Development and project planning
One of Swiss Prime Site Immobilien’s strengths is its ability to develop its own projects. This paves the way for the Company to operate with a high degree of independence from market cycles. In accordance with the business model, acquired land, sites or properties that no longer sufficiently conform to the current standards are subject to analysis, then optimised, developed and transformed to meet customer or market needs.
Development projects are based on the Group’s strategic targets aimed at boosting organic growth and increasing corporate profitability. Earnings from completed projects are realised in the form of revaluation gains, rising rental income and sales proceeds. New projects developed by Swiss Prime Site Immobilien generally exhibit above-average net yields versus the market as well as the existing portfolio. On the other hand, the key revenue streams from rental income have been continuously growing. The project pipeline currently shows estimated growth of around 3% per annum until 2023. Two projects are destined for sale or partial sale at present, which will result in around CHF 100 million in realised pre-tax profit.
The volume of Swiss Prime Site Immobilien’s project pipeline amounts to CHF 2.1 billion as at end-2017, comprising projects that are already under construction or still in the planning phase. Overall, the Company plans to construct new rental floor space amounting to roughly 400 000 square metres in the coming years. And expectations point to around CHF 120 million in additional rental income as a result.
Projects under construction
Construction projects comprise an investment volume of roughly CHF 600 million. In this context, the constructed rental floor space will amount to approximately 102 000 square metres and generate earnings of CHF 37 million per year. Overall, six projects are under construction at present. The most significant investments are being carried out in the large-scale «Espace Tourbillon» building complex in Geneva, with a volume of CHF 233 million. Two buildings of the five structures to be erected were already sold shortly after the construction start date in the second half-year 2017. The objective here is aimed at realising another partial sale. However, approximately 30% of the original floor space of 95 000 square metres should be retained in Swiss Prime Site Immobilien’s portfolio in order to provide additional rental income. «Schönburg» in Berne represents another trail-blazing project. The former Swiss Post headquarters is being totally modified at a cost of CHF 193 million and newly transformed to utilisation as hotel, retail floor space, fitness facilities and apartments. Projects under construction exhibit an average net yield that exceeds the current portfolio mean.
Projects in planning phase
Projects were in the planning phase at the end of 2017 with estimated investment volumes of roughly CHF 900 million. In this context, the constructed rental floor space will probably amount to approximately 120 000 square metres and generate rental income of CHF 46 million per year. The largest individual project of all will be «Pont Rouge» in Lancy. The project plays a significant role for the Geneva region in its form and due to its location, since another transportation juncture and economic hub will be created for the city as a result. The planning envisages that investments amounting to around CHF 260 million will be carried out for construction and operations of an additional roughly 30 000 square metres of rental floor space. The Company also plans to construct very flexible projects especially directed at future generations of tenants in Schlieren and Zurich in the coming years. Traditional industrial sites there will be transformed into melting pots of knowledge transfer, research, start-ups and small businesses. In addition, the pipeline includes projects in the planning phase for the Tertianum group company (assisted living business field) located in Richterswil and Lugano.
Swiss Prime Site Immobilien holds land reserves amounting to roughly 129 000 square metres (potential investments of around CHF 600 million) that harbour further potential for future growth, in addition to substantial utilisation reserves in its portfolio.