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Edited Transcript of SPSN.S earnings conference call or presentation 2-Mar-17 9:00am GMT

Thomson Reuters StreetEvents

Full Year 2016 Swiss Prime Site AG Earnings Presentation

8005 Mar 2, 2017 (Thomson StreetEvents) -- Edited Transcript of Swiss Prime Site AG earnings conference call or presentation Thursday, March 2, 2017 at 9:00:00am GMT

TEXT version of Transcript


Corporate Participants


* Rene Zahnd

Swiss Prime Site AG - CEO

* Markus Meier

Swiss Prime Site AG - CFO

* Peter Lehmann

Swiss Prime Site AG - CEO of Swiss Prime Site Immobilien AG

* Hans Peter Wehrli

Swiss Prime Site AG - Chairman




Unidentified Company Representative [1]


Ladies and gentlemen, welcome to our financial results conference of the Swiss Prime Site Group. You may have seen from the document kit that we are more open, more colorful and this is meant to express the way we perceive the world and our position in it.

Now, this is the agenda today. You will have guessed that we would provide information on the financial results, on the property portfolio, on our strategy and changed structure and give you an outlook on the annual general meeting.

Let me hand it over to Rene Zahnd. Both Mr. Lehmann and Mr. Zahnd have a cold, so we'll try to be very gentle on you. Well the questions are okay, but there won't be any answers.


Rene Zahnd, Swiss Prime Site AG - CEO [2]


Good morning. So I'm glad that I have a microphone so I don't have to speak too loudly with my sore throat.

So, let's start with some highlight. We have compiled a comparison of -- with the last three years 2014 to 2016. The real estate portfolio is now over CHF10 billion for the first time, despite the sale of CHF412 million in 2015 to the Swiss Prime Investment Foundation.

We've also been able to increase our operating income to around CHF1 billion. That's a record figure. And compared with 2014, you can see that it's almost not the same company anymore. Here particularly we've benefited from acquisitions for the Tertianum Group.

In rental income, we have CHF453 million. That's even a little more than 2015. So, despite having sold the package to the Investment Foundation of CHF412 million, based on rental income, 2015 has even been exceeded.

And, as far as the EBIT goes, we are slightly below 2015, because we don't have the income from those properties anymore. So the EBIT has been shown adjusted of all the ups and downs of IAS 19 and new revaluation effects. And half of them come from 2015 and also adjusted by the sales of the Maag sales where we sold entire storeys in 2015.

And we have CHF285 million in net profit. That's 20% above 2014 and 1.4% above 2015, our best year to date until then. And also, the equity ratio increased to 46.6%.

In terms of earnings per share, we now have a price of CHF4.04 and that also means that the dividend is secured. And it's also a little below 2015, but above 2014.

And the net asset value is also very positive. After deferred taxes, per share we have a price of CHF72.43. Once again, an increase over 2014 and 2015.

So these were the key figures. So what have we been doing? Let me just mention some of the highlights from the different business fields.

In real estate -- I'm not going to read it all out, just the main points -- in real estate, we have been able to strengthen our markets by working much more closely with Wincasa. And we also insourced additional staff for project management, for portfolio management and that has enabled us to be much more productive and more operative in those markets.

And this is reflected in the time to market of our project pipeline. That means that we filed building applications and received approvals very quickly, so that we were able to drive our projects forward more quickly. And that, of course, leads to lower vacancy rates, which was reduced considerably in comparison with 2015.

In retail, the turnover in our own properties was increased markedly over last year. We have very stable footfall and this is very positive, considering that tourism has declined in the city of Zurich and we've also had a lot of refurbishments in 2016. But nevertheless, the footfall has been stable.

And the online shop is a small shop, but it's growing now. And we should also mention the projected medium-term expansion at Zurich Airport. I'm going to talk about that some more later.

In the area of assisted living, integration of new units is on track. We are expanding our network all the time. We now have 71 facilities as of the end of 2016 and we have managed to markedly increase our profitability.

Now let me go into more detail. The time to market of our real estate, well we received three applications, three approvals for Geneva projects and 10 days ago, we also received permission for a project in Berne. And this is immediately valid and so we can start construction at the end of the spring, beginning of the summer. And we also filed an application for the Siemens site in Zurich. There was a positive referendum.

We should also mention positive referendums on the Weltpoststrasse in Berne. That's an important project for this year, for 2017. This is a property that we've owned for a while and where we have constructions rights with the municipality of Berne. And we filed an application here and the referendum on this application was positive. So we are now able to build the flats and sell them to third parties in the market, so we are expecting the project to bring us some profits this year.

Then PPP is a role model in Richterswil, this private-public partnership where the municipality of Richterswil decided not to invest themselves in assisted living, neither construction nor operation and entrusted the project to us, to our Group. So SPS will invest in the property and Tertianum will operate the site. This is a model that we are going to continue strengthening in the market.

The first Motel One in Basel was opened in the summer of 2016, as we reported and another one will open this summer in Zurich. This has enabled us to re-lease 70,000 square meters. That's almost twice the area of the Richterswil site and the Schoenburg Berne was repositioned. We have received approval, as I mentioned.

This used to the a property of the post office, but also another area in Wankdorf in Berne is also part of this. This was reshaped and we have now rented apartments, a hotel, a Co-op and a gym. So this is a transformation of the building.

And Brandschenkestrasse in Zurich was also repositioned. That is a former office building, which is now also going to be converted into a Motel One.

We are also proud of two turnarounds that have not quite finished, but their first milestones have been achieved. The first one is the Stucki site in Base. You all know its history. We made two main changes here. A year ago we were lucky enough to find a gym operator who are very successful in the market. They have 4,000 subscribers already and this brings traffic to the center.

And then we also found a cinema operator who is going to take over a large part of the property and convert it into cinemas. The remaining areas will then be split amongst the remaining tenants. So Stucki is going to become much more attractive.

The second turnaround is the A1 center in Oftringen. You may remember that this was originally a retail space for dedicated products and for a DIY shop. Bauhaus is going to take on 60,000 square meters. Previously it was turned into a general retail space which didn't work and so now we have repositioned this. And we've also managed, despite the challenging environment, we have managed to make new purchases totaling over CHF250 million.

Now Wincasa, of course, one important point is the renewal of property management contracts with major clients which offers us visibility and stability for the next few years. And we've also been able to make some new acquisitions with major clients, such as Swisscanto and Swisscom. This is an expansion of our customer base and with immoveris we've been able to find a strong regional presence for the regions of Berne and Fribourg and we also have expanded assets under management, more than CHF64 billion portfolio on the Swiss franc side.

And in the fourth quarter, My Wincasa was launched. This is a digital tenant's portal. And another new feature is the new large-site development business area for launch sites.

Jelmoli, here we've also launched an online shopping portal, a second sales channel. We've also expanded our competence in shoes, in footwear and we also have the shop-in-shop concept. And we've increased sales in our own operated retail space and increased turnover and we are planning to expand at the airport of Zurich.

Tertianum, we have integrated SENIOcare. This is finished. This integration has been completed.

And we've acquired Boas, which is now also going to be integrated in western Switzerland. Let me just mention by the by that the acquisition of Boas was a decisive element not just to get a foothold into western Switzerland, but also because it's taught us how western Switzerland works.

