Swiss Prime Site closed out the 2018 financial year with favourable results. Both the core real estate business and the Services segment contributed to this pleasing result. The portfolio of existing properties was optimised by acquisitions and divestment. In addition, the project pipeline was implemented according to plan and augmented with new projects. Technological changes were prioritised in the group companies in the Services segment. The progress achieved will make the business models of the vertically integrated real estate-related business areas significantly more robust for the future. Sustainable growth and long-term success are of paramount relevance to the entire management team, and in particular to René Zahnd, CEO of Swiss Prime Site.
René Zahnd, you have been CEO of Swiss Prime Site for three years now. How has the real estate market changed since you took up your position in 2016?
The market has become considerably more dynamic. New technologies and the changed demands of market players are leading to a diversification of the source of demand. The positive side effect of this change is that the real estate sector has to focus much more strongly than previously on the client (tenant/user/operator) and their specific needs. This has meant that products coming onto the market are also absorbed at the end of the day. Another change has occurred in the residential market, which is now reaching its limits. Put another way, too many residential properties are still being created in the wrong location. What is more important for Swiss Prime Site, however, is the fact that demand for office floor space has picked up again, particularly in the greater Zurich area.
How does the interest rate situation influence your business model?
Although the assumption a few years ago was that interest rates were bound to rise again soon, we are still confronted with a low interest phase. The effect is that all market players are on the lookout for returns, and one place they are finding them is the real estate sector. This means that currently we are in direct competition not just with other real estate companies, but also with life insurance companies, pension funds and other institutional investors. Thanks to our attractive portfolio and the project pipelines, we are able to cope well with the existing market situation. Our results reflect this.
What does this new competition mean for you?
When more players participate in the real estate market, this often results in excess demand and price increases. This does not affect us severely, given that we have a large portfolio of 190 properties, as well as a wide pipeline of around 20 projects at our disposal. Both factors give us a certain degree of independence vis-à-vis the market. When it comes to seeking higher returns, we see great potential in project developments in particular.
It appears that you continued to cope very well with the challenges in the 2018 financial year. What conclusions would you draw?
At the start of the year, we promised our investors successful business performance. We were able to fulfil our promise. We are definitely satisfied with the result. At the earnings level, we grew by 5.1% to CHF 1 214.1 million. Rental income, which is the most important indicator in our core real estate business, also rose by a pleasing 2.0% to CHF 479.4 million.
How did earnings perform in the Services segment?
We achieved year-on-year growth in Services as well. Our major growth area was assisted living, through our group company Tertianum (+10.2% compared with 2017). We expect further growth in that area in coming years as our network expands. Some record sales were posted at Jelmoli, especially on «Thank You Day» which marked the 185th anniversary, and also during the pre-Christmas period. Our strategy of not participating in pointless discount battles such as «Black Friday» once again proved to be the right approach this year. We are convinced that our customers value this firm position.
How did Wincasa and Swiss Prime Site Solutions fare in 2018?
Wincasa was able to achieve increased turnover (+1.5%) in a saturated market. But much more pivotal for the real estate service provider is the transformation of the business model into a digital concept, and the development of new services. The newly established Mixed Use Site Management unit has acquired a number of interesting contracts over the past year. We reorganised the management at Swiss Prime Site Solutions in the summer of 2018 and this has already paid off. Following the renewal of the asset management contract with Swiss Prime Investment Foundation (SPIF) ahead of schedule, the focus is now on delivering the best possible service for this customer. In this respect, we are very fortunate that the employees of this group company have expertise across the whole real estate spectrum. The assets managed by Swiss Prime Site Solutions increased from CHF 1.4 billion to CHF 1.6 billion in 2018. All in all, a pleasing performance.