Ladies and gentlemen, welcome to our media conference. Today, this is the agenda that we are having. You're familiar with it. A short welcome then the highlights and the key figures for the financial year outlook and expectations. And 5, we're going to have question and answers.
And 6, Apero Riche. As people like to say, the business year is 1 with a record result. Operating income rose by 3.7 percent to CHF 1,258,000,000,000 Profit rose as well. Clearly, as you can see here. The property portfolio went up as well to CHF 11,800,000,000 revaluations rose as well.
Everything rose. Vacancy rate went down though by 0.1 percentage points and the Annual General Meeting will propose a distribution of CHF3.80 per share, and a new Chairman of the Board is going to be elected, of course.
And
this is a quick overview. We would like to dig further into it. Let me hand over for the first perspective that is going to be highlighted to the CEO, Rene Zandt. Thank you, Hans Peter, and good morning. Welcome to this media conference.
It's always easy to be able to stand here when figures are not too bad. We will are certainly happy with 2019. Now talking about the details, we had a rise in the property portfolio by 5% to, as it was said before, CHF 11,700,000,000 and an increase in operating income by it reflects top line CHF 487,000,000 on to rental income, which is always highly essential as it reflects top line CHF487,000,000 or a plus of 1.6%. And at the level of EBIT, we've got a nice increase in excess of 30%, 31 point 3 percent to be precise, up to CHF628,000,000. Now of course, this is the figure that we are particularly pleased with.
That's profit of CHF609 1,000,000 which is more or less doubling profit over the previous year. You can see the small asterisk. Of course, this doubling was to do with a one off tax effect of around CHF 173 1,000,000 but it's also related to revaluations and I'll touch upon the details, revaluations which we had a positive impact on ourselves. Then the equity ratio rose by 50 basis points to 44.4 percent. Profit or earnings per share is CHF4.14 and our Chairman would of course say you earned your dividend of CHF3.80 which we would like to pursue as our objective.
And we also have a nice increase on our net asset value up to around 72%, a plus of 6 0.1%. And I keep repeating it, bear in mind that this figure includes the services segment only on the basis of book values. Moving on to the property portfolio, I'll talk about revaluations later on. So I'm not touching upon it at this point. Net property yield continues to be ratifying at 3.5% versus 3.6% in the previous year, 0.1% less.
The discount rate, as you can see further compression on the discount rates on to currently 3.06% and the vacancy rate, as the Chairman mentioned before, went down slightly versus the previous year from 4.8% to 4.7% and compared to the first half year in 2019, 2018, it evolved stably. What's portfolio? The largest share is, of course, offices, office space. And let me mention it, retail, the retail share was reduced considerably from 34% to currently 26% in recent years. Now saying this that retail share was reduced.
Well, retail is not retail and the locations are not all the same. We went through the different locations, so high street, A or B locations. And when we reduce then in terms of B and C locations So these were smaller sales that we proceeded to last year. It is also interesting to look at the majority profile of rental income, Walt, in excess of 6 years, that's nice, and around 20 5% or to be precise, 22% with a maturity of over 10 years. This 22% specifically includes tertianum rental income.
Now this chart, you'll be able to read at home in detail. I'm not going to present everything but just pick up the highlights. Letting success. This is what we are measured against, 128,000 square meters or 8% of the entire portfolio was let a re let last year. Nice figure, I think.
And for sales, I mentioned it before, we streamlined the portfolio of selling smaller properties including some retail shares, C and B locations of retail and it's also exciting to look at the condominiums at Plan les Wat commercial property there, not residential property. And Peter yesterday said who invented it? Well, he invented it, by the way. This really is an interesting model, I believe. The sales have proven us right.
I will show you a picture of the office. We are convinced we will have let it by the end or sold it by the end of the year in for condominiums. And finally, project developments, I'll show specific charts about this. We purchased some things there. We live on the property.