There is a cantonal procedure in western Switzerland, so they have very few care beds. As you may know, care beds and apartments will be part of our portfolio. So the care bed sites we were able to acquire with Boas are even more important.

We managed to expand the network to 71 facilities and that means that the number of apartments is 1,800 and 2,700 care beds as of the end of 2016.

And we've also had a brand presence of Tertianum. Luca Stager always gave us two House of Brands in Swiss Prime Site. One is Jelmoli and the other, Tertianum, with Vitadomo senior care and Boas and he was right. We've changed this and that means that we now work under the Tertianum brand and operate in two markets, Tertianum residencies and care facilities.

And sustainability, well this is a slide that you all are familiar with. Last year according we had these six core initiatives. These are measures that we took to integrate these into the business plan. In order to boost our business even further, we've created a special function, sustainability and innovation. And our business report 2016 was now under reporting GRI and we also received the certificate just one week ago, as you can see here on the slide on the right bottom corner.

So the question is always whether we walk the talk. Did we actually implement everything we promised in 2016? We think yes. This is the slide that I showed in 2016. I don't have to go into every detail here, but looking at the property portfolio, we managed to decrease vacancies. We also put a focus on modernization transformations and we intensified assisted living and grew in that.

We also reduced financing costs, as Markus Meier is going to tell us a little more. And we also ensured further development and we could say that the objectives have been reached. Actually we can say that.

And this is my last slide. We have a very attractive dividend on offer. We are going to propose to the annual general meeting a dividend of CHF3.70 per share. Compared with the closing price, this is going to be a yield of 4.4%. This payout is tax-free because it comes from capital reserves.

So I'm going to pass over to Markus.


Markus Meier, Swiss Prime Site AG - CFO [3]


Thank you very much. Ladies and gentlemen, may I present to you the key financial components of what was a very good annual results 2016. But first of all, let me give you two pieces of information.

First of all, acquisitions in the segment of assisted living, that is SENIOcare and Boas, SENIOcare in 2015 was on the books for a quarter and in 2016, it was on the books for the full year whereas Boas SENIOcare in western Switzerland was closed at the end of February 2016. So it's been on the books for 10 months in the financial results.

Second important thing is last year, that is to say in 2015, here on the Maag site we had 83 condominiums that were sold, which generated turnover and expenditure, both of which did not apply anymore in 2016. We consider promotion of condominiums not to be one of our core businesses.

So let's get started with the main source of revenue, that's rental income. Our rental income at corporate level increased gratifyingly, by 1.6% to attain CHF453 million. It is clear to see that there's been a considerable increase in the segment of assisted living, CHF25 million from additionally leased properties. And this is the first time we're having an acquisition effect in this segment of assisted living. But you need to bear in mind that given that these are additionally leased properties, we will, of course, have rental expenditure on the other side appearing later on.

Then on the left-hand side, minus the CHF14 million of lost rental income due to the divestments in Q4, divestments to the Swiss Prime Site Investment Foundation. Then very gratifyingly we have caught up CHF5 million by purchases completed in 2016 and by completed projects.

Then, on the other hand, we lost CHF5 billion due to various effects on current investment properties, primarily the effect generated in the retail trade. Due to lower sales with some tenants, we ended up with lower sales based rents from Stucki or the Birchi Center in Zuckwil, or the St. Gallen shopping arena.

And, finally, a minus of CHF3.6 million due to modifications and modernizations, primarily Schoenburg in Berne, where we now have a promising development project running. So this will be very gratifying in future.

Now, this chart is an attempt at showing you the bridge from segmental income to EBIT at corporate level. On the left-hand side you can see the columns for 2014, 2015 and 2016, with the retail, assisted living and real estate segments. And it is fair to say that across the board, operating income was increased considerably. But you can also see for real estate, shown in the dark blue color, that we have around CHF110 million that got lost. This was income proceeds from the sale of condominiums primarily. And then what is also missing, of course, is the amount due to the CHF14 million of properties sold to the Investment Foundation that we saw on the earlier chart.

Then on the assisted living segment, in the center in the brighter blue segment, we can see the considerable increase, which is the effect from the acquisition, Tertianum acquisition, with 70% more income. Next year there will be even more of it.

Then we've got a slight reduction in retail, but we need to bear in mind that in 2015 we still had the Clouds Restaurant on the books for six months. If you factored this out, then Jelmoli, The House of Brands on its own, would have produced a slight increase.

Let me also mention an increase in revenue despite various services that were not up for sale in 2016 due to modernization and conversion to the footwear unit, or the Bucherer watchmaker specialists.

And in the center segment, we can see the operating income, the EBIT contributions to the corporate profit for real estate. We clearly see the lion's share in the operating income. We are a real estate company, that's why the lion's share comes from that business and the decrease again is attributable to loss of income from the sale of condominiums.

And the second thing that is easy to see is growth in the assisted living segment. Even if compared to the large real estate share, it is not in the same amount, but there is strong growth. Consolidation primarily includes revaluations on owner occupied properties and depreciation.

Then we tried to present to you how operating income compares to 2014 and 2015. We tried to come up with the normalization attempt in 2016. There was a major contribution from measures taken in the field of pension funds. Our pension fund had excessively high conversion rates, which we adjusted by reducing the conversion rate down from 6% to 5% through four steps. But we also introduced other measures and we are fair enough to disclose this.

We also suffered under IAS 19, the IFRS standard for pension schemes, and we are now showing the effect from these recovery measures with regard to our pension scheme.

Then we've got revaluation gains, which we have always factored out because we can control them to some extent, but they are strongly driven by yield compression.

Then we've got gross income of CHF42 million from the condominiums here at Maaghome and you can see two things. Since 2014, we have clearly increased and improved in operating terms. But you can also see that versus 2015, we're lagging behind to some extent, primarily due to the fact that the rental income loss from the transaction to the investment foundation has not been entirely caught up yet. But as you saw before, we're on the right track.

This is the income statement, beginning with the operating income of a good CHF1 billion. So we broke through that threshold for the first time. Then the halving of revaluations, which we actually expected in 2016 to generate lower revaluation gains and there was a reduction of the discount rate of 19 basis points versus 2015. And the average discount rate is now 3.47% in real terms.

Revaluations, especially regarding to the absolutely top primes, top sites, were in excess of CHF100 million. These are sites that shows the Bahnhofstrasse properties and the properties on the Maag site here, including the Prime Tower and the Platform, but also including high street shopping sites in Geneva, Rue du Rhone, Place du Molard and Freie Strasse at Basel and finally the Opus office site at Zug.

So the revaluation gains are very one-sided. Furthermore, we've got some lower income from associated companies. These are our parking holdings in western Switzerland. It's about licenses and investments. So we're not at the level of the previous year and we will lie low in future as well in this regard.

Operating expenses increased considerably, of course, due to acquisitions, primarily or partly adjusted as a result of the Maaghome condominium transactions. But there was a market increase from CHF609 million to CHF680 million.

What is very gratifying is the reduction of the financial expenses. We benefited from the excellent interest rate setting and we repositioned in bilateral banking relationships. And in the capital market in June, a convertible bond was converted to the tune of almost 80% and we replaced it by a new one. We wanted to be represented in the convertible market. We issued CHF250 million of convertible bond at an interest rate of 0.25% and then we issued a straight bond in the autumn in the amount of CHF250 million as well and the coupon of 0.75% for a period of nine years.

