Swiss Prime Site Immobilien
Swiss Prime Site Immobilien AG is a real estate investment company specialising in Swiss property. Its portfolio mainly comprises commercial and retail properties and was valued at CHF 10.6 billion at year-end 2017.
Integrated value generation
The Swiss Prime Site Immobilien business model generates value at a number of stages. It is based on strategic acquisitions of building land for new development projects and purchases of existing properties with stable revenues or significant transformation potential. In its cost/benefit analysis of possible new investments, Swiss Prime Site Immobilien takes account of such factors as the market environment, plot dimensions, floorspace, building regulations and other legal considerations. Potential site utilisation is evaluated on the basis of the most recent available data. When an investment is made, Swiss Prime Site’s first step is to establish a multi-dimensional business plan (covering utilisation, market conditions and target groups). The key focus is on generating substantial added value. Particular care is taken to ensure that market demand for the planned floorspace configuration and service offerings is as strong as possible.
Portfolio management, the third step in the value chain, serves to ensure stable revenues. The focus here is on minimising vacancy rates by configuring offerings to meet future demand trends and on managing the properties to a good standard while keeping costs under control. This also helps the company to generate profits from revaluations.
Finally, Swiss Prime Site Immobilien keeps a close eye on the life cycles of its properties. When market conditions are favourable, properties may be transformed or offered for sale. Sales immediately following the development phase generally represent an attractive market opportunity when specific demand arises. Strategic disposals, on the other hand, are largely driven by appraisals of future market trends.
Close collaboration within the Group
Swiss Prime Site Immobilien works in close collaboration with the other Group companies which use parts of its portfolio for their own operations. This enables the company to make rapid and focused investment decisions which then provide the basis for profitable retail and assisted-living operations.
There is symbiotic collaboration between Swiss Prime Site Immobilien’s real estate business and the Wincasa Group company. The latter has local market knowledge which is of great value to Swiss Prime Site Immobilien in developing its portfolio. Conversely, by administering the Swiss Prime Site Immobilien portfolio, Wincasa gains a reliable partner with whom to work on developing innovative services, such as the mixed-use site-management concept. The fact that both Group companies use the same systems and processes to manage the properties helps to reduce vacancy rates and ensures that ancillary costs can be invoiced to tenants more efficiently.
Opportunities and risks
Swiss Prime Site Immobilien operates in a dynamic business environment characterised by economic, social, political and regulatory change. The consolidation of the real estate market, the low-interest-rate environment and government initiatives to encourage greater urban density are just some of the developments which Swiss Prime Site Immobilien follows closely in order to identify emerging opportunities and risks.
Swiss Prime Site Immobilien paid particular attention to its vacancy rates in 2017. The company regularly reappraised its property strategy, developed timely and innovative transformation concepts and placed even greater emphasis on proactive communication with its tenants. All leases were also continuously stored and monitored in a central database. These various initiatives enabled Swiss Prime Site Immobilien to manage its vacancy risks actively, thus reducing vacancy rates to a minimum.
Beyond this, Swiss Prime Site Immobilien also devoted considerable efforts to reducing its concept and design risks in 2017. In order to anticipate the future requirements which will be placed on its new, forward-looking designs correctly, the company made a close examination of market demand. This enabled it to identify emerging trends in property use, to determine the activities in which potential tenants and commercial property operators are engaged and to take account of these insights in its design phase. By constantly updating its ideas and incorporating these and changes in market conditions into its project business plans, Swiss Prime Site Immobilien was able to reduce its concept and design risk considerably.
Swiss Prime Site Immobilien invested CHF 204 million in new projects and developments in 2017. At year-end, its portfolio comprised 188 properties. Thanks to enhancements to existing buildings, high maintenance standards and a reduction in vacancy rates from 6.1% to 5.2%, the company achieved revaluation gains of CHF 66 million on its rental properties in 2017. In order to ensure that it continues to generate sustainable yields on its properties in the years to come, Swiss Prime Site Immobilien ensures that it maintains a well-stocked development pipeline. Swiss Prime Site Immobilien has some 2 000 tenants, with whom it maintains an active dialogue. In this way, the company can incorporate their needs and activities into its plans at the design stage, thus enabling it to develop attractive offerings.