We have project developments that we're taking over in the portfolio. So it's a matter of adding to this portfolio, you will see the figure of €2,000,000,000 on the portfolio. We want to maintain it. Now what development properties? Well, we reinforced ourselves in Praia Casia Verne, PAV, that's this future big development property by the Canton of Geneva and the city of Geneva behind Pont Rouge, behind the new train station, which is the introduction to the new development plot and we secured some plots there for the long run.
It will take some years, but then it will be an exciting environment for the entire Canton of Geneva. We also bought some development plots at Ooster to round off our portfolio there to be able to develop a larger building there and at Ouchstein, the Canton of Basel, Allant. We also purchased to reinforce top line quickly on the basis of rental income, we purchased fully let properties in the field of logistics in the region of Basel and for office space in the region of Bern. Moving on to portfolio management. What stood out last year were the negotiations and the closure of a new rental agreement with this tenant that you can see here this location.
Remember, we bought it in an asset swap with Credit Suisse against Seal City and we also took over Worblaafen fully to our portfolio and we're given other properties, but the focus is on this property, the current tenants, is no secret. It says here in the chart, it's Swisscom and they will move out and move to district number 5 in Zurich, so releasing some of the surface here. So the question is, is that a risk to have a vacancy there or is it an opportunity? Well, it turned out to be an opportunity. We clearly let these Now I promised I would talk about reevaluation gains.
If you look at this and analyze it in detail, you will see that one part of the reevaluations is to say, well, we were lucky. That was driven by the market. Well, it was driven by the market to the extent of €65,000,000 that's discounting, the reduction of the discount rate that was due to the market. That was not our achievement, but our own achievements So what we generated internally is active portfolio management, a large share of the €110,000,000 of revaluation gain is attributable to Muhlerstraase. And of course, it was one of the objectives in project development, further €28,000,000 of it is from the development business, and that's how you get up to the total of €203,000,000 revaluation gain.
Moving on to buildings under construction. Let's specifically talk about the project pipeline. Over on the right hand side, you can see that the pipeline in total is CHF2 1,000,000,000 but the composition is different than from the past half year. We're taking you on the journey. There are developments that we have already transferred in the portfolio and the amounts that you're seeing there for projects under construction or being developed or reserves are always adjusted to the current situation.
So these are the updated figures, dollars 560,000,000 projects under construction. The 560,000,000 do not include any more projects, the projects of Schoenberg, Bern and Yond. They've been taken onto the portfolio. You can deduct them and the others add up to €560,000,000 So what is interesting is what we're going to transfer to the portfolio this year. That's Westlog and you'll see a picture of it and Stukipark 1, the first part of the finger docks and conversion of the former NZZ printing shop.
Just to show you a quick succession of pictures, Yond has been let to the tune of 90%. We're doing very well there. And we told you it was going to take some time and courage to do that at a pre letting level that wasn't at 50 percent. I think we can say that, Peter, now that these hyper large rooms and the mezzanine flows, I think you need to see that first. You need to sense that first before you accept it and find it good.
And as you can see, the market welcomed it very well. We're at slightly above 90% of letting ratio and it's already on the portfolio of Swiss Prime Sight. Same goes for Schoenbergen. It says 95% let here of 142 apartments. Yesterday, 138 have gone.
So 4 are still available. The hotel is fully let, retail space is fully let with co op food and the gym, the co op gym has also been fully led. So it's a wonderful story, the transformation of an old office building of the Swiss Post. And over on the right hand side at a letting ratio of 85% with Elektra Montreal as a tenant, we have this logistics office as you come into Zurich. And over on the left hand side here, this is the well known picture of Espace Tourbillon, the 5 commercial buildings from A to E.
To remind you, we sold C and T, Building C and D. They were sold to Hans Wilfthorff Foundation 2 years ago and the condominium segment is now being performed in building A, the smaller building. We will have sold that by the end of the year on the basis of our analysis. And we're keeping on our portfolio have various options for buildings B and E. The first stage then at center of the former and so it's a printing shop and we have a picture of the old situation here.
