Swiss Prime Site : Semi-Annual Report as at 30.06.2021

2021

SEMI-ANNUAL REPORT

Contents

• 2 Selected group figures

	3	Report on the first half-year of 2021
	6	Financial commentary on the first half-year of 2021

• 9 Consolidated financial statements

琀	屴 9 Consolidated income statement

• 琀 10 Consolidated balance sheet
• 琀 屴11 Consolidated cash flow statement
• 琀 12 Consolidated statement of changes in

琀	屴	shareholders' equity
琀	13	Notes to the consolidated financial statements
琀	28	Definition of alternative performance measures

• 30 EPRA reporting
• 34 Five-year summary of key figures
• 36 Property details

Reporting structure

Reporting consists of the semi-annual report and the review for the first half of 2021 (PDF available to download from www.sps.swiss). For reasons of sustainability, only the review is available as a printed version.

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S e l e c t e d g r o u p k e y f i g u r e s

Selected group key figures

						without
						Tertianum1
				01.01.-		01.01.-		01.01.-
Key financial figures		in		30.06.2020		30.06.2020		30.06.2021
Rental income from properties		CHF m		219.9		208.9		213.4
Income from real estate developments		CHF m	22.8	22.8	34.1
Income from real estate services		CHF m		58.6		58.6		57.6
Income from retail		CHF m	43.6	43.6	46.0
Income from assisted living		CHF m		72.4		-		-
Income from asset management		CHF m	4.8	4.8	7.5
Total operating income		CHF m		425.2		341.2		362.8
Revaluation of investment properties, net		CHF m		-⁜47.3		-⁜47.3	144.5
Result from investment property sales, net		CHF m		5.7		5.7		36.0
Result from sale of participations, net		CHF m	204.2		-		-
Operating result (EBIT)		CHF m		313.6		107.2		355.6
Profit		CHF m	269.7	64.4	257.1
Return on equity (ROE)		%		9.6		2.4		8.4
Return on invested capital (ROIC)	%	4.9	1.5	4.4
Earnings per share (EPS)		CHF	3.55	0.85	3.38
Financial figures excluding revaluations and all deferred taxes
Operating result (EBIT)		CHF m		361.0		154.5		211.0
Profit		CHF m	320.0	114.9	163.5
Return on equity (ROE)		%		11.3		4.3		5.5
Return on invested capital (ROIC)	%	5.7	2.4	2.9
Earnings per share (EPS)		CHF		4.21		1.51		2.15
Balance sheet figures			31.12.2020			30.06.2021
Shareholders' equity		CHF m		6⁜085.6				6⁜087.8
Equity ratio	%	47.8			47.3
Borrowed capital		CHF m		6⁜640.6				6⁜788.3
Loan-to-value ratio of property portfolio (LTV)	%	41.9			42.0
NAV before deferred taxes per share2		CHF		95.41				96.11
NAV after deferred taxes per share2		CHF	80.11			80.14
Real estate portfolio
Fair value of real estate portfolio		CHF m		12⁜322.6				12⁜457.6
of which projects/development properties		CHF m	829.5				1⁜031.4
Number of properties		number	185			184
Rental floor space		m2		1⁜673⁜005				1⁜654⁜518
Vacancy rate	%	5.1			4.7
Average discount rate	%	2.91			2.83
Net property yield	%	3.2			3.2
Employees
Number of employees as at balance sheet date		persons		1⁜728				1⁜677
Full-time equivalents as at balance sheet date		FTE		1⁜505				1⁜455

1 琀Figures without Tertianum Group (figures January and February 2020 as well as result from sale of participations). The sale and deconsolidation of the Tertianum Group took place on 28 February 2020.