The income tax was also reduced. It was exceptionally high last year, again driven by the condominium units, with an over-proportionate tax burden. And there was another effect in 2016, given the corporate tax reform number 3. The canton of Vaud had a referendum and approved the reduction of the tax rate, which slightly reduced our deferred tax burden.

Profit ended up being CHF311 million before revaluation and deferred tax of about CHF285 million, which is an increase of 1.4% over the previous year. And here, you can see the development of the property portfolio from a purely financial point of view.

We purchased properties in the amount of CHF250 million, as you can see. So we also divested properties worth CHF260 million. And the worth of the investment properties was increased by just under CHF150 million. This includes investments and revaluation.

Now, you will hear everything else on the property portfolio later on from Peter Lehmann.

So let's move on with a very solid equity ratio of 46.4% [sic, see presentation page 21 "46.6%"]. You can see the considerable factors that led to an increase across the threshold of CHF5 billion, the profit of CHF311 million and the convertible bond converted to the tune of just under 80% in June. And, of course, against that, we've got the payout of CHF3.70 of dividend paid out in April, which meant CHF260 million of deduction on the equity.

Moving on to our financing structure. It continues to be very well balanced in terms of maturities and cluster risks versus the creditors we have. We have mortgage secured funding for CHF3.3 billion and bonds, and outstanding bonds, seven of them, six debentures and one convertible bond. And the average volume rated interest rate was reduced from 2.1% to 1.8% at residual terms of maturity of 4.5%.

Loan to value, the loan to value ratio is at 44.4%. We would assume that in this excellent interest rate setting, financing cost will be reduced gradually.

So, so much for the financial figures. Let me now pass it on to Peter Lehmann for more information related to properties.


Peter Lehmann, Swiss Prime Site AG - CEO of Swiss Prime Site Immobilien AG [4]


Thank you, Markus. Now I'd like to take a look at slide 25. This is the portfolio development over the last year.

CHF10.09 billion has been added, an increase of CHF400 million. The CHF400 million is constituted by CHF250 million in acquisitions and CHF150 million in investments in existing properties so it is an organic growth. And I think we can also expect the same rate for the future; between CHF400 million and CHF500 million in terms of portfolio growth.

This is because we do both. We invest in existing properties, but we also acquire sites, properties, as we did last year. So we do both of these things.

As you can see in our property sales results, we generated CHF24.9 million net, mainly two properties, one in Geneva, Rue du Rive and another Locarno property. And in future, we will sell the occasional property whenever we feel that we can obtain a particularly good price.

But we will also divest developments that haven't generated any earnings yet and we will then also make profits without losing our rental income. That's a very interesting way of going about it and this is something that we're going to do this year and next year.

The vacancy rate is shown in the right of the slide. Last year we were able to cut this by 10%. CHF2.7 million of losses were prevented. So, we think that these are very interesting times. The market is difficult. We often hear that there is too much offer, but, at the same time, our products are very much geared towards meeting demand and can be very successful. And that's why we are confident that the vacancy rate will continue to drop in 2017 to below 6%. And, based on the experience and based on the five projects that I'm going to explain to you about later, I think this is realistic.

So tailor-made solutions are now the name of the game. There is no typical real estate project anymore. Everything is different to meet specific needs of specific users. And this is something that we have been concentrating on to meet such specific demands.

You've all seen this slide before. This is our share of long-term rental contracts. As you can see, we have a slightly increased figure in four years, when some Swisscom contracts are going to be up for renewal. We are already negotiating with the tenants in order to renew the contracts, so that we can eliminate that peak. So probably next year this curve is not going to look the same for that reason.

Now this is our portfolio according to regions and according to types of use. By region, Zurich is strongest 42%, Geneva second place with 21% and northwestern Switzerland has increased by 2% due to acquisitions in Basel and Lucerne.

Central Switzerland is a particularly interesting region with great potential, and that's why we're glad that we've managed to grow here.

In terms of type of use, we have 40% offices and 33% retail space. A few years ago, we said that we would reduce the retail space continuously. We've done so and that means that also last year we reduced our retail space by 1%.

Now, let's take a look at some re-dedications of properties. I would like to present our five highlights. In addition to new builds, redesigning existing buildings is a particular challenge. This is a building that once was a post office 80 years ago. Then it was a bank until 10 years ago, or five years ago. And as of July 2017, this is going to be Switzerland's largest hotel, German-speaking Switzerland, with more than 400 rooms.

We were able to implement two re-dedication projects; one in Basel where we have an occupancy rate of 99%. I don't know whether Zurich is going to be on the same level, but it's certain that the demand is very high. It is just a few hundred meters from Paradeplatz, with room rates of around CHF130 and that's exactly what companies are looking for today.

This is reasonable and the quality is high. The rooms are very well equipped and you don't feel like you're in a discount hotel at all. It is a design hotel and we're very glad that we are able to be part of this project.

Schoenburg Berne, as Rene Zahnd already mentioned, is a typical 1970s office building in a cross design. Until two years ago, it was the headquarters of the Swiss Post Office who then moved and the challenge here lay in finding a new use for the building. It was almost a shame to just use it as offices, because it is in such a great location.

You have a wonderful view over the city of Berne from here because it's on the hill. And so we decided to split use; 130 rental apartments and on the wing that you can see coming towards you on this picture, we implemented a design hotel. We have received the building permit and we are expecting the building to be finished by 2019. And due to the high demand for housing, we are confident to have a high vacancy rate here once the building is completed.

Just over a year ago, we bought the NZZ Print site in Schlieren. We bought it because it is in an excellent location near the train station, but we also like the design of it. And now we had to meet our -- fulfill our promise of filling the building with new life. In 2016, we found a strong partner, Zuhlke, who are going to move into the building. We found a tailor-made solution for them.

You can see here an image of what used to be the printing hall. The ceilings are 30 meters high. The machines have been taken out and we're going to put some floors in. And so here, a relatively modern office building. They're going to leave a relatively modern office building into this old industrial building where they feel that they fit much better, which is a better fit for them, rather than one of those 1970s standard office buildings.

Now Stucki is refusing to die. We've had so much Stucki bashing and so we've really heard everything that they was to say. It's close to the border, retail problems and nobody expected Stucki to ever be successful again.

And that was a challenge for us and that's actually made us want to succeed even more. And so now shopping malls are no longer popular properties. You don't want 100 meters of mall space with shops to the left and to the right. So we tried to find a mix of use cases so that we could lead to synergies with the business park across the road and this is the solution that we found.

We got together with Arena Cinemas, with whom we work in other places too. They are going to implement 18 cinema screens. It's going to be the most modern cinema in Switzerland. And 1,200 square meters of area, useful area -- useable area is going to be -- of retail space is going to be reduced. And when we communicated this, our tenants stopped telling us that they wanted to move out.

Nobody wants to move out anymore now that they've heard about the new concept, because they feel that this concept really has a future. And we are now in the comfortable position of trying to find enough shop space for all the retail customers who want to stay.