The first stage over on the right hand side of Stuki Park, the first two buildings here that we're going to take onto the portfolio in the course of this year. Now we have under construction 2 projects for Tersianum, 1 based at Monte, the other one at Richterswil, fully let both of them and I'll be coming back to these projects. So these buildings, we haven't sold them. We just sold the business, but they will remain Swiss prime side property or ownership. Now in terms of planning, we are planning for around 950,000,000 worth of development projects beginning from the bottom, Terciano Terciano at Paradiso, then Jet 2 at Schlieren.
That's a new building, new construction set that we're erecting next to the ANZZ printing shop. I'll be coming back to this. Then we've got Alta Port Rouge. That's the office building, the tower directly at the new railway line, then Stuckey Park 2, that's finger docks numbers 34, Munstrasse. Well, that's of course among the projects because it will be empty one day when Swisscom has departed, it will be empty and you can see it on the basis of the amount.
It's a deep intervention in the structure that we're making there to make the building fit for the new owners. And that's why it's in development. It's not only greenfield developments but also developments on the portfolio especially in cities and then we also have Rheinstrasse at Augs. It's a plot that we bought at the end of last year and we are also showing here Marglive, the development project here on this particular site here. Now where do we stand when it comes to these projects?
You're familiar with this slide from the last conference we had. Well, it says whether we have submitted a design plan, whether it's been approved already or where we have an architectural contest. The design plan has been published in Alton. Zone plan is underway at Alst and we have an architectural competition for MARG Live here and we have submitted planning applications from Paradiso and Lugano and it's being prepared for Munezstrasse and we have received building permits for Alto Port Rouge, the new building at Schlieren and the former Buildings 34, the finger at Basel. And at the bottom, I'm not going to read that off, you will find the pre letting status with regard to the various projects.
So much on the real estate property core business. Now let's talk about services segment. Now what shall I mention here? We set an interim objective of EBIT from Winkauza and Tarsianum to be more than 50,000,000 by around 2020. We achieved this objective 1 year early in 2019 EBIT contribution.
Aggregate EBIT contribution from Vinca's and Tercianum amounted to 51,700,000. So this interim objective has been achieved. Now for the various units, Wincarza, we have a nice increase in assets under management to CHF 71,000,000,000 and also a very nice gain of new mandates. It was mentioned yesterday, we won over BLS and Swiss clients Dominisse from the French speaking part of Switzerland. So these are all nice names to add to client portfolio.
We have an EBIT margin of 12.3%. So certainly, across Switzerland, we're doing well on the basis of a comparison to others. Now this is Wincarza business. What else does Wincarza do? And we also invested a lot of money in digitalization.
Of course, management has to be digitalized, especially all the residential businesses to be digitalized end to end. It's no use. Just digitalizing one part of the onboarding process, the idea is that everything should be digitalized from applications to handover of apartments. Everything should be done in a digital manner if possible. And of course, the important part of management will be less about apartments.
Well, apartments that become vacant will be full again tomorrow, but the risk is where we have clients who've rented 15,000 or 100,000 square meters of office space and that's where we certainly need personal management. We purchased in a platform called Stream now. It's a tenant landowner platform that stands for everything is residential. This platform, of course, is not only to be there for residential, but also for other products in the market. Then on to Yalmoli.
Next Monday, if anyone is flying off from Zurich, next Monday, we're going to open the Yanboli shop at Airsite, not in circle yet, but at Airsite, we're going to open directly after the X rays, I would usually call it. You get to not to the gate, but to Yamoli first. We're looking forward to this opening and the opening the surfaces and circle will be opened between the 1st and the 10th September. The 10th September will be the official opening of the circle at the airport. And you're familiar with the name by now.