In accordance with the Group’s comprehensive sustainability agenda, Swiss Prime Site Immobilien made significant efforts to reduce the environmental impact of its property portfolio. The company also invested CHF 2 million in decontaminating the land earmarked for its Stücki Park project, thus ensuring that the new buildings will be erected on sound foundations (see the «Protecting the environment» section on pages 47 ff.).
A company can only be managed successfully if it emloys highly qualified, motivated and healthy staff. Swiss Prime Site Immobilien offers its employees attractive jobs. By designing flexible working-time models and taking active health-management initiatives, the company was able to keep absentee rates to a comparatively low 1.32% (see the «Attractive working environment» section on pages 49 ff.).
Maintaining active contacts
Swiss Prime Site Immobilien sees continuous improvement of its business activities as an obligation to its stakeholders. In addition to its tenants, these are seen as including society at large, local communities and government, as well as business partners and suppliers. In 2017, the company took part in Swiss Prime Site’s first stakeholder dialogue. The stakeholders attending that meeting identified developments/projects, green buildings/increased energy efficiency, vacancy management, market orientation, reputation and image as particularly important topics. Accordingly, Swiss Prime Site is focusing its sustainability efforts on these areas.
Tenants are the primary group with whom Swiss Prime Site seeks to maintain an ongoing dialogue. These stakeholders’ principal interests are the premises they occupy, the services they receive, the efficiency with which their buildings are managed and the ancillary local offerings available to them. Internationally active companies continue to expect particularly sustainable constructions and request certification to document that their properties meet their required standards. Particularly in its commercial properties, Swiss Prime Site is keen to achieve mutual advantages for its tenants. In the retail sector, for example, this can be facilitated by having a balanced mix of tenants, whose offerings complement each other. Strategic partnerships with anchor tenants and key clients can also help to extend business relationships. Swiss Prime Site Immobilien offers its existing tenants and other interested parties property-specific information meetings, property viewings and joint events attended by its construction project partners.
Swiss Prime Site Immobilien also maintains regular contact with potential future tenants. These exchanges help the company to be better prepared to meet the wishes of tomorrow’s clients. Topics covered in these discussions include questions on preferred locations, floorspace requirements, moving-in dates and specifications for possible extensions. At the ground-breaking ceremony held to mark the successful launch of its YOND project in Zurich Albisrieden in 2017, for example, Swiss Prime Site Immobilien carried out a so-called conjoint analysis to determine the requirements of potential tenants so that they could be incorporated into its design plans.
Swiss Prime Site Immobilien also maintains regular contact with local and cantonal authorities. This active dialogue provides the company with valuable insights into local perceptions of how particular areas are developing, which can potentially have a positive impact on the subsequent processing of planning permission requests.
Focus on costs and occupancy rates
In order to ensure long-term business success and continue to generate added value for its stakeholders in the future, Swiss Prime Site Immobilien focuses its attention on objectives such as reducing operating costs, cutting vacancy rates and optimising project execution. In 2017, increased management efficiency, energy savings and structured electricity purchases enabled the company to reduce its operating costs by 1 percentage point to 14%. Thanks to a pilot integrated project execution process applying lean construction principles, it was possible to shorten planning phases and achieve a higher degree of cost transparency. While this also resulted in additional savings and greater certainty regarding costs, the key objectives were to raise quality levels and promote innovation.