Now, in combination with the services building across the road, we now have the planning permission to create an additional 27,000 square meters of useful space -- useable space and certain use types are in very high demand in Basel. For example, fully equipped laboratory space. And we are now bringing a product to the market which is going to be received with open arms and we are, therefore, confident that the 27,000 square meters are going to be fully rented out in two and four years respectively.

So in a few weeks' time we are going to inform about our exact plans with Stucki. It's going to be exciting and I think you will also find some answers to the questions of what retail space can be used for today and tomorrow.

Now, you know this building. This is the media park. It's completed, almost fully rented out, 95% (sic - see presentation page 32 "90%") of occupancy rate. This used to be a bank, and, even worse, it was actually a computing center, which was very dark inside and because the buildings were very deep, so we had to make big changes to the building to make the surfaces more attractive. We did not have a tenant when we decided to embark on the project, but we felt that the concept was very good and it proved to be right and we're very glad to have another successful redevelopment here.

We also have made considerable acquisitions, CHF250 million in total. So here you can see them. The first one was in Baar, the main -- the headquarters of the Partners Group.

Then in Lucerne, the large property directly on Lake Lucerne. And Geneva, Rue des Alpes, also directly on the shores of the lake.

And another property in Baar and of course, the building in Lucerne, the Gotthard building, where 130 years ago the headquarters of the Gotthardbahn did their business, or started their business in fact. And this building -- for this building we now have a long-term rental contract with a very well-to-do tenant. So we generated between 3% and 4% in earnings here, so we are satisfied with the outcome of these acquisitions.

So this is my last slide about the project pipeline. These are the main projects that we are planning for the future. This list, of course, is always changing and it is going to change because we have shown that utilization is increasing. We've seen this in Lucerne, in Schonbuhl, but also in Schlieren. Urban development in Schlieren is helping that.

So we are going to have almost 100% occupancy and that is great potential that we can't even estimate what its value is going to be. But the trend is clear, inner-city locations due to densification are going to be for our benefit -- work in our favor.

It's going to be 35% to 50%. Thousands and thousands of square meters are going to be given to us practically for free only with 20% value-added tax. And this is going to increase our portfolio's value over the years. So, as you can see, we won't have any problems investing our capital in a profitable way.

So that was all from me. Now over to Rene again.


Rene Zahnd, Swiss Prime Site AG - CEO [5]


Thank you, Peter. So, actually, we've covered 2016. We are looking forward now to the years to come. We have reorganized accordingly.

This is the first chart I would like to show you under this heading. We're well aware that we will be successful if we are very close to markets and clients, so we have slightly adjusted our organization. You can see the Group is Swiss Prime Site, with the Group management at the top.

Then we've got five fields of business; real estate, now led by Peter Lehmann as the CEO; then Wincasa, Jelmoli and Tertianum; and we now have Swiss Prime Site Solutions Limited. That is new.

You will recall a year ago we had the Foundation on this chart, which was wrong from a purely legal point of view, as we do not own the Foundation. The Foundation is owned by the investors and now here we've got our team that provides services to the Foundation and will provide services in future to other third party vehicles. I'll be coming back to this.

So this is the new unit Swiss Prime Site Solutions. Now it's been entered in the commercial register for a number of days. Under this unit, we are also going to request the FINMA approval. We submitted the request with FINMA yesterday. It would have been necessary anyway. You will be aware, given the new rules, we will need a FINMA approval and we submitted the request yesterday. The reporting structure is then shown at the bottom line of this chart.

And we're moving on to the next chart, under the heading of reduce to the max. What are we going to do in the various fields of business? What are the main strategic thrusts? Moving on to properties first, well relative independence from the market is certainly key. We will never be entirely independent, but we want to be as independent as possible from the market of investment properties.

How can we do that? We are going to keep investing in developments and add to the pipeline and refill it once a project is moving into the phase of realization.

Secondly, we are going to focus on transformation and modernization, as we have done successfully.

And thirdly, as Peter mentioned, we are working on possibilities of becoming more compact as a result of the new zone planning law. And we are going to further increase our market footfall. We are very close to interested tenants and this all means that the vacancy rate will be lowered in 2017.

We are indicating a range of 5.5% to 6%. I'd be disappointed if we didn't reach at least 5.75%, so much for 2017. And this, of course, means some pressure on Peter Lehmann, but he's not sweating yet, so it seems to be okay.

Moving on to Wincasa. Those that participated in the Investor Day last autumn at Vitadomo will be familiar with the figure I announced then. For operating EBIT, the operating business of Wincasa and Tertianum, we have this figure of CHF55 million to CHF60 million, which we announced. And medium term, that's plus/minus 2020.

Now, let's begin with the margin. If we take the operating EBIT, Wincasa, that's the EBIT you have an impact on without any IAS 19 ups and downs and without depreciation of the customer base at the Group level. So last year, we had an operating EBIT of CHF20 million, slightly more than CHF20 million, which is remarkable. More than 16% of EBIT margin.

A 16% EBIT margin, well that raises the question how are we going to go on in the business? We certainly want to maintain the margin first and foremost.

Secondly, it will be important to keep working on the client base and keep expanding on the client base. Up to now we had very few large clients. It's always better to add to the client segment, adding more large clients, as we did last year with Swisscom and Swisscanto.

Then we would like to tap into new sources of income, for instance, the new segment of large-site development and management, which I mentioned before. And we are going to keep investing in digitization. That is very important. Digitization will change the job of site management.

So it's a question of what services can be outsourced to clients and maybe tenants, that would be the first step. That happened under My Wincasa and there may be additional steps taken in the future. So the site manager has to be focused on where added value can be generated directly with clients and with commercial properties. We need to know when clients are no longer happy, want to move out.

We need to know when clients are no longer happy, want to move out. We need to know what their needs are. We should take the burden away from them, especially with regard to the minor administrative work that can be replaced digitally.

The question always is where does digitalization take us. Now we don't really know. Of course, it's certainly a license to play. You've got to stay in that business. If we don't do it, somebody else will. So it's important to be a front runner in the field of digitalization. And I think Wincasa will help us to be in good shape in this regard.

Now for Jelmoli we've got three important points to be mentioned. First of all, we want to keep increasing sales on our own managed services and stationery services. We also have ecommerce. And so that's the 1.5% to 2% revenue growth. What's the focus there? We need to have good brand positioning because brands are really what makes us stand out from the crowd of competitors.

And then the services that we could provide, that will also be a differentiator. And we've managed to do that in menswear. This year we are going to focus on women's wear. We need to obtain the same brand positioning as with men.

And then we need to increase e-commerce revenue. We launched the online shop and of course wanted to grow, to grow considerably. There is no reason why we should grow more slowly than the rest of the e-commerce market.

And thirdly, in this segment it will be decisive again to move away from textile. If you want to hear about an interesting figure. In the House of Brands Jelmoli we currently have 36% of surfaces devoted to textile items. If we distinguish here between tenants, then the tenants are at 31%, and the owned managed surfaces are at 39% and the total in-house is 36%. Jelmoli was at 45% of textile a number of years ago. So we are convinced that moving away from textile and towards additional services, towards entertainment certainly is the right path towards the future.

And then, of course, what is also decisive is to expand towards the Zurich Airport. From 2019, we are going to represented there on three surfaces. What was the motivation? Well major economies of scale. With the same management that we are running the House of Brands, we will be able to operate the airport services.