2 Services segment (real estate-related business fields) included at book values only

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R e p o r t o n t h e f i r s t h a l f - y e a r o f 2 0 2 1

Good results in extraordinary times

Swiss Prime Site posted good results in the first half of 2021, with operating income of CHF 362.8 million and a profit of CHF 257.1 million, or CHF 3.38 per share. This is proof of how resilient Swiss Prime Site's business model is. Both the core Real Estate business and Services segment pressed ahead with the implementation of their strategic and operational goals despite the chal- lenges­ posed by the COVID-19 pandemic, which in some cases were considerable. The marked recovery in the economic and social situation from the second quarter of 2021 also played a role here. Thanks to the stabilisation of the epidemi- ological situation, the long lockdown, which had restricted life in a variety of ways and challenged us as a group, could be lifted. We remain optimistic for 2021 as a whole and for the years beyond.

Moving into the future with flexibility, digitalisation and sustainability

We have been grappling with the COVID-19 pandemic for more than a year. It is now slowly becoming evident what this means for our company in the long term. Location and quality - with an emphasis on «healthy buildings» - are still the key criteria for attractive office space. But flexibility is now part of the mix: the increase in working from home has become a reality in Switzerland too. Companies are therefore increasingly looking for central locations and high versatility for future rental spaces. They want to offer their employees hybrid models which involve regular time at the office. In addition to an attractive environment, this demands in particular ample room to move in order to quickly adapt to changing internal and external demands. We are ready to benefit from this trend with our properties in prime locations and also our innovative and flexible concepts, such as in YOND or JED. Demand for co-working, as a supplement to traditional rental contracts and in combination with home working, is also likely to continue grow- ing. To respond to this market trend and also lead the way here in the real estate sector, we are working together with selected providers throughout Switzerland. At several of our properties, we already offer our clients attractive, modern and flexible solutions for co-working, meeting places and workshop spaces.

Another take-home for us is that retail space in prime locations is still attractive, and will remain so. In July 2021, we recorded customer footfall at Jelmoli and other premium locations comparable

to pre-pandemic levels. Meanwhile turnover, with the exception of gastronomy, is similar to 2019 levels. Re-lets and first-time lettings in Zurich further confirm this. The increasing number of omnichannel concepts is also feeding demand.

«Prime locations are still attractive and will remain so.»

Another impact of the pandemic is the dizzying acceleration in digitalisation. As a company, we made the decision years ago to be a pioneer in this area with significant investments. In 2021, we are now seeing the first results of this decision. For example, we put our new ERP system for Jelmoli into operation at the start of the year. The platform provides real-time data so that our brand and category managers can respond quickly and flexibly to changes. Jelmoli's new online store also runs on this platform, which has integrated warehouse and order management. Other digital components will also go live at Wincasa in 2021. Following on from «Sihlcity» - the shopping and entertainment centre - the airline company Swiss is now the second major customer to be connected to our new, fully digitalised core system. Since August, we have also been rolling out our «Wincasa Home» tenant app to around 30⁜000 tenants throughout Switzerland. New construction projects for our properties are now managed mostly digitally. Third-party customers will follow in the next few months. Further milestones in Wincasa's digital transformation will follow. All these projects have a common goal: we are reducing the manual work- load, are becoming more efficient and flexible and can therefore offer our clients a better, customised service.

The pandemic has once again shown us as a company how important sustainable management is. As a business, we have been committed to comprehensive sustainability for some time now. To embed this deeper within the organisation and define the associated goals, we set up a Sustainability Board two years ago comprising high-calibre members. The Environmental Policy and Code of Conduct for Suppliers that we drew up and implemented in 2021 was just one of the outcomes achieved. We prioritise the topic of sustainability, particularly in the context of our property developments and modifications, and are pursuing the goal of achieving climate neutrality in our portfolio before 2040. In Swit- zerland's first ever large-scale circular economy project, on Müller- strasse in Zurich, we were pleased to sign a tenancy agreement with Google.

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R e p o r t o n t h e f i r s t h a l f - y e a r o f 2 0 2 1

«In Switzerland's first ever large-scale circular economy project, on Müllerstrasse in Zurich, we were able to acquire Google as a tenant.»

