I think we're much more focused now and thinking about what is decisive, what is crucial to achieve efficiency gains and to best manage our properties. And the second and equally important component is through the transformation, we sold properties that had a high-cost factor, they were smaller properties, more difficult to manage, more focused on retail, perhaps a little older. So these are the components that then drive cost of property. And you can see that reflected in the higher degree of efficiency as far as real estate cost is concerned. The second thing I would like to highlight is cost of goods sold, was flat on the retail side, but it now went up 20% which goes to show that how we have to move in the final phase of Jelmoli, we had to give more discounts, considerably more discounts than in previous years to bring down inventories and this is reflected in the cost of just under CHF 73 million in 2024. In total, reduction of operating expenses of 4.6%, but the more relevant figure is found at the bottom. We're excluding Jelmoli and developments and sales sold of things. And in total, we ended up with CHF 140 million of recurring operating expenses, which is a plus of 13%. Why 13%? We had many one-off effects by Fundamenta, for instance and all the costs that were charged to the P&L as far as acquisitions is concerned, but also higher depreciations and depreciations of intangibles in the course of the Fundamenta acquisition. These are one-off things, and I would assume that we will grow a little less in future in terms of costs compared to income. The total of cost minus is shown here and 6.5% higher EBITDA. And if we do our math as before, excluding Jelmoli, excluding developments and divestments, just focus on the recurring part, SPS 2025, you will see that we have growth of around 9%, which shows the revenue power which is underlying in our business. I'd like to present some things about the 2 segments. So one sheet -- I forgot about the operating profit, FFO, we showed that before, 4.2%, plus of 4.2% composed of an absolute figure of 4.8%, a plus of 4.8%. You can see the breakdown here, especially driven by EBITDA. And the counter position here is the higher interest expenses that we had of around CHF 62 million, so 11% more than the previous year. And this adds up to the CHF 325 million of FFO, 4.8% plus for the Fundamenta acquisition, we carried out a small capital increase of paid [indiscernible] in terms of shares. There's a high number of underlying shares and per share we ended up with the 4.2% we mentioned before. Let me highlight one thing, looking at FFO. And this is in the smaller print at the bottom of the chart. We are, of course, interested in the FFO return, which shows how efficiently we manage our own capital. I think it's fair to say that in both segments, we have good performance in this area last year. For real estate, we went up from 4.7% to 4.8% in terms of asset management from 26.5% to 29.4%. And the 29.4% are worth mentioning from my point of view because that's on the basis of almost double the equity of asset management based on the additional shares that we created for the acquisition of Fundamenta. And this shows that the acquisition of Fundamenta was very accretive for shareholders. So the capital return was clearly increased towards almost 30%. As far as the intrinsic value is concerned, we're reporting a plus of 1.6%, the combination of the proceeds revaluation and the dividend that we paid last year and EPRA NTA, you will see a small reduction, which is attributable to -- well, EPRA in its definition looks at all the debt the company has independent, irrespective of debt for asset management or for real estate and the counter positions on the positive side, you will see goodwill or other valuations of asset management that are excluded. So here, based on EPRA view, we only have additional debt without having assets booked against it. And that ends up with a slight reduction. It's a one-off effect, but this will be the new base from now on. Now let's move on to what I wanted to say a minute ago. The 2 segments are shown here. We saw many of the figures before. What is growth attributable to the top line in the real estate field, we grew strongly through redevelopments and new buildings and significantly around CHF 7 million from existing properties. This has to be viewed against the CHF 10 million that Rene Zahnd mentioned before, preceding sales proceeds, which shows the underlying performance is not 6%, but more like 9% if you add this divestments. Let me also mention the composition of EPRA like-for-like, the 3.3% shown here. Part of it is due to indexations, around 1.5% last year, which is more or less market driven. So I prefer to be -- to focus on the other 2 components. We have almost 2% of real growth that we created last year, 1.4% through higher rental income. That's real terms. That's not due to indication, but 0.4% due to a reduction of vacancy, which adds up to around 1.8% of increase in real rental income, which is a good value in the Swiss setting, I think. I'd like to show you one chart about asset management and give you some more details. I mentioned it before, a growth of 42% for the asset management segment management fees, the basic fees rose by 43% and