And, secondly, the footfall at the airport is very interesting. The Zurich Airport is growing in terms of frequency and it's also relevant to reach out to brands. The brands are already believing in Jelmoli and we are getting more premium brands interested in us, especially once we are present at the airport.

The airport is also a possibility to play on the three surfaces using digitalization in particular. And we want to also come up with a purely digital shop. So this is some of the outlook with regard to Jelmoli.

Then moving onto assisted living, so assisted living, or Tertianum, is subject to a medium-term goal of ROIC of 10%. And what's our current status? We've got operating EBIT without IAS 19 and without depreciation on the client base and the SENIOcare brand, in 2016 of CHF22 million EBIT. That is a 6% to 7% of ROIC, so we've doubled it versus 2015.

Wincasa and Tertianum in aggregate brought us to CHF42 million of EBIT compared to the CHF55 million to CHF60 million we announced for the medium term. So we are on track and we'll achieve it in the medium term.

What are the main drivers here? Of course, the enhancement of care expertise. Let me repeat that our guests, male guests, usually enter at the age of 81, female guests at the age of 85 and the time of residence is two and half years. So this goes to show that the older people get and the longer they stay at home means that in our centers we need care expertise, so we are focusing on that how to get skilled personnel, or even train our own personnel.

Second important point is to find out what the essential ecosystems are. We are talking about subcontractors who, in the final analysis, is going to give us direct access to future guests.

In terms of integration, I've already mentioned that. We concluded SENIOcare. Boas is being integrated currently. It's always remarkable to say that Boas integration is clearly easier. Why so? SENIOcare and Tertianum were competitors in the past. And when you start integrating personnel, you can sense that. It takes a lot of effort to complete the integration because everyone keeps wearing their earlier hats. So they were competitors in the German part of Switzerland and it took some effort to complete that integration. Today it is fair to say that we managed to do that. People are on board. Thank you, Luca to you and your team.

For Boas, the situation was slightly different. We were not active in the French speaking part of Switzerland and they are from a setting where they earlier on bet on -- betting on hotels rather than assisted living. So they were very happy to find the expertise in the Tertianum Group.

Then we are going to press ahead with project development. We've got 15 to 16 projects to take us to 2021. We are on 71 sites. And you can do your maths there. And, of course, we want to take the PPP model of Richterswil to Switzerland.

And finally, last but not least, we want to implement new technologies. We are looking into robotics. Of course, that will replace human beings. Care is very much human driven, but robots can provide support. We are also talking about the Internet of Things, intelligent, or smart mattresses. These are things that we can activate in our centers without any problem whatsoever.

And onto the final field of business Swiss Prime Site Solutions, which is a young flower. We are not specifying a specific return. We've got the Swiss Prime Site Investment Foundation. Let me repeat why we launched that. The focus at the time was that the Swiss Prime Site would get rid of residential properties, create a new vehicle for these. That's the reason why the Swiss Prime Investment Foundation was launched. The focus here keeps being on residential properties, which is good in the market because we can also invest in residential properties.

Now this is not the end of it. The question is how can Swiss Prime Site Solutions grow? What are the additional products that we might look at? We can still be looking into a collective scheme, or an additional foundation or maybe taking over additional asset management mandates. So that is the field which we consider to be very interesting in terms of growth potential.

Let me refer to the bullet point at the bottom. We have a current base of clients of 250 pension funds, which is very interesting. We need to maintain that and try and make available interesting services.

So much about the fields of business, what are the other important points with regard to sustainability? Let's begin with clients, the stakeholders at the top left. This year in April, and I'm looking very much forward to this, we are going to have the first stakeholder panel, which will be an exchange with persons from various walks of life. We want to benchmark ourselves to be sure we are on the right track under the heading of sustainability.

Moving onto financial excellence, from next Monday we are going to begin with business planning for the three years to come, and are going to implement the so-called sustainability roadmap. Then, under the heading of compliance and social commitment, we are going to report for the first time according to GRI.

And we are also going to publish a sustainability report. You can do it focusing -- do it together with the semi-annual results, which may be interesting from a marketing, point of view. But the other option is to publish it one year from now to give us integrated reporting.

The integrated reporting is precisely what we want to do because we are saying that our sustainability road map is part of the business plan, is part of the business, so logically it would mean that the sustainability report -- the first specific sustainability report, should be published one year from now as an integral part.

Moving onto sustainable investments and services, a lot has been said about Schoenburg of Berne. We also managed by partnership with a company to change the statics in the building. If you look at, you've got the grids, the support grids in the offices that are relatively narrow. Now if you want to build apartments, you can imagine you don't like to live in an apartment with a lot of pillars, a lot of grid structure. So how can you change that? Because in an existing building that is to be converted. We applied building information modeling, a 3D system, to widen the structure and to create more appealing space for apartments.

The next objective we have is to protect the environment with long-term targets for energy use and consumption of electricity and water at properties in our portfolio. We do not invest in sustainability just for sustainability sake, but we want to bring down operating expenses. It's no use setting goals that are not really key to our business. So we need to reasonably invest on financial resources.

And last and certainly not least, further investment in being an appealing, or creating an appealing working environment. We also have come up with a new leadership training development program that will begin in 2017.

Let me hand it over to Markus for this chart.


Markus Meier, Swiss Prime Site AG - CFO [6]


Thank you. We've put thought into -- upon -- in transferring to Swiss GAAP FER, we are going to implement IFRS. You will not miss any information that we have under IFRS. We want to be leaner. There won't be five pages on pension fund reporting. And we won't have several hundred million francs of additional properties or debt on the books due to IFRS 16. We don't that.

So these three things that are impacted here. First of all properties, not in terms of valuation but valuation will be done by Wuest & Partner, as it was done before. There's no other methodology, no other assumptions. But we won't have the owner occupied properties anymore. Actually, we don't really have them, as we are a real estate investment company.

We've got owned managed properties with Tertianum. But basically, we are a real estate investment company so we will only have investment properties. There won't be any depreciation on owner/occupied properties anymore or revaluation anymore. So this will streamline the whole thing and widen transparency.

The second aspect is IAS 19. There won't be any IAS 19 obligations in excess of CHF100 million on the books anymore and provisions, or the discount rate discussions that we had in the past that caused a lot of expenditure, we won't have that anymore. We will only have the ordinary pension fund contribution from the employer. That will be shown as expenses.

And thirdly, goodwill. As a result of Jelmoli and Tertianum and Wincasa we have CHF450 million goodwill on the books, which we are going to book out through shareholders equity. So shareholders equity will move down below the threshold of CHF5 billion. But in the annex, according to GAAP there, we will report depreciation. Goodwill will be shown there. And we will make sure to manage that goodwill well.

What does that mean for 2016 you will ask? Of course, if we look at earnings per share before revaluation and deferred tax we are at CHF4.04. And with application of Swiss GAAP FER in the restatement and you will see we'll bring it down to below CHF4 but clearly higher than the CHF3.70 we are paying out, or proposing to pay out as a dividend at the AGM to come.

And for equity ratio, we will be constant at 45% despite the booking out of goodwill through shareholders' equity because balance sheet total will come down as well. And the LTV will be around 44% to 45%, we will remain there. So you can see that when you're familiar with IFRS you won't spot major differences under the new accounting standards.