We're happy to have won over a new CEO for Yellmoly, a female one who can start earlier. Her official start which we're communicating today will be April 1, 2020. Swiss Prime Sight Solutions had an excellent year, not only increasing assets under management by CHF2.3 billion, but also they extended the contract early on with Swiss Prime Investment Foundation by the end of 2023 and this one year before the expiry of the contract. These are nice indications that we are always happy to hand back to our clients. And as you can see, EBIT increased from CHF4,200,000 in 20.18 to CHF7.8 million in 20 19.
Terms of as we communicated before, we are selling Tersianum. To be precise, we're selling the business, the operating business, but we are retaining and you can see this unveiling of partnership. We are retaining the 16 investment properties that we already have on our portfolio and we will also retain the 2 projects under construction and the 2 under development. So we will have a total of 20 investment properties that are used by Tersyanum and that will remain on our portfolio. Closing, here it says expected by the end of February.
I can tell you that closing will be tomorrow from 7:45. So closing, it will be tomorrow Friday 28th February. And for the implications, I'll leave it over to you, Marcus, to go into the details there and the results. Now so much on my part, let me hand over to Marcus, our CFO.
Ladies and gentlemen, I would now like to talk to you about the financial figures of the excellent year 2019. We had growth in our core business, real estate in terms of rental income and proceeds from property sales. We also had strong growth in assisted living in Terceano as planned due to opening new operations, but also due to the excellent vacancy rate. And Chezyanam is going to leave the group tomorrow. And in any place where this has considerable effect, I will point those out to the extent that we already can do now.
But of course, you will get the full results in August when we present the semiannual results 2020. We also saw growth at Vincasa and Real Estate Service Provider, both in construction management and management fees. And we also saw a very strong growth of asset management fees for 3rd party clients via Swiss Private Solutions. Now let's start with the main element of yield net rental income at group level, which grew by 1.6 percent to CHF 486,900,000. And like EPRA, like for like.
That means that the identical portfolio, 20 2019, from then, we had a 0.8% growth. From sales and acquisitions, we were able to generate an additional 3,000,000 in rental income. That means that new acquisitions more than compensated for sales of properties. The rental income from acquisitions
were
not so much from 2019, but from the previous year when we carried out the edit asset swap with Credit Suisse, where we were able to swap 24% share in Seal City against 49 percent share in an office building in Waer Blaufen with Swisscom as a main tenant and 2 other prime location properties such as Mulostrasse, I already mentioned. The city swap also reduced our retail exposure to 26%. And the also the acquisition of Beethovenstrasse in Zurich also helped us to increase our rental income to by another CHF2 1,000,000 last year. And we had CHF10,500,000 reductions in rental income, mainly stemming from the Seal City asset swap. But it could also be attributed to the sale of the retail properties at Barmholst plant in Bern and on Rue Croix D'or near Rue du Rhone in Geneva, a major shopping street at low yields.
And we also lost €2,300,000 due to modernization refurbishments. This happens sometimes, but these are necessary parts of active portfolio management. And we showed that we can be successful in that, for example, with the Motel 1 in Spa and in Zurich. This time, it was about Stuckey Shopping Mall where we can't have rental income for a while due to modernization, refurbishment and also the a one shopping center, shopping mall, which is now being reconverted into a specialist retail sale space and also the refurbishment of the former OBS property on Bar Crusoeplatz in Basel. This is an Italian fast fashion store.
It's no longer fast fashion. To remind you, in 2018, we were able to find new tenants for all of the properties in the second half of twenty eighteen. But now we are going to have a financial service provider and other service providers at Bafuso Platts in Basel. And we also generated €2,400,000 rental income from Tertianum, which is going to stop as of tomorrow and also €2,400,000 from Finnish projects excuse me, it was €2,000,000 from Tertialum and €2,400,000,000 from the Finnish projects such as Yonden Zurich, Aldersrieden and Schoenburgen burn. And we also have some rental contracts from Finnish developments, Schonburg and Bern and Johnd in Zurich, which were rented out at the end of 2019.