Swiss Prime Site Immobilien takes a number of proactive measures to maintain its revenue stream by preventing units from falling vacant. These include active, innovative approaches to marketing. Fast, streamlined processes help to enhance the attractiveness of its offerings by ensuring that the right properties are available at the right time. The company also reviews existing rentals with its tenants before leases expire, extending them wherever possible. Where potential is identified, Swiss Prime Site Immobilien also transforms existing properties to create new offerings and products. Renovation and refitting work is scheduled to match current leases, so that it can be carried out when premises are not in use. In 2017, the company reduced its overall vacancy rate to 5.2% and will strive to reduce it further in the years ahead.
Compliance social commitment
Dialogue fosters acceptance
When new properties are built, existing buildings are transformed or new large-scale projects are completed, new living and working spaces are created. As a real estate owner and investor, Swiss Prime Site Immobilien is conscious of its responsibility for the social, ecological and economic framework surrounding its properties. Sustainable urban and spatial planning is thus a key priority. The effect that new buildings have on local job opportunities should also not be overlooked. The value chain created by a building project helps to maintain local and regional jobs in the construction and service sectors. By investing in the infrastructure surrounding its properties, Swiss Prime Site Immobilien also contributes to their local communities. At the Sihlcity shopping centre in Zurich and the Stücki centre in Basel, for example, the company contributes some CHF 300‘000 each year towards the cost of public-transport links.
The planning for every project begins with an analysis of the specific characteristics of the site. What local offerings are currently available and what could usefully be added to them? How can existing social structures be supported or enhanced? With each of its projects, Swiss Prime Site Immobilien seeks to establish dialogue with local residents and authorities, politicians and representatives of the business community at an early stage. These discussions are initiated by staff in the portfolio-management and development departments and by Group Communications. Open dialogue provides important insights into the needs of a community, thus helping to ensure that new projects meet local requirements and deliver genuine innovation. Such exchanges can also foster the acceptance of a project, by explaining the advantages and added value that the planned developments will deliver. Furthermore, by evaluating local conditions and community needs at an early stage, the company can reduce the risk of objections being raised during the planning permission process, thus avoiding costly delays.
In 2017, the company worked with local communities to obtain construction permits for a number of important projects, most notably for the Schönburg und Weltpostpark in Berne, Espace Tourbillon in Plan-les-Ouates in French-speaking Switzerland and the YOND project in Zurich Albisrieden. By involving local stakeholders, Swiss Prime Site Immobilien also successfully initiated an innovative transformation of the Stücki Park in Basel. This project will transform an existing shopping centre into a mixed-use facility which will also include office space and a large multiplex cinema. By working with the canton of Basel-Stadt and the adjoining Basel Technology Park, the company will also be able to offer new laboratory facilities for start-ups and larger companies in the life-sciences sector. The new site configuration was also agreed with the local residents’ association, whose key priority was to ensure that it provides sufficent green spaces.
Commitment to the real estate sector and the business community
Swiss Prime Site Immobilien’s social commitment is focused on innovation, research and teaching. Initiatives in these areas are closely linked to its core real estate business. The company is a member of the Swiss Real Estate Investors’ Association (in German, «Verband der Immobilien Investoren»), on whose supervisory board it is represented. The Association’s objectives include the promotion of liberal market and competitive regulations and the representation of the real estate sector’s interests vis-à-vis the political and business community and society at large.
Data security is a priority
Swiss Prime Site Immobilien sets great store by complying with all applicable laws and regulations. This is central to its business philosophy and a key factor in maintaining the excellent reputation it has established. For that reason, the company always strives to justify the trust placed in it by its stakeholders – particularly in the area of data security. Swiss Prime Site Immobilien uses a tailor-made real estate database to support its portfolio and asset management activities and to enhance its collaboration with clients, suppliers and business partners. Data security is constantly monitored and evaluated. By digitalising more and more of its services, the company is also able to operate more sustainably, since replacing paper documents with electronic data formats saves resources as well as time.
Further information on data security can be found on page 29.