Let me pass it back to Rene Zahnd.


Rene Zahnd, Swiss Prime Site AG - CEO [7]


So my last slide is guidance. We had a good year, good 2016. And it's always a bit bold to say that next year is going to be even better, but we are going to say it anyway. And we think that the interest rate environment is going to remain more or less as it has been in 2016.

That means that we will have further top line growth. And -- but that only is a good thing if you can only increase profitability, which is why we are going to also increase our operating profit before revaluation. So we are going to have the Swiss GAAP for EBIT as one figure.

We are also going to lower vacancy rates. We are confident that this will be possible. Our portfolio is going to grow through acquisitions, but also through three projects that are going to be added to our portfolio, Etzelgut, Tertianum project and the -- and an office building in Meyrin and a third one is, of course, going to be Motel One in Zurich. All of these three projects were introduced to you earlier. And that is going -- Motel One is going to enhance our portfolio as of the third or fourth quarter.

And we also expect that our dividend policy is going to allow us to offer an attractive dividend next year too. So that was our expectations.

And now it's back over to our Chairman for the information about the annual general meeting and for our question and answer session.


Hans Peter Wehrli, Swiss Prime Site AG - Chairman [8]


Right, the annual general meeting, all members will be available for re-election. Herr Hammer is going to -- except Herr Hammer. And we are also going to try and approve a new remuneration model with long-term incentives. And, as I mentioned, the dividend is going to be proposed to be CHF3.70.

In summary, we feel that we are doing well. 2017 is going to be successful. And in the summer, we'll have to plan, make our plans for the period until 2020. That's going to be a task for the summer.

I would like to management for their commitment for their hard, excellent work, [Klaus Bender] for the new website. And so we have new colors, new corporate design. So -- but maybe you will still have the same questions despite the new corporate design unless there is a surprise in store.


Questions and Answers


Unidentified Audience Member [1]


Thank you very much for your presentations. I come from Zurcher Kantonalbank. I have four questions. The first question concerns the one-off effects. Mr. Zahnd mentioned some up and downs on page 18 in the transition to the operative income. You mentioned CHF37.5 million in terms of pensions. That's the first question.

The second question concerns vacancy rates. In the press release, you mention 5.5% to 6%. The figure is 5.3% as of -- as per end of year. So you are expecting a sequential worsening. And I wanted to ask about maturities for 2017, how much of that do you have negotiated already and what's to be expected in that respect?

And the third question concerns the valuation, which seems ambitious compared with other listed companies. 4.37% is a relatively low discount rate. What are you expecting in relation to the -- what have you been able to reduce in terms of cash flow in this difficult environment? And what -- how do you negotiate with the valuators I would like to know?

And fourth question, on page 37 you mention that segments are going to be bundled. Maybe I misunderstood this, but you're going to report Wincasa and Jelmoli together. This would be not so good for us because there are different drivers behind the two. And I would like to know if that is the case and why?


Unidentified Company Representative [2]


Let's start with page 18. Maybe I can say something about the one-offs. The operative comparison EBIT 2014 and 2015, 2016 CHF35.5 million (sic -- see slide 18 "CHF37.5 million") per service (sic -- see slide 18 "personal") costs were taken out due to the -- this was necessary for our pension fund.

And then, of course, we also have the normal IAS 19 expenditure which we can't prevent and which we haven't deducted. We don't like normalizing, leveling. And the other question was the revaluation effect, which you also take out as analysts and the gross profit from our --.

So we are not going to level. That's not the way we do things. But the specific positive effects, the CHF35.7 million due to the renovation, that was just something that we wanted to communicate to you. And the acquisition in assisted living also led to some integration costs. And they are going to still be incurred in 2017.

Integration of employees and systems that costs money. Branding also costs money because that's all part of our business development too.

EPRA excludes profits from developments and sales of property sales. And we also see that as our core business. We want to generate profits from developments all the time. And that is why it's not necessarily our business model.

And valuations, you had a question concerning vacancy rates. So vacancy rates are always measured in the same way. This is accumulated total of earnings, which were not generated. That's the way we did it this -- are doing it this year and will do it next year. So the vacancy rate is not worsening but it's going to improve or be reduced in other words. And it's going to be measured in the same way as in previous years.


Unidentified Audience Member [3]


(Microphone inaccessible).


Unidentified Company Representative [4]


I don't have -- I don't know about the details for the EPRA vacancy rates because we don't work in an operative way here. But, as I said, the vacancy rates in 2017 are going to be below those of 2016.

And on valuations, yes valuations are cautious in terms of possible rent reductions in shopping malls, for example. We've already seen that in the valuations last year. We think that's a good thing. But, of course, these are not -- this is not a great scope because rentals run over the long-term. And so Stucki has seen some drops in rental income. Geneva to La Praille and in some other centers we've also seen a decrease in rental income round CHF1 million, by about CHF1 million.

That's simply a result of the fact that we can't sometimes renew rental contracts at the same level. But there are other developments that counteract this because rental spaces, retail spaces are becoming smaller. And so by square meter, retail spaces are more expensive. So a large part of the absolute price is diversified. And so that actually leads to a very small difference ultimately.

One-offs until it's refurbished is the answer to the question that --.


Unidentified Audience Member [5]


(Microphone inaccessible).


Unidentified Company Representative [6]


These are economies of scale. We do Wincasa electronically. Whether we operate 1,000 or 10,000, it doesn't really make much of a difference for Wincasa. That's the objective. These are economies of scale. It's not from one to two but from 1,000 to -- 100 to 1,000, that's economies of scale.

That's the idea. Isn't that right Oliver? Standardization, service providers have flat economies of scale. But still if we simplify this process this will do that and then it won't play a role whether we are operating 10,000 or 100,000.


Unidentified Audience Member [7]


That is not -- so it's not a contradiction in terms that you're -- that thinks your customer demands?


Unidentified Company Representative [8]


No. As I said, these are one-time investments and that is easy to shoulder if you then have earnings from that property for 15 years to come. So these questions I think have been answered.

And the organization of segments. Segments yes, well we started close to the customer and that is -- and to the market that's why we decided to take real estate out of the holding company and create a separate structure headed by Peter Lehman.

And then we decided -- we tried to decide what belongs together. On the right hand side of the chart, we have Swiss Prime Site AG, which also has to do with real estate. And that is why we decided to communicate both. And Tertianum is the growth segment, which we wanted to keep separate. And we -- there are various service providers that are going to be taken together in segment reporting Wincasa and Jelmoli.

So the leadership structure is going to be the same but the reporting is going to bring them together. The advantage is that we don't have to do what everybody thinks we should so, because we don't want to do that. There are things that we don't do because others don't do it either.

And we don't want a competitive disadvantage. Mr. M doesn't do it either with Mr. G and Mr. C doesn't do it either with [Anna Hoff]. So that's why we don't want it. We decided that on the Board and that's why we are not going to do it like that.

And, of course, the common element is the rental market. Jelmoli and Wincasa both have a part of the rental market. Jelmoli is our main tenant in our retail portfolio. So that's what brings them together. That's the idea. We bring things together where it's necessary.

Mr. Fry.