And of course, we have some room for improvement here because we are going to get rental income from this year. At group level, we are going to get CHF 65,000,000 less like for like due to the TasiAnum sale. So if you see the rental income guidance on the developments, this 2019 bar is going to show net €65,000,000 less. This chart shows the distribution of operating income, the top line in other words. And you can see the distribution of EBIT total of CHF628,300,000.
Total operating income grew by 3.7 percent in both segments, both properties and services, 2% in properties, mainly due to rental income, which is and also POC valuations of the 2 properties, MondeWarte in Geneva and Berpos Park in Bern, a residential property. The sales the turnover from property developments was CHF 80,000,000 last year, CHF 7,000,000 above the previous year, but we also had expense from property development of CHF 63,000,000 in 2019. The growth of operating income in the services sector shown on this chart was CHF 38,000,000, 32,000,000 from the Wincarza growth contribute here as well as a strong €5,000,000 from our asset management for 3rd parties. At the center, you can see the distribution according to segments. You can see quite clearly that we are a real estate company.
And the EUR 573,000,000 are the core business of Swiss Prime Side, which is properties. And the services segment accounts for CHF 34,000,000 EBIT from Tertianum. This is a strong increase over the previous year, which is due to the continued ramp up, adding new operations, but also an improvement in the vacancy rate. The CHF 34,000,000 will not be shown like for like anymore for 2019, but they will be compensated via over time through additional rental income from developments. And 2020 is also going to show onesix of the EBIT on our account because deconsolidation is for the end of February.
With CARSA, Top line growth, as I mentioned, for construction management and management fees, euros 70 €1,000,000,000 And you can see the effect of the digitalization process via the introduction of their digital business model, namely customer value center platforms and systems. These have a temporary above average negative effect on the EBIT here. Gellmori had a difficult year. It was a good year for food and gastronomy, but not such a good year for fashion and non fashion. Business before Christmas was also did not meet expectations.
So we are very glad that the new CEO is going to help us prepare the way for more success in the future. Then, plus Prime Sight Solutions in Asset Management for 3rd parties was truly excellent. Now here you can see the condensed P and L of Swiss francaisde. We already mentioned the yield then also revaluations on properties more than CHF203 million. That was a strong year, which reflected the portfolio quality and the contribution that the portfolio management and the developments make here because twothree of revaluations come from our operative business and are therefore not due to the lower discount rate.
The 16 basis points to 3.6 percent was reduced, and this would be 3.58% in nominal terms. The big revaluation successes were very much centered on Zurich. Zurich West, the prime tower and neighboring buildings, these also at Beethovenstrasse and Mullerstrasse, prime locations and the Sky Key Zurich Oerlikon, they all helped us achieve these revaluation results. And also, developments also had a positive contribution on revaluation effects, for example, Zurich, Jetland and Basel and Mouraju and also the Stuckey Park in Basel, the finger docks, this is not the mall, but the Tinger dogs that are currently under construction and which have a very positive effect on our revaluation results. And sales success, €20,800,000 In total, these are sales of Yield properties.
And we also have to add the POC gains, another CHF 17,000,000 almost. And in terms of POCs, we are going to be able to show more gains over time. Then operating expenses have increased considerably by 4% to CHF 856,000,000, very much driven by the planned growth in assisted living. At Tatianum. The personnel expenses, in particular, come into play here and This concerns both the guests and the personnel, and that shows that it is very personnel intensive business.
And so of the CHF568 million, CHF287 million are accountable to personnel expenses at Tatianum. It's also a major operator of properties. So this also is quite a large expense item. So now that we are selling Tatiana, the this will halve our operating expenses. So this is going to have a strong effect on our results and also, of course, on our headcount.