nonrecurring fees grew even more considerably compared to the first half year. You will see that there's clear acceleration in the second half year with clearly more issuance and higher acquisitions. There'll be more details from Anastasius later on. And of course, the CFO is very pleased with the 47% at the bottom. We grew less rapidly for cost and for top line, which shows the first synergetic effects that we realized last year, which is practical of a synergetic effect is the reduction from 2 offices to 1 in Zug. We only have one office and one uniform IT platform left for everyone to cooperate on. These are the first things that we have implemented last year, and this had an effect on raising the efficiency here. It's also shown in the EBITDA margin that we're showing here, which grew by some 2 percentage points. And finally on this, the real estate segment is very stable as we showed before. And the asset management segment here is very stable as well. We're focusing on large institutional investors, and we have a high share of recurring revenues. Around 3/4 are recurring revenues, so they're independent from transaction markets. And what is especially important to note is with the recurring revenues and not even all of them, just look at the management fees alone, we are already generating a profit, considerable profit, which goes to show how stable the asset management segment is in addition to the stability of the real estate segment. Four more charts on the balance sheet. Beginning with assets, property, the property portfolio has more or less remained the same, CHF 13.1 billion, more or less at the end of 2023 and 2024, despite the sale, CHF 332 million. Add to this, the valuation results and the investments that adds up to the CHF 345 million. And we compensated for this by 2 components. In last year, we developed -- we invested in our development pipeline around CHF 185 million. And then we have the valuation result of CHF 122 million, which is before IFRS 16 effects. For the CHF 122 million, let me say the following. You can find this in the bullet point here, we had a constant discount rate and it's really constant down to the second spot behind the point behind the dots. So there's hardly any market effect in it. Transactions that this partner observed have not indicated that yet and our valuators left the discount rate the same. The CHF 122 million are generated by our own performance and Rene Zahnd mentioned that a minute ago. Certainly, we were able to have new leases that were higher or new rentals that were higher than we have in our valuations and vacancies turned out to be lower than we assumed. And on the cost side, we were more efficient than valuations included. And these 3 effects make for the increase by CHF 122 million, but that also means by inferment, should the market move one way or the other this year, it will be reflected in the discount rates and would lead to a corresponding change. Two more charts on financing or liabilities. We concluded the year at around CHF 5 billion of net liabilities, LTV of 38.3% which is a nice increase of improvement over the past year and even a good change over the first half year, mainly driven by the divestments that we carried out and that we used to bring down liabilities and to a smaller part, driven by revaluations. The large lion's share of it is really due to divestments. One figure I like very much because it's moving in a different direction from the past. I usually had to say that our average discount interest rate rose, but we are now seeing the change in our average interest rate. Although almost 90% of our interest rates have been fixed, we're seeing it already. We've come down from 1.2% at the end of 2023 to 1.1% at the end of 2024. So I would assume that we have reached the base points for financing, and this is going to go down in the future. And you can also see the way we fund ourselves. We have a good capital market last year and we used the opportunities. We have around 45% of unsecured bonds currently. Moving on to the final chart I have for you, the maturities. If you compare this to the previous year, you can see 2 things. Our large consortium loans with leading Swiss banks were renewed by 1 year. We have maturities up to the end of 2029 or 2030. And I'm particularly pleased that we have agreed with banks on the same conditions, the same terms as up to now on a partnership basis and we're very well set up until 2030, which gives us a high degree of liquidity, as Rene Zahnd mentioned, around CHF 1 billion at the end of the year, 31st of December. And what has happened in 2025? Very quickly, we did 2 things. On January 6, we carried out an issue of CHF 210 million at an interest rate of 1.13% for 6 years, 6.5 years, which will prolong our average maturity of funding for some bit. We're getting to more or less the 5 years we like to have. And what did we do with the money? We repurchased or bought back our convertible bond, which matured on January 13. The picture of maturities in 2025 is already looking different. CHF 297 million have been paid back and replaced by a straight bond. So much on my part, so much for the figures. Thank you very much for your kind attention. I'll hand it back to Rene Zahnd for more details on real estate.