Unidentified Audience Member [9]


I would like to know -- I have a question about the cinemas in Stucki. What is the lot per square meter because of course they're going to pay much less rent? And you mentioned project sales. I suppose these are going to be the apartments of Schoenburg because you said that you didn't want rental apartments. And in Weltpoststrasse you mentioned a 90% vacancy rate in Weltpoststrasse and is that -- when are you going to get rental income from that?

And another question, maybe Mr. Zahnd, you or your predecessor once said that Tertianum is going to be sold one day and now goodwill has been depreciated. Are you going to reveal how much you won or lost in that?


Unidentified Company Representative [10]


So that's just a small correction. Mr. Graf never said that Tertianum was going to be sold. That wasn't what he said. We never spoke about selling Tertianum. An IPO was mentioned yes. Yes, we are going to stay in the driver's seat.

So the first question on the cinema at Stucki, we are not losing, we are actually winning because if we weren't going to do anything we would have vacancy rates, considerable ones. Well I'm just telling you what the reality is. We don't do it because it's a good story, but it has to be worth it.

And for the cinemas, we have a good contract here for Basel, which can be compared with La Praille in Geneva or other cinemas. So there are benchmarks here. So we have been able to eliminate some vacant areas even though we can't generate CHF300 but maybe just CHF200 per square meter. But, at the same time, some of the tenants are now concentrated on smaller surface areas where we -- which means that we can increase the earnings per square meter.

So, in total there is not going to be a drop in earnings in view of the fact, that many contracts that would have been up for renewal were not renewed with the same rent as before. We actually had some rental contracts for CHF750 per square meter. I don't know how they did it. Of course, that's no longer possible. Not all.

And, now if the gym and the -- will also lead to more footfall and so now with that we have been able to generate increased footfall increased sales turnover in the retail business. So the overall picture is what counts. And this means that in the cinemas we may have to reduce the rent per square meter. But by generating more footfall and increasing the attractiveness of the place in general, we have actually a better result.

We don't want this to be a shopping mall anymore. We want this to be a place where things happen. And so we have different rental income in different areas. But what counts is the overall result.


Unidentified Audience Member [11]


Well, so when will the cinema operator starting paying rent and the gym?


Unidentified Company Representative [12]


The gym has been paying rent for a while and the cinema is going to start rent -- paying rent when it is opened. First, we still need the approval, the construction approval, so I don't know yet.

The second question concerns the apartments, the rental apartments. This is not Schoenburg, but (inaudible). That was the property that we referred to. Those properties are going to be developed and sold.

And the last question on media park, the rents are going to start coming in from mid-2017 because we gave some rental free time for internal development of the building.


Unidentified Audience Member [13]


So this means Ringier didn't pay for a year and a half? Beginning of last year, or end of last year vacancy was reduced?


Unidentified Company Representative [14]


Well, these surfaces that are launched in a staggered manner, but I cannot disclose anymore.

Well at least we would be the argyle nimbus because a lot of people want to move to Lenzburg at the time, so we are battling a cross-continual borders.

You were first with your question, please.


Unidentified Audience Member [15]


I have three accounting questions. Are you going to show your lease figures under Swiss GAAP FER?

And can we assume the same growth of CHF200 million to CHF300 million operating lease? Are you going to disclose that?


Unidentified Company Representative [16]


Yes, of course.


Unidentified Audience Member [17]


And, can we assume that it will keep grow as it did this year around CHF200 million?


Unidentified Company Representative [18]


Not quite because this year SENIOcare, that was 2016. SENIOcare was included for 12 months and now additionally we are going to have the two months missing in 2016 of SENIOcare, plus additional projects in general in the field of assisted living. That will be added. So, the increase will not be the same.

And then for pensions, the employer provision will simply be shown as zero fully funded pension plans, exactly, yes. Well especially due to the measures that we have taken, we now have sustainable long-term development of the pension fund. That has been secured and no additional employer contributions are to be expected.


Unidentified Audience Member [19]


For potential revaluation of owner occupied properties, can you give us an estimate?


Unidentified Company Representative [20]


Well, we reported them under IFRS at fair value, so there won't be any revaluation effects, only with regard to future valuation effects. Well, they will not be mirrored in the shareholders' equity but on -- in the P&L.

And another aspect, we have depreciated owner occupied properties although they were valued at fair value, which is special, but it is normal under IFRS. So, it all seems to be a bit clumsy, but we won't have that anymore any depreciation on owner occupied property, only fair value, which we've had so far.


Unidentified Audience Member [21]


[Inaudible - no microphone used]. What's happening to the depreciation and deferred tax after the changeover of accounting system?


Unidentified Company Representative [22]


Well, this is a bit much of accounting now, but depreciation was shown in the P&L but then was then lifted to the fair value again through the shareholders' equity. So it's a transfer of the P&L to shareholders' equity. Fair value is fair value. It's the registered partner valuation.


Unidentified Audience Member [23]


So tax expense will then rise?


Unidentified Company Representative [24]


No, no.


Unidentified Audience Member [25]


Why should they rise?


Unidentified Company Representative [26]


Well, this is all deferred. It's all deferred tax. Given the revaluation on the fair value, well, that hasn't changed. It was corrected again, so below the line, there is no tax effect.


Unidentified Company Representative [27]


Please hand over the microphone quickly.


Unidentified Audience Member [28]


Thank you. I have four questions. Question number one, on the like-for-like comparison. Could you perhaps talk about rent growth and with regard to Jelmoli and like for like in the segment of senior living, please give some comments.

The second question, regarding the vacancy rate. How many of the guided improvements, 10 to 60 basis points, are related to Stucki or [Flupark]?

Third question is about a follow-up on the accounting change. How much exactly will be for the balance sheet? Of course, goodwill will be dropped, and on the liability side, we won't see the pension liabilities anymore. So what's the effect below the line at the end of the day for the pension fund?

And my final question is you said that going forward, you will focus more on development. What does that precisely mean for the two years to come for CapEx, and what is your expected return on these developments, or return on investment expectations?


Unidentified Company Representative [29]


Well, let's begin at the end, Peter. Well, for CapEx, it's easy to be seen in the chart that we added to the presentation.

In terms of return, you can assume that this is an ROIC. The land is already on our books, so we need to be able to show a return on invested capital, and I would suggest you can assume a good number six.

Now, this can even go up on the basis of valuation, but I would suggest that you assume a six there. So it's interesting for us to be in that business, because we do not need to buy expensive land.

With regard to your questions about vacancy, well, Stucki is nothing to do with it, yet this will only apply in future. And regarding the share of Flupark, you can assume that it will be around 20% of vacancy reduction -- account for about 20% of vacancy reduction.

Well, like-for-like rental growth in 2016, we were about 1% below the previous year on a like-for-like basis, mainly attributable to the effects from the retail trade lower sales -- lower sales base rents as a result. And the net effect on shareholders' equity due to the accounting change will be a good CHF400 million. No more goodwill items, client base of brand rights from the acquisition, and we won't have the pension fund liabilities anymore and all the deferred tax effects, which add up to a good CHF400 million of shareholders' equity.

Any further questions?


Unidentified Audience Member [30]


Thank you. I have three questions. The first on valuation changes. I think you had a positive CHF75 million on investment property, and where -- the negative figure, which development projects did it relate to?