Sustainable investments and services
The health and safety of all those using its premises are crucially important to Swiss Prime Site Immobilien. The safety of its properties is guaranteed by strict adherence to all building regulations and requirements, safety-at-work directives and guidelines on barrier-free building design. Where relevant, the criteria for the various types of building certification are also observed. Requirements forbidding the use of hazardous materials are met by appropriate provisions in the company’s contracts with its suppliers.
Swiss Prime Site Immobilien works in collaboration with its sister company Wincasa to ensure the health and safety of its tenants. In addition to carrying out preventive measures such as evacuation exercises and fire-alarm tests, Wincasa also develops property-specific safety concepts for buildings exposed to greater levels of risk. At the Prime Tower in Zurich, for example, the Stop 2.0 project now ensures more stringent access controls, thus enhancing the safety of those working there.
Safety also encompasses natural and environmental risks. These are assessed by region and property and covered by appropriate insurance policies. The changing climate requires that building envelopes and technologies be adapted to withstand more extreme meteorological and climatic conditions. When purchasing properties, the company assesses their environmental risks as part of its due-diligence process. The earthquake resilience of all existing properties is assessed, with further specific checks being carried out on those in areas exposed to particular risks. Between 2016 and 2017, the company spent CHF 4 million on protecting and adapting its existing properties.
Sustainability throughout the supply chain
For the properties in its portfolio to be sustainable, the company’s supply chain also needs to meet the requisite environmental and social standards. Swiss Prime Site Immobilien’s general business terms for suppliers include requirements relating to quality management, safety at work and working conditions. In the case of new constructions and modernisation projects, the obligation to comply with statutory safety-at-work requirements is fully transferred to the general contractors and the companies they have hired. Before construction commences, an accident-prevention safety concept must be drawn up, which Swiss Prime Site Immobilien has to approve. No complaints regarding infringements of statutory requirements have been recorded at any Swiss Prime Site Immobilien site in the last ten years. Since 2017, Wincasa has managed Swiss Prime Site Immobilien’s construction projects on its behalf, and will continue to discharge the rights and obligations associated with these undertakings with the same diligence as previously displayed by its sister company.
The origin of all materials used in a project, such as carpets, façade coverings and premium-wood panelling must be certified, and Swiss Prime Site Immobilien takes particular care to ensure that all materials are produced in accordance with human rights conventions and its Code of Conduct. In order to raise its suppliers’ awareness of these issues, the company requires them to submit appropriate certificates and self-declaration forms. While Swiss Prime Site Immobilien plans to carry out a systematic evaluation of its suppliers based on ecological and social criteria, no such actions were carried out in 2017.
Protecting the environment
Demand for energy-efficient, environmentally friendly properties is increasing, with ever more tenants looking for buildings with ecological certification. To meet these needs, Swiss Prime Site Immobilien applies Swiss Sustainable Building Standards (SNBS) criteria to all its projects. New properties are built to demanding sustainability standards. Major buildings such as the new Swiss Post Office headquarters in Berne, the Prime Tower, SkyKey and Media Park in Zurich, the Stücki Park in Basel and the Opus 1/2 building occupied by Siemens in Zug have been awarded quality certificates such as Minergie®, LEED and DGNB.
Systematic energy savings
Across all its operations, the company has made greater use of renewable energy and higher levels of energy efficiency a key priorities. The YOND project, for example, has been simplified by dispensing with both active cooling and mechanical ventilation. Following a portfolio analysis based on various building parameters carried out in 2017, the heating systems used in 40 properties were checked against their planned refit schedules. This identified 20 properties whose current inefficient fossil-fuel heating systems will now be replaced by 2020. CHF 400 000 of the 2018 budget has been allocated to planning for this work. Roughly one third of the heating needs for the property portfolio is currently met by district heating. Since most of this type of heating in Switzerland is generated by waste-incineration plants, this is a more environmentally friendly solution than gas- or oil-fired systems.