[Interpreted] Thank you, Marcel. So I'm now going to talk about the portfolio, our direct investments in other words. You've seen the slide before. And our investment hasn't changed that much. We're still interested in properties along the A1 and half of A2. That's the connection between Basel and [ Zucan ] Lucelle. And as you can see here, we now have 139 properties. That's exactly the efficiency that Marcel Kucher mentioned. We sold a number of properties and now the new number is 139 rather than compared with 159 in 2023. And you can see also here the different use types. And you may remember that we used to have a retail share of more than 30% and we said that we wanted to reduce that to below 20%. And now you can see that we have achieved this. Of course, after the transformation of Jelmoli, we had reached it and we are now able to show you that we now have 19.8% retail, which is [indiscernible] 20% objective that we had. That means, of course, the share of office space is increasing, also some logistics and infrastructure spaces, laboratories. So those 2 parts are going to increase and compensate the reduction of retail. And this is a slide that's always interesting because this shows the Wuest & Partner Square. You can see here, these are the prime locations here in the top right-hand corner. And in this quadrant, you have an excellent location, but not the best quality and anything else is what we sold so far. So this is the long tail that I mentioned earlier that no longer fits our portfolio due to the purpose, but also due to location. So Niederwangen, Regensdorf, all these are places that are not exactly metropolis and we have sold those properties. And so now we still have 2% in those 2 quadrants, that's CHF 13 million, CHF 62 million, CHF 262 million, that's the last part of this capital recycling project. We're going to sell those. And then once we have done that, we should be able to move those dots over to the right. And this is -- we can't always just sell, but of course we also -- so these are the properties that we are planning to sell in 2025, so that the red properties are sold. Vacancies, we have a record low of 3.8%. And we've already mentioned that the objective in the medium term is still ambitious, but we feel that this is realistic to get down to 3% in the medium term. But of course, this always depends on the number of new projects that are added to the portfolio in various locations. We usually have a vacancy rate of 80% for a new project, and 1 year later, ideally, it is full, but of course, the more portfolio -- more properties you add to the portfolio, the more difficult it is to reach the 100%, of course. And so we think that we will probably be able to improve by approximately 0.1% so that we end up with 3.8% at the end of the year. Here, rental contracts, this is quite the usual picture when you look at the lease of expiry of the rental contracts. So you see average length of rental contracts is 4.8 years, I believe, to be accurate. And this is for commercial real estate. And this is a slide that I like showing because this is -- explains our capital recycling strategy. But of course, it's up-cycling really. And so these are the real figures. CHF 1.3 billion have been sold from our long tail. That's the cash that we now have available for reinvestment into projects that brought us the additional top line. So that's up-cycling of the long tail towards those properties that are in the top right-hand quadrant. And so we are going to optimize a mix from retail towards office in better locations and greener properties. So that's a good investment because it means that it will create additional yields and add new properties to our portfolio. So this is our project development pipeline, which still contains approximately over CHF 2 billion, but some of the projects aren't active. These are just potentials for the future. This shows the next CHF 1 point billion for the project pipeline that we are now looking at for the next 5 years or so. So the committed part is shown in the right-hand column, approximately CHF 400 million and CHF 900 million are still open. This is important because we are always asked what we invest per year, how much we invest per year. And that's this figure here, that's CHF 170 million for 2025. And the projects concerns are the completion of JED and Schlieren and BERN 131 office building which is going to be ready in May, June this year. And then there are 4 new projects, the smaller renovation of the [ Fraumunsterpost ] and a new project that I will still talk about in a moment. And then, of course, we also need some for Jelmoli and the YOND project. So these are the projects that we're currently working on. So these are almost -- the JED new building in Zurich-Schlieren is already completed and people are already moving in. It has no cooling and heating system, but it works. We were there in December, and it was pleasantly warm without a coat on. And this can be achieved by very good insulation and smaller openings. And we look forward to hearing how the tenants feel about it once they've moved in and used it for a while. And then there's BERN 131. Those of you who are going to go on the motorway later towards BERN will see it. It is a beautiful building. I think it's almost iconic. And we currently have a pre-letting rate of 65% and we are expecting to hit 80% once it's ready for people to move in. And -- we are optimistic that by next year, it's going to be fully occupied. And Jelmoli will be explained later with a separate slide and then the YOND campus in Zurich Albisrieden. This is the continuation of the previous YOND project. These are new buildings and one renovation of an existing building. And we still have recalls for maaglive and we still managed both with Jelmoli and for YOND to obtain construction permits. So it's still possible. And that's a good thing. I was almost surprised by it. And particularly when it comes to Jelmoli, we certainly were all so relieved, because you tell the staff, well, Jelmoli is going to close and everyone is going to be let go within 2 years, by the way, not for overnight. And then you close the building at the end of February. And then just imagine you didn't get a construction permit for the renovations. And that would mean a vacancy for 2 years. And that kind of thing can happen if you don't get a construction permit. So we were very, very relieved when we did get the construction permit at the end of last year, which means that the transformation is going to become possible soon. So those are the projects. This is a selection of planned projects. One is the Kantstrasse right next to the new stadium. So it's not a beautiful building, but it's going to be a logistics property. And then the renovation of the building in Geneva with Globus and this is a project development in Basel and of course maaglive in Zurich, which is still not yet legally valid, which is why we've had to postpone it a little. So that's the overview and I already spoke about Jelmoli in the building construction permit. We've already signed the contract with Manor and the gym that is already in the building. And we already have a pre-letting rate of 50%. And that's what we always wanted that we would invest once we had 50% pre-let. Above that, there are going to be offices with a separate entrance for the offices. That's where these are, our entrances at the moment and there's going to be a reception, so quite similar to the one here in the Prime Tower. So it's going to be quite sophisticated, and we are going to have, hopefully, a very high-quality tenants. Of course, it always takes a little time. We now have the building permit, we received it in November. And in January, we were able to work through all of the change requests, so change requirements. And so it's difficult to negotiate with tenants until you know the exact plan. And that is why we now have the possibility to offer this to tenants for the offices starting from March. And we also look forward to being able to submit another application for Jelmoli for the roof garden. There was a competition. And in March or April, we are going to submit the planning application and we expect that it's going to be the place to be in Zurich with the restaurant and the green park almost on top of the roof. So those are the developments. And now I have a couple of slides on sustainability. This is a very important topic to me because sustainability has some -- is in danger of being forgotten. But 2 years ago, it was a question that was asked often about sustainability. And now suddenly, it doesn't seem to be so important anymore and that is a great shame. We are responsible. We work in the real estate industry and 40% of CO2 emissions come from our industry and that is why it is up to us to change things here and that is why I'm very proud of what we do. Main topics is the reduction of CO2 emissions, and the portfolio is going to be carbon-neutral by the end of 2040. And this is how it works. The dotted line here, each of those dots is one of our properties. And we know for each and every properties which measures we have to take when in order to stay on that reduction path. We have a milestone target in 2030 and then the -- which is going to be 50% versus 2019. And so we're very close to being able to confirm that we will reach the 2040 objective. We're not quite there, but we feel that with another new -- with new measures or maybe also some technological innovations, we will be able to achieve the objective of carbon neutrality by 2040. And then the circular economy is very, very important because it makes a great difference if you can separate materials cleanly and reuse it at the same quality level. And even if it's been used twice, you can reuse it again. And so if you just expect a building to exist for 50 years, the same material can be used for 100 years and that really is a quantum leap. We have to focus on that. And that's also something that all of our teams are very passionate about. And then we also do green leases, 76% of our leases and our so-called green leases, this we want to achieve 100% by the end of this year. So that's sustainability. And I really say this from the bottom of my heart that this is so important, and we now -- we want the actual effect, but the reporting for all the different labels is very cumbersome because each label wants something different, has different requirements. And this distracts -- actually distracts from the actual topic and the effect. And so those 2 are important, that's what we have to work on, that's the biggest lever that we have and we're not going to give up on it. So that was my passionate speech on sustainability. And now it's over to asset management.