And with the new compensation model, what will be the management measured against? What are the objectives?

And about a detail on Tertianum, EBIT, in the segmental reporting, we've got CHF15 million EBIT, and you talked about CHF22 million. Which figure do I have to refer to?


Unidentified Company Representative [31]


Well, let's begin with your CHF15 million. Let's begin at the end. The objective under Swiss GAAP FER of course relates to the operating EBIT that can be achieved by the segments. That's the CHF22 million. The CHF22 million plus the CHF20 million of Wincasa adds up to the CHF42 million, compared to the CHF55 million to CHF60 million.

Not included in the CHF55 million to CHF60 million are EBIT streams from Jelmoli or the newly founded Swiss Prime Site solutions unit. That would have to be added on top.

Now, regarding valuation change, that related to the Schoenburg project in Berne. A year ago, we still assumed that there would be a considerable part of condominiums which produce, say, an appealing valuation, but then in the course of the studies, we decided not to subdivide the whole project. And which then had an impact or led to a one-off correction to valuation.

Let me add to this. I can fully support the strategic move. It's a cross-shaped property of mixed use in future, and there is nothing worse if a hotel manager wants to have a new driveway, a new parking area, and you have 135 people, owners of condominiums, complaining about that. We wanted to avoid that. That is why we said it's going to be rental apartments, and we keep them on the portfolio.

And regarding the LTI, now, how far do you want to go about the details? I could be brief about that. We will be measured at Group management against the EPS, and in the short term, there will be KPIs, and each one of us will have a KPI related to growth, combined to a KPI regarding profitability. To simply grow is too simple if you're not profitable. So we have different fields of business, and the growth KPIs are different.

Let's take the example of Wincasa, where we have assets under management. That's the growth objective, and profitability is the EBIT margin. I think the fundamental idea is that we want to promote profitable growth and compensate for profitable growth.

That's the reason. It's not an objective for us to be bigger, and profit in its own right is not an objective. Mrs. [Martel], please?


Unidentified Audience Member [32]


Good morning. I have a few questions, as well. First of all, if you want to retain the rental apartments, you have 1% on the portfolio already. Will these apartments be transferred to the investment foundation?


Unidentified Company Representative [33]


Well, fundamentally, we have no problem with everything in the portfolio. Even if you're critical of the [collar] law, you can still develop sites, and we will remain in the 1% range of rented apartments. There won't be any major change to this share.

And the second thing is, we're currently not [collar] law critical, which we --


Unidentified Audience Member [34]


Well, can you tell me why? Can you tell me why?


Unidentified Company Representative [35]


Well, there are documents. It's 30, 40 pages, and it's a whole procedure, and then you get a ruling that tells you that you're not subject to the [collar] law.

Let me add, regarding the rental apartments, we've got the 1%. The 1% are typically mixed-use apartments, or apartments in mixed-use buildings. You cannot simply cut them by half and sell half of it.

And secondly, the transfer to the investment foundation, that was possible once. We can't do it anymore now, so that would not be an option. Second question?


Unidentified Audience Member [36]


My second question is, well, you mentioned 70,000 square meters have been let out or re-let out. How much of it is new and what were the new tenants acquired?


Unidentified Company Representative [37]


Well, this relates to various buildings, properties, especially in the Media Park. We have achieved 20%, as mentioned before. Then in the [Rotatum] in Winterthur, we let out various storeys and took the letting ratio up to 80%.


Unidentified Audience Member [38]


Can I briefly come in and add, this was Bauhaus and Zuehlke last year, but you're talking about new tenants or re-letting to existing tenants.


Unidentified Company Representative [39]


Well, I think it's a 20/50 breakdown, isn't it? No, that's correct.


Unidentified Audience Member [40]


My final question, Bulkara in Jelmoli, is this a temporary business while they're rebuilding at Bahnhofstrasse, or will Bulkara remain with Jelmoli?


Unidentified Company Representative [41]


We will see over time. I'm sorry, Franco.


Unidentified Audience Member [42]


I have a follow-up question on LTI, the LTI. You said EPS will be the benchmark in the long run. Now, should the interest rate setting change and what will the impact be on --


Unidentified Company Representative [43]


Well, the EPS that is taken as a basis for the period of three year vested LTI is before revaluation and deferred tax. That's consistent with your EPS considerations.

More questions? Yes, please, Mr. Fry.


Unidentified Audience Member [44]


Well, the re-lettings that you mentioned, that you refer to, what level were they at? For instance, in Rotatum in Winterthur, did you have to make major concessions? You were successful, but did you have to make major rental concessions?


Unidentified Company Representative [45]


No. Rotatum is a very appealing building. Only the beginning of the letting activities, we didn't respond sufficiently to client needs and offer single storeys. These were in demand, single storeys, and rental prices in Winterthur are around CHF220 to CHF235, and this also applies to Rotatum.


Unidentified Audience Member [46]


And the others?


Unidentified Company Representative [47]


Which others?


Unidentified Audience Member [48]


The other re-lettings, were they done on the existing portfolio? Below the line, you've got minus 1% like for like.


Unidentified Company Representative [49]


Well, the minus 1% is primarily due to a loss of sales-based rent, and apart from that, re-lettings were done on the same prices and the same terms.

Well, the nicest story I can tell in this regard is that we have Charles Voegele as a tenant for eight properties, and I can tell you that Charles Voegele took over all eight contracts, and we even increased rental income in two of them. So when you're in the right spot and have the right properties, then site remains interesting. Location remains interesting. It's probably the best proof of this working, if the micro location is good.

Mr. Fry seems to remain to be critical. Any more questions?


Unidentified Audience Member [50]


A follow-up question on [Stefan Schuermann]. Could you briefly outline the new management compensation plan and the effective changes?


Unidentified Company Representative [51]


Well, the changes relate to the long-term view, but maybe we can give you two or three things. Well, let me try. We've got a short-term incentive, 62.5% of the total incentive, and 37.5% are long term, long term, before revaluation of deferred taxes. We need to mention here that the entire Group management at the end of the three years will receive shares, which was not the case up to now.

It was for us, Swiss Prime Site, but not for colleagues from the Group company, so everyone at the end of the day will have a part of shares, and for short term, there are individual objectives, 25% of the 62.5%, and the other objectives, the other targets, growth and profitability, account for 75%. So that's a brief summary of it.


Unidentified Audience Member [52]


Thank you very much.


Unidentified Company Representative [53]


The holding period of shares is three years. We won't get allocations immediately, but there is a lockup, and we have an entitlement of getting the shares three years later, based on a valuation system.

It's not the same model that applies to the Board of Directors that gets 50% of the salary in terms of shares but shares that are granted immediately.

Any more questions?

Well, of course the whole thing is capped at 100% of base salary. That's important to note. I always prefer caps. We don't want to get an uncapped nirvana.

Well, I think as you have sensed, we are more confident than a lot of us think in this industry. We are not afraid of any bubbles or any other issues. We are firmly convinced that we are well on track, doing well and have additional potential to tap into as here on the mark site.

By the way, [Tornhaller] will be opened in the autumn on the mark site, a wooden construction, so we encourage you also to enjoy new forms of culture in Zurich and wish you a good time. Let me now invite you to the infamous apero riche one floor up.

Thank you for coming.


Editor [54]


Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.