We currently have 5,100. We've seen a growth of 5,100 to 5,400 FTEs between 2018 2019, but the deconsolidation of TasiAnum is now going to reduce this number to 1400 FTEs, mainly at Rincasa and Yamalik. Financial expenses. We have been able to show have optimized financing in a low interest environment and a similar maturity structure to previously. And a very special figure, the tax expense is actually positive, EUR 50,000,000.
This is the staff effect, the effect of the tax reform in old age dependent pension insurance, which was accepted by a referendum on the 19th March 2019 and is going to be introduced here this year. And so this has led to reduced corporate rates in many cantons, and this has had a very important effect for us, particularly Baselstadt, Geneva and Zurich. We have been able to release our CHF 173,000,000 of deferred tax reserves. And we still have deferred tax reserves of €1,100,000,000 in our accounts, just to put things into perspective. So this has led to doubling of profits on the per end of year to CHF609,000,000.
Before in terms of profit reform revaluation effects, this is an increase of 10% of CHF 315,700,000. This is the development of the real estate portfolio, financially speaking. The main growth driver is the growth from development. It accounts for 316,000,000 euros and it shows that we are able to develop and we are able to sell at much higher yields than with our existing properties. So this is very positive indeed.
We are able to be very active in the value generating part of the business and show some considerable growth here. The main developments have already been mentioned. We also have value increases on existing profits properties. These account for CHF291 1,000,000 and also include revaluation gains of CHF218 1,000,000. We also had some saw some acquisitions worth CHF67 1,000,000.
Two properties with development potential for the future, the one in 2 Corridor in Geneva and in Alst. Alst. And we also saw and this also adds to bring us to the CHF 67 Then we also sold the properties, 9 in total, CHF 440. This is one was a very valuable property on Rue Croix D'or in Geneva and 8 other properties in
B
locations with predominantly banks as tenants and retail as tenants. So we have been able to improve the to concentrate the high quality properties in our portfolio. The divestment of TOTIANUM is not going to have any considerable effect on our real estate a considerable effect
on our real estate portfolio.
We are still we still own assisted living properties. We feel that this is an area with long term rental income and allows us to diversify our real estate portfolio. So it's going to continue to be part of our investment policy. Let's take a look at Equity Development. Here, we can see the payout of CHF 290,000,000 and the annual profit, which is driven by the revaluation gains, the onetime effect due to the release of deferred tax reserves.
This leads to a very solid equity ratio of 44.4%. The Terxyanam effect here from you probably know that this leads to recycling of goodwill as part of deconsolidation. CHF 300,000,000 are going to be able to be added to the goodwill, and that's going to strengthen our equity basis. But we will be able to show you the profit from the transaction in 6 months' time, which will also help to strengthen our equity position. We're also going to lose some assets, which will lead mean to a reduction in equity in middle two digit million area.
We have continued to optimize our financing structure. We are doing this very calmly. So we optimize and update our structure all the time. Last year, we issued EUR 350,000,000 in the spring and EUR 170,000,000 in the autumn to extend the duration. But also the EUR 200,000,000 bond, which was matured at the end of the year, was refinanced prematurely.
And the maturity structure is still very well balanced. And the average interest rate is 1.2% and the average maturity is 4.2 years. The loan to value ratio of our properties is 45.7%, and this is going to be reduced to below 45% due to the Tatianam divestment. So that's the finances. And now back over to Rene Zandt.
Thank you, Markus. Moving on to the outlook and expectations for 2020. Well, when he goes through the media or even a week ago, compared to a week ago, things are changing fast and I would want to touch upon that but also talk about the positive outlook with regard to our portfolio, beginning with the capital market here in this chart. Well, this is now rocket science. You're all familiar with that.
We're continuing to assume a policy of negative interest rates and Swiss National Bank has confirmed its expansionary policy. In terms of politics, it was gratifying to see that the referendum on more affordable homes, what the outcome was and we only have 1% of apartments in our portfolio. So one might say, well, okay, that's not too bad. But it's important for our customers and managed by wind cars, for instance, or the large clients treated by solutions with 50% of residential share, it was of course essential for this referendum not to go through. Another important point would have been important for us.