[Interpreted] Ladies and gentlemen, a cordial welcome. I'll give you some details on Swiss Prime Site Solutions using the next chart. I think the CHF 13.3 billion of assets under management have been mentioned before. I'd like to focus on the CHF 1 billion that we've grown more or less organically. So the Capital Markets Day statement we made from the past years have been confirmed and we've grown on the base of the existing products. Add to this CHF 4 billion with the acquisition of Fundamenta. Another gratifying figure is the CHF 612 million of issues -- the issuance of new money. We have gained more than 30 new clients, and we are at around 600 -- more than 600 institutional clients across various products. And in inverted commas, "only with 3 to 7 of 7 products, we carried out issues from summer '24 only." This figure is really considerable. In terms of income and cost, it's already been mentioned, and I'd like to highlight on the recurring fees of CHF 53 million that went up around 40% versus the previous year. And at the same time, our cost ratio was lowered. If you bear in mind that the CHF 28.8 million of cost versus recurring fees of CHF 53 million and this is almost double, and we are already making around CHF 25 million of EBITDA from the recurring fees in other words. Another figure I'd like to mention is for CHF 1.2 billion we carried out transactions in 2024, around 60 properties. If you break this down into 10 months, minus holidays, minus closures of notary offices, then it boils down to 6 properties per month. Where did we grow? Well, you know the basis of the second pillar of Swiss Prime Site, the Swiss Prime Site Solutions. On the left side -- left-hand side, you've got fund management, where we grew by around CHF 1 billion past year in that center. This is the asset management mode with the investment foundations that grew around CHF 2.4 billion. And for third-party businesses, we grew by CHF 1.5 billion. We want to keep growing across all the segments. We're seeing a lot of potential everywhere, be it with contributions in kind, third-party mandates, and issues on the basis of existing products. What's the difference compared to the real estate company? We have a lot of products that are heavily invested in the residential sector. On the right-hand side, in real estate advisory, more than 2/3 is in residential and in asset management, more than 2/3 is in residential. So there is a focus on residential, which is fundamentally powerful. And we're seeing that the segment is increasing. There's increasing demand in Switzerland generating added value for various products. And if you're seeing that almost CHF 450 million of rental income that we're generating for our clients, this is really a considerable figure for an asset manager. Now size is one thing, performance is something else. We are customer-driven, products-driven. The products need to work. On the left-hand side, you've got the KGAST benchmark. The investment foundation of Swiss Prime is place #2, cash flow in terms of cash flow performance, Akara Diversity is among the top 10. And with both products, we have to say that we're very much juniors. Prices were higher when we bought in and our competitors have been in the market for 20 to 30 years and for Akara for the past 7 years, the product has been available for 7 years, we outperformed by 4%. Over on the other side, in commercial, we are operating with our commercial fund, strong performance of 5.7% of cash flow yield. 2024, you probably have read it that we're going to have an issuance in March. Now this is the foundation of the 3-pillar model, and we need to generate performance for our clients there. That is important. So that's been a small update on Swiss Prime Site Solutions. Thank you very much for your attention. Over to Rene for the outlook.