The property, in which existing materials and components are to be reused, will become the third base in Zurich for the technology company. In the first half of 2021, we also launched our second green bond with a volume of CHF 300 million. Demand for this bond was again very high. It offers sustainably-minded investors the opportunity to invest directly in green real estate and the reduction pathway. We are also making great progress in these areas. In the past three years, we have reduced the CO2 intensity of our investment properties by around a quarter. In addition, development projects are being planned as carbon neutral and certified to internationally recognised standards such as SNBS, SGNI, LEED and BREEAM.

Higher rental income and lower vacancies in the Real estate segment

Although the situation remains challenging, we increased rental income in our core Real estate business by 2.2% to CHF 213.4 million [CHF 208.9 million excluding Tertianum]. The growth was driven by new tenants moving in during 2020 and early 2021. One highlight is the JED project in Schlieren, which we were largely able to complete by the summer, marking the opening of the adjoining park with a small ceremony. We have also cut vacancies by 0.4 percentage points to 4.7% since the end of 2020. Overall, in the first half of 2021, we signed new or renewed rental contracts for a total of more than 47⁜000 m2 of space across the entire real estate portfolio, reducing vacancies in the process (previous year: 41⁜000 m2). The volume of leased office and retail space has increased significantly, especially in the second quarter 2021. As mentioned above, Google will move in as a new sole tenant on Müllerstrasse in Zurich from 2023, occupying a total of over 15⁜000 m2 of rental space. We are delighted to provide the company with attractive, flexible and above all sustainable rental space. Contracts were signed with two anchor tenants for the promising Alto Pont-Rouge project in the canton of Geneva.

«We have cut vacancies by 0.4 percentage points to 4.7⁜% since the end of 2020.»

We are implementing the project pipeline as planned. Projects with an investment volume of CHF 902 million (including land) are currently under construction. In the first half of the year, we invested CHF 110 million in this area, creating significant value. Other projects with an investment volume of CHF 539 million (including land) are in the planning stage. At the same time, we are continuing to optimise the portfolio. For example, we sold another building in the Espace Tourbillon project in Geneva on attractive terms. Along with an investment property at Stadelhofen station in Zurich, which was also sold at very favourable market conditions, we have already exceeded the targeted sales profits (target: CHF ~30 mil- lion) for the 2021 financial year with CHF 36 million in the first half of 2021. We also acquired a plot with good development potential for city logistics in Zurich-Altstetten.

New clients, higher revenues and digitalisation in the Services segment

In the Services segment, we achieved operating income of CHF 135.1 million. Adjusted for Tertianum, this was a 3.8% increase year-on-year.

Our real estate asset management business for third parties, which is operated by group company Swiss Prime Site Solutions, enjoyed particularly buoyant growth. For our client Swiss Prime Investment Foundation, we launched the investment vehicle «SPA Living+ Eur- ope», which is designed for European retirement living, indirectly giving us a foothold in the very large and stable German market for the first time. The first transactions have already been completed. In addition, the Swiss Prime Site Solutions team arranged an issue with a volume of CHF 91 million for the SPIF Real Estate Switzerland investment group and made acquisitions of around CHF 118 million. In the first half of 2021, we also acquired an important new client in a competitive process, whom we will help to build up a portfolio. This is impressive proof of our strengths in winning over real estate investors with our services. Last but not least, we also took key steps to expand our business model. At the end of the first quarter of 2021, we submitted a fund management application to FINMA. As soon as we receive approval, we will be able to launch our first product. Preparations are well underway. Assets under management increased from CHF 3.0 billion at the end of 2020 to CHF 3.2 billion as at the end of June 2021.

Wincasa impressed an important major client with its range of services so that the term of the main contract was extended by a further five years until 2026. The transformation of the business model is ongoing and will allow us to continuously add additional services to the new platform. Assets under management increased from CHF 72.0 billion at the end of 2020 to CHF 73.6 billion at the end of June 2021.

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