I always warned about the prepurchase right for the federation and the municipalities, which would not have only been hampering project development, transaction market. Now you know that the prepurchase right according to Swiss law means that you would have to find an agreement with a buyer and then have 3 months' time whether to find someone who would enter at the price. And this period of time, the whole thing is now off the table with the decline of this referendum. As far as population development is concerned, I won't want to make a statement. Now over on the left hand side, the about the economy, I have corrected this part 3 times and revised it downward without exaggerating.
It's really not fair to say that the current situation with regard to coronavirus will not have an impact. Now we were looking at GDP growth in Switzerland, which is closely related, of course, to international competitions such as the Olympic Games in Tokyo, you're aware that a lot of money would be channeled back to Switzerland. Now whether they're going to take place, we'll see. But expectations, of course, have been revised down when compared to what was communicated at the beginning of the year. And then and this is to do with the current situation, of course, is the question of the virus, coronavirus is that we are strongly dependent on China.
The question is how fast is China going to recover to ensure supplies to the world. I think it will probably take more time than we might be imagining. So this is an increased risk in parallel. To this, we have a risk that is always there in years where we have an election in the United States of America. We're going to see what's going to happen from now to November.
And is this certainly be absorbed by the market. Schoenbergenbrand is the proof of the pudding. If the site is good, you have no problems neither for residential nor for office or logistics or other fields. So we remain guardedly optimistic also for this year and we have seen that the rental income that we were able to demand from crime sites, office sites in Zurich have has gone up. So there is potential there.
So much for an outlook on 2020, I would say we are guardedly optimistic, but certainly slightly muted due to coronavirus and it would be good for the press to write about sustainability. For instance, why am I showing this slide? This chart shows many things. I'll take you through it. You've got this hatched line.
That's the current residential population in Switzerland. Let's say it's 8,500,000. And you have the time axis here on the horizontal axis beginning in 1950 and going as far as 2050, that's CO20, that's the government's objective. Where do we stand today? Go to this bar, we are at 6.5 equivalent ton emissions per capita per year, 6.5 tonnes.
Now if you see the composition of it, then our industry accounts for around 1 third. That's building technology and buildings as such. And if you want to take this down to 20, 23 by 2,050, you can see the wall here. The wall means you have to begin to respond today. When you construct today, the buildings will be there for another 60 years and if you don't build in an energy efficient manner, this slide is never going to be any better.
So this clearly shows you where our efforts have to be. And the question is how do you respond to this as a business? There are companies that purchase buying certificates. I'm not in favor of that. I don't think this is a good avenue to embark on.
We need to work on our own possibilities. That is why we developed our reduction pathway, CO2 reduction pathway. We took the entire portfolio. That's about 1,600,000 of square meters of space and we looked at it and said, well, let's take heat thermal energy, for instance. What's the first step we would do in the portfolio regarding thermal energy?
We're going to perhaps take out all the oil heatings from the portfolio. That's step 1 and you end up with natural gas or better. The second step is not to have any fossil energy anymore but remote heat for instance or a share of renewable energies of 40%. And the 3rd step would be to double the share of renewable energies inside our own portfolio. That's for thermal energy only.
Now for electric energy or power, we are going to use hydro power or solar power to adjust to there. Now so much for energy and it would be absolutely stupid once you've settled the energy part. You have buildings that cannot store this energy. That would be bad. That's why we're investing in refurbishing the building shells.
That's about €150,000,000 for 30 years. That's €20,000,000 of investment in building shells. And if you want to top that off, you cannot only build 0 energy buildings as with the project Jed at Schlieren, but you can use the buildings as power stations. So the buildings would produce a plus of energy. We're not that far yet, but if we then manage that not we Swiss prime side, but we as technology providers, if we manage to save or store the power we produce and then use it when you need it, we will have taken a major step.