[Interpreted] Well, moving on to the outlook and questions. For the outlook. Again, we're a new company with 2 pillars. We've taken over the outlook on the basis of last year's KPIs more or less. We're guiding for FFO I, important figure for the future dividend payout of between CHF 4.10 to CHF 4.15. Why is it below CHF 4.22? Because of the loss of the Jelmoli rent. And of course, there are new projects from the product -- project pipeline that go into the portfolio and we are expecting higher rentals and reduction of vacancies, but this cannot compensate for everything that we're losing from rent from Jelmoli. LTV in the low 39% range, 38.3% was the figure this year and vacancy below 3.8% and assets under management with Anastasius Tschopp in excess of CHF 14 billion. This is all about the outlook. That's where we usually move on to the question-and-answer session. As always, please ask only one question at a time. We are having interpreters. It's going to be difficult if you ask too many questions and we hope you with the questions up here, but for development pipeline, we also have Urs Baumann and for the standing portfolio, we've got Karin Voigt and Reto who can come in, Reto Braegger from Jelmoli who can come in if there are questions for them.

[Interpreted] Ken Kagerer usually puts the first question. I don't know whether you're looking on. I'm already missing the first 3 questions. I wish you a good health, good recovery, but there is someone who would like to break the ice asking the first question.

[Interpreted] Yes, [ Lynn Darr ] of Vontobel. I have a question. This morning, you mentioned that you're positive about transactions this year as far as the outlook is concerned. What kind of transactions and what kind of types of properties you're talking about?

[Interpreted] Anastasius, would you like to take that?

[Interpreted] Well, from asset management, we can say that business is doing well, is accelerating on all parts, residential, commercial offices in the market. We've got a strong pipeline that we've built up for the different product lines of ours and the various transaction players have clearly come back to the market. In Q4, we had a lot of issuance. This is part of it and money needs to be invested now. Well, for the real estate company, we're always looking into interesting opportunities. And if you just look at the market, interest rates are likely to go down further. And until that will be priced in and real estate prices rise again, we would assume it could be a highly interesting first half year with interesting properties coming into the market. And of course, the location has to be the right one according to this partner's grids. And again, we're talking about office space where we want to grow additionally. So we won't buy any retail properties, but we're alert in the market and we're optimistic to find one of the other objects in the first half here.

[Interpreted] I have one more question. Total funding cost is clearly higher than the year before. The interest rate went down on average. What are the reasons?

[Interpreted] Two things. First, we had additional funding, raised additional funding for Fundamenta. So the basis is larger. And secondly, we're reporting key dates at 1.1% on 31st of December. And you will remember that the interest rates went down in the second half year. So the average rate was slightly higher than in 2023. And in combination of these 2 things, you will see what you're seeing. But I'm positive that we've reached the peak because these are the key dates rates, and we're not really expecting major additional funding volumes. So it ought to be stable, plus/minus and go down at some point, depending on what the SMB is going to do.

[Interpreted] And final question on vacancies below 3.8%. What does it mean, 3.7%, 3.6%?

[Interpreted] Well, I tried to give you guidance. So I gave you rather precise guidance, but I'd say more likely 3.7% this year. Any more questions? Just quickly, [ Florin ]. You'll take the questions from external.

[Interpreted] [ Philip Zugarus ], [ Zurige Continel Bank ]. My first question is what is selling for CHF 260 million, what mix of use?

[Interpreted] Well, we're selling a mix of uses, which is between retail and some office. So these are the ones marked in red, the dots marked in red that we want to sell. And we are also assuming that we ought to make a small profit, but these are the last properties that we want to sell. But of course, logically, profit will go down a little bit. But I think we can bring down retail, maybe the 19.8 ought to go down slightly.