In order to identify opportunities for increasing efficiency, it is essential to have comprehensive energy-consumption data. The company’s EC/BO energy-control and operational-optimisation system provides online energy consumption data which is updated every 15 minutes. Initially, 21 properties were connected to the system, with a further 57 being connected in 2017. The 2018 budget has allocated CHF 2.5 million to connecting a further 70 properties. By the end of 2019, 148 of the company’s current 188 properties will be on the system. By systematically analysing this data, opportunities for improving energy efficiency can quickly be identified and exploited. Over the last five years, the company has streamlined the operating costs of more than 90 of its properties.
Using resources responsibly
While the use of sustainable building materials and technical initiatives such as heat recycling and intelligent building-control systems can help to cut energy utilisation, behavioural changes are also essential. This means that tenants, clients and employees also need to be made more aware of the need to reduce energy and water consumption and to diminish the volume of waste they generate.
In order to reduce water consumption at its properties, the company collates and analyses water-usage data. Technical solutions such as tap aerators, dual-button lavatory flushes and smart used-water pumps are implemented to cut water usage. New constructions and transformation projects apply the standards required by the relevant certification bodies. The production of building materials also consumes large quantities of water. Swiss Prime Site Immobilien is currently evaluating the feasibility of modifying its contracts with manufacturers to reflect these concerns.
Like all other Group companies, Swiss Prime Site Immobilien is now reporting the resources it utilises in its own operations for the first time (see table).
Building on sound foundations
Analysing land and safely removing any hazardous materials it may contain is a routine procedure for Swiss Prime Site Immobilien. In 2016 the company carried out hazardous-material checks on the 184 properties it then owned as well as on its building land. The aggregate surface area analysed was 121.04 hectares. The individual surveys showed that the 27 properties (15% of the total) and 32.35 hectare (27%) had some degree of soil contamination. These provided the basis for formulating appropriate decontamination concepts and carrying out decontamination work which was monitored by the relevant cantonal authorities. The decontamination budget for the Stücki Park project in Basel amounts to CHF 4.3 million, of which CHF 2 million had been invoiced by the end of 2017.
Attractive working environment
Swiss Prime Site Immobilien employs relatively few staff, all of whom are highly qualified in their specific fields. For that reason, each employee receives individual management attention, with personal development and training objectives being set at each annual appraisal. Continuing-education initiatives are determined in accordance with market needs, with attention typically focusing on areas such as digitalisation, negotiation strategies and lean construction. The company places particular emphasis on developing its young talents. In 2017, a Group-wide leadership programme was launched which serves to establish a shared understanding of management principles and encourages dialogue between its participants. The first two modules – covering Active Leadership and Situational and Individual Leadership – were taught in 2017. The third module will be devoted to Successfully Leading Teams through Change. Employees are given the opportunity of attending events, trade fairs and presentations to broaden their knowledge and maintain personal networks.
Swiss Prime Site Immobilien sets store by retaining its employees, even when their personal circumstances change. This helps to foster diversity within the company and also promotes equality of opportunity. Initiatives to further these objectives include flexible working-time arrangements and support for mothers returning to work after childbirth. In 2018, Swiss Prime Site will evaluate a range of systems for measuring salary parity. No cases of discrimination were reported in 2017.
With its attractive salary models and fringe benefits, Swiss Prime Site Immobilien offers above-average conditions of employment. All staff, whether employed on a full-time or part-time basis, receive benefits over and above the statutory minimum. Contrary to widespread practice, company pension benefits, for example, are not reduced to reflect state pension entitlements. The real estate sector does not have any collective wage agreements.
The company has instituted a number of measures to minimise the risk of its employees falling ill. These include free influenza vaccinations and programmes to promote good posture, physical fitness and psychological well-being. Safety procedures have also been defined for emergencies and protective clothing is provided to staff visiting building sites.
SAP’s SuccessFactors human-resources application, implemented in 2017, has further enhanced the company’s HR processes and made them even more efficient.