That's our CO2 reduction pathway and if we do all this, we will be by we will be on CO2 free emission free by 2,040, 10 years early on, but it doesn't cost any more. The question is just whether you invest in the right thing at the right point in time. And if you tackle it early on, that is to say now, you can make it. And then we will have made a significant contribution. We have an impact on this gray bar, and we will have made a significant contribution to eliminating this gray bar, so much on the CO2 reduction pathway.
Moving on to guidance, beginning on the right. For guidance for 2020, we've already mentioned that we're going for a vacancy rate despite the new projects that we're going to take on the portfolio of below 5%. Profit expectation, Markus Mayer already commented on, we expect a significant increase in profit prior or before revaluation and deferred taxes due to the sale of the business of Tasi Arnhem and we continue to be able to we believe that we can continue to be able to have an attractive appealing dividend policy. And this chart, we keep updating it. That's the current pipeline.
We have a total of 84,000,000 of additional rental income by 2025. This is rental income from those products or projects under construction or being developed. What is not included here is potential rental income from reserves, the €500,000,000 of reserves that we have and why so? Well, we don't even know what we're going to do with these reserves, so we cannot calculate potential rental income. So that will be additional rental income from these are from projects under construction and in development.
And the area hatched in red includes rental income that we won't have anymore from Tarsianum, but we will present this to ensure you can have a like for like basis for comparison with and without Tarsianum. And if you add all this 2022, you will come up to 30,000,000 75,000,000 or 320,000,000, €320,000,000,000,000, euros 75,000,000,000 are like for like without having to readjust any other screws and thus compensating for the loss of Tocyanum. Now let's move on to the question and answer session, and let me hand over to Hans Peter Weli at this point.
Thank you for your presentations, and I'm now happy to take your questions. Thank you very much. I have 3 questions, if I may. The first one about the maturity profile of rental contracts. So what would you expect between 2020 2022?
Are you expecting any increases or decreases in rents? And what's the vacancy rates that you're expecting?
Okay. Peter?
Well, there's nothing unusual. Just like every year, 65% of rental contracts are going to be up for renewal and already have been negotiating. And it's quite clear, our top locations are showing upwards trends. So we're going to generate more rental income, particularly due to the scarcity of good office properties, but we're also seeing a similar trend in Geneva and partly also in Basel. So renewing rental contracts always are an opportunity to help us generate more rent between 12 digit percentage points, but there's definitely an upward trend.
You had another question? Yes. On the vacancy rate, PSB is always the competition at 5.7% compared with 3.5 percent, and your guidance is 3.5 percent. So why is there such change in positioning compared with the competition? Well, I can't say anything about PSP's figures.
I can't comment on those. But you can see that we have a continuous decline of vacancy figures. And whether it's 3.0 or 4.0, it's not really that relevant. We have to just generate what's optimal from our properties. And if you have rental in contracts that are too low in terms of rent, then you can also lose money.
So but we are generally comfortable with the drop in rental in vacancies, sorry. May I add another couple of points? Of course, it's true what Peter said. You shouldn't forget that our project development pipeline brings out a lot of projects. And usually, we don't have 100 percent rental, but this is covered by the below 5% vacancy.
But we always see a vacancy as an opportunity. Vacancy in a good location can be sold well, or you can just keep bid in your portfolio and wait for it to for a good opportunity to come up. And that's our philosophy, and I think it's been successful. So we're not going to comment on our competitors, but we could achieve EUR 1.82 easily if we had a different policy here. Okay.
My third question and last question is concerning Yalmori. So we do have a certain track record of losses from operations Following the sale of Globus, the situation may become even more difficult. We're trying to attract top brands, but the new owners of Globus are well positioned to attract those top brands, maybe even better than the Elmoly. So what's your strategic response to these developments? Or maybe you should just sell the activities as a whole?
Okay. I'll say the stupid make the stupid comment. You can make the clever one. No, anyway, this