[Interpreted] Second question, I have synergies with the Fundamenta group. What potential are you seeing there? Can you further increase the EBIT margin?

[Interpreted] Well, we gave you guidance when we bought it. We're well on track. We're probably a little faster than we thought in realizing the synergies. But otherwise, the outlook hasn't really changed. We are going to fetch the synergies that we saw primarily in 2025. And well, I think there's potential. So this is within asset management. Of course, now as a new company with the 2 pillars, there are synergies between the 2 pillars. And we will be able to leverage those slowly but surely. Asset position management has to remain separate, but anything that's construction that requires destruction -- construction competence or development competence will be needed. So it's always about having the best idea and creating the best product. And I think we still have potential for creating more synergies here between the 2 pillars. And I think we could also talk about continued growth, which can be driven by synergy.

[Interpreted] That's my last question. So you're planning to work organically, to grow organically? Or are you also looking at acquisitions?

[Interpreted] Well, there's always that possibility as a matter of principle, but the CHF 60 billion, CHF 70 billion with CHF 50 million EBIT contribution is the starting point. The starting point is CHF 13.3 billion. Are there any more questions from the room?

[Interpreted] [indiscernible] of KBW. On the pipeline, particularly the YOND campus, Steinenvorstadt, you now have lower expectations than in the half year results?

[Interpreted] Thank you for that question. The effective CapEx has been changed a little. We used to have -- show the entire investment costs.

[Interpreted] But for mark, it's unchanged?

[Interpreted] No. Here, the price -- the land is very low.

[Interpreted] And now the WAULT development in the portfolio, you now have more than 6 years. Are there still going to be structural reductions?

[Interpreted] No, I think we are going to remain between 4.5 years and 5 years. At the beginning, we still had a lot of Tertianum properties, which had 25 years, which had a positive effect on the WAULT. And now at the end of last year, we sold 2 Tertianum properties with less favorable location. And so that reduces the WAULT. But that's not structural because the 5% Tertianum use within the portfolio is okay for us.

[Interpreted] And last question. The FFO contribution of Fundamenta in 2024, how much was it?

[Interpreted] We're not going to publish that. Are there any more questions? Yes, over there.

[Interpreted] Tommaso Operto of UBS. I have a question about the sales and particularly -- in particular for office properties. You said the focus is on selling in less favorable locations, but you already did sell quite a lot of those already. Is it a little bit too procyclical? Or are you expecting this divergence to accentuate further?

[Interpreted] Maybe Urs can answer that.

[Interpreted] So you're looking at -- about the planned sales, referring to the planned sales or the ones in the past? Well, when you sell the less favorable locations, that means that you are expecting further devaluations. No, we don't. But the actual profile of the profit -- profitability is the same as last year. And we don't sell buildings because we expect devaluations. We look at who the best owner for any given property is. And that's what drives us, not because we think that there's going to be a devaluation of a building. Well, the -- as a matter of principle, we always expect the values to rise. You don't have to have a crystal ball to say that. If we now haven't had a discount rate adjustment and already -- we've already had 3 interest rate reductions by the Swiss National Bank and more to expected, this is going to have a positive effect also on those properties that we're looking to sell.

[Interpreted] But the revaluations are better in the better locations?

[Interpreted] Yes, that's correct.

[Interpreted] And a question concerning the financing costs. You bought the -- purchased the convertible bond. So what's the effect on the financing costs, not just the cash flow financing costs, but the...

[Interpreted] Well, there is no effect. The convertible bond has run out. And so there's less potential dilution because the CHF 300 million cannot be converted anymore because they've been paid back, but there are no further effects on noncash. So part of the financing cost was always non-realized losses on those items, if I understand this correctly, of the CHF 87 million.

[Interpreted] Are you referring to the embedded derivatives?

[Interpreted] Well, that just referred to the ongoing bond. And so that means that we can pay back the convertible bond in cash. This is a right that is part of the investment conditions and IRS wants us to pay that back in -- to show it in the balance sheet as paying back in cash. And that is why it is listed under our financial liabilities. And the more our share price rises, the more expensive that would be and that is shown in our balance sheet. If we didn't show this, if we were to convert it in 5 years' time, then we would have a profit that we would then have to show in the balance sheet, of course. That's why here now we're showing the worst case in the balance sheet and that makes -- and that's because of the embedded derivatives. Andrea had a question?

[Interpreted] How long have you known that [ Sarah ] would move out of the Jelmoli building? Did you have to change the plans a little? It's been known for about a year. And the change of the plans is that, yes, we're going to have the lobby there, the lobby for the office building to make it more representative. And so you're going to compensate this with even higher office rents because they're getting a better lobby.

[Interpreted] No, that's not compensation. We've always wanted a representative lobby. But now this is an opportunity to do that very well.

[Interpreted] And another question, can you give us an update on Mullerstrasse?

[Interpreted] Well, in Mullerstrasse, we are already receiving rent, but they haven't moved in yet. We're expecting them to still. And what we're hearing in the market is that they have now filed a building application for renovation, but whether they're going to move in themselves or not, I don't know.

[Interpreted] Andreas von Arx of Baader-Helvea and on revaluations. Could you give us an idea how much of it is development-related and related to the existing portfolio?

[Interpreted] Approximately CHF 15 million is the answer.

[Interpreted] So that's the CHF 15 million, CHF 18 million revaluations on the CHF 80 million of investments plus the value of the property?

[Interpreted] Well, it always depends on how you define a development. The IFRS million says CHF 210 million are classified as development. A large part of them is already part of our portfolio [indiscernible], for example. So the end figure is CHF 15 million profit by the end of the year, and that's respectable. And that makes this due to higher rents and lower vacancy rates and the same discount rate, unchanged discount rate. That's correct. So those are the factors that have already been added.

[Interpreted] What do you mean by added?

[Interpreted] Well, the higher rent is already part of the revaluation. Yes, as soon as we've renegotiated them and have a new contract and the higher rents are shown in the valuations.

[Interpreted] I have a question about the sale of real estate. You said CHF 10 million in profit, but I also see CHF 32.7 million negative tax effect on the buildings in the FFO. So that's a net minus CHF 20 million.

[Interpreted] Yes, these are deferred taxes. That's not going to have an effect on the P&L. But in cash, of course, deferred tax has to be shown on all of the valuation results. And as soon as you sell, it is going to be moved from the deferred taxes to the actual taxes. Well, this is interesting because we always hear this discussion about whether valuation should be on book value or the actual invested in [indiscernible]. And so here, this would mean that the deferred taxes belong to the shareholders rather than the tax office. And so here, with the sales, the tax office received the CHF 20 million or CHF 30 million.

[Interpreted] Well, I don't quite understand what you're saying. According to IFRS, we have deferred tax on valuation effects. And of course, once a property is sold, it becomes -- it is changed from deferred to actual. That's normal in bookkeeping.

[Interpreted] And the financial costs of CHF 63.8 million. Those are flat -- yes, we have to understand that first of all, this is the valuation of the derivatives is quite an important part here, approximately CHF 215 million long cash, the element that I explained earlier. And this will have an effect on our share price. This is going to be another CHF 15 million next year. And if it goes down, then it will go down. But the cash component is important for us and that is going to remain approximately stable, a little bit depending on the interest rates development. Are there any more questions?

[Interpreted] [indiscernible]. On 27, you talk about the target usage mix of the portfolio. And can you tell us what the time horizon is for that? And why the mix does not show any earnings from retail?

[Interpreted] Well, the target mix is what I showed earlier, and this will still have 20% retail.

[Interpreted] Yes, I'm referring to Slide 27, which is about the pipeline.

[Interpreted] Well, this is what we're developing. That's not the actual portfolio target, but that's the development portfolio. That means we're not going to add retail. And of course if we don't add retail, then of course, the share will go down. Any further questions? Yes, Tommaso.

[Interpreted] Tommaso Operto from UBS. Question to Anastasius. Regarding nonrecurring income, which rose by almost 60%, can you give us a breakdown of how much is organic, how much came from Fundamenta, firstly and secondly? What was the breakdown in the second half year? So was most of it attributable to Q4? Or was it more or less equally spread?

[Interpreted] Well, thank you very much. I think the split -- the breakdown is old solutions around 75%, Fundamenta around 25%. It was only for 9 months of total result that was included from April when the merger was closed. And the second question, your second question, well, yes, clearly, in the second half year, the result in the first half year showed it CHF 14 million of EBITDA. We are at CHF 42 million now. We have the issue in the second CHF 300 million on 2 products, transaction volume of CHF 1.2 billion, of which I would say around CHF 800 million occurred in the second half year. But of course, work had already been done for preparation in the first half year and then things were closed in August because notary offices were on holiday in the summer.

[Interpreted] And in the second half year, what was the spread between Q3 and Q4? Transaction volume for Q3 was not significantly higher.

[Interpreted] Well, it was significantly higher in Q4 where all the issuance occurred, the new money is not only with us, but with others and it only flowed from the second half year and was reinvested in second half year. You always need some time when you're not ready yet. Otherwise, it's clearly -- so logically, it's clearly Q4.

[Interpreted] Question on vacancy if I may. Compared to the previous year, vacancy went down, but compared to the first -- the half year in '24, it rose.

[Interpreted] Well, yes, we guided for that because we had additional project developments that we took on the portfolio in the second half year that are not 100% full, as already explained. So we were at 3.7%, now at 3.8%, if I'm correct. That explains the difference.

[Interpreted] More questions from the audience here onsite. Yes, please.

[Interpreted] [indiscernible]. You talked about goodwill depreciation on Fundamenta. Did I understand that well?

[Interpreted] No, no, no. You got that wrong. No, we're far away from depreciating goodwill. You do a goodwill test every year and we've got headroom of 60% to 70%. So we're a long way from having to depreciate goodwill. But what you do in such an acquisition is you always try to attribute the assets that you buy. And in the case of an asset manager that does not have any hard assets, you try and attribute them to intangible assets. In our case, it's around CHF 40 million of the acquisition and that is written off over 20 years. It's CHF 0.5 million per year and we're going to see that. It's an accounting thing. It doesn't have a cash impact. It's just one of the components. But no, we are far away from writing off goodwill. A lot of things would have to happen for us to be there. We are a long way from it.

[Interpreted] A follow-up question on rental income maturities. I think it's 14% next year. Can you perhaps give us more details about where you're standing?

[Interpreted] Well, we saw from the past that we were always between 10% to 15%, which would then have the 2 years. We're talking about 2016 -- 2026, 14%. Homburger is one of the larger players and they were certainly going to stay. We're already negotiating contracts. We would assume that we can conclude this year and to prolong the contract again. More questions? Yes, please, Tommaso.

[Interpreted] Question on Jelmoli. Is there an update on marketing of the space available, the vacant space? Or hasn't it been marketed actively?

[Interpreted] Well, we have going out marketing office space from March 2025. That's what I mentioned briefly. We had to be certain on the basis of building permit and conditions that we have the proper data to show to tenants.

[Interpreted] And what are the expectations for rent per surface per square meter of usable space, Urs, Karin?

[Interpreted] Well, depending on the fitting of tenants fitting and fixtures, I would think the range would be between CHF 700 million to CHF 950 million, considerably depending on what tenants want to do in terms of interior fittings and depending on the levels in the building.

[Interpreted] Well, it's the best place to be in Zurich. You have to think about that. So you can go as far as CHF 900 million, especially with this entrance area, the lobby. By the way, Andrea, you have this question. When we communicated that we're going to close down Jelmoli, we informed Sarah and they didn't want to sign an [ NDA ]. So we assumed they were going to stay. So throughout the project development, this was a change and they said, well, if you reconstruct, we are going to go. And so that gave us the opportunity to build this generous lobby area to make it the place to be if you want to have an office there. So the assumption of up to CHF 900 million, CHF 950 million is justified.

[Interpreted] Any update on Grand Passage cooperation with Globus?

[Interpreted] No, there's no update yet. We are going to meet with Globus by the end of Q1 with -- I'm talking about Central Group, the new owner. And we're going to see what they intend to do about Geneva. We're planning for that. And if I have understood properly, the strategy of Globus, they want to enter the high price premium volume. There's 2 places to be in Switzerland, Zurich and Geneva. So logically, they'd have to do that. But I think when we come back for the half year results, I'll have news for that. More questions? If not, there are no more questions here in the audience. Let's take the question or questions from online.

The first question from the phone is from Steven Boumans, ABN.

My question, by year-end '24, we've seen some prime transactions with one prime Zurich transaction priced at a yield even slightly below 2%. Today, your book yields remain stable, though, so it's not in the books I guess. Therefore, the question, could you please comment on how you think that the yield impact should have been on your portfolio based on these recent market transactions?

We've seen this and that underlines our positive move towards the further real estate market in Switzerland. So so far, as you mentioned, not yet reflected in our valuations, but we take a positive view going forward, as we mentioned before and that is part of it that we see larger transactions again at yields below 2% in Prime locations.

[Interpreted] Well, thank you for the answer in English. I don't know what the interpreter did, whether he interpreted into proper English or not. Well, anyway, it was what I said before that the revaluation is getting momentum again. So it's not yet being reflected in the portfolio. And there was also the question about transactions. [indiscernible] at 1.9% and you saw that. That was really the basis of that question. Any more questions from online? If not, there are no more questions. So thank you very much for having come here in such a high number. As usual, we'd like to invite you -- we do invite you for an aperitif, not on the 33rd floor this time, but we're going to go up again to clouds. You can leave all your things here, your coats and they will be brought up so that you can leave after the lunch or the aperitif to your offices from the [ Clouds ] restaurants straight away. So thank you very much and see you soon or see you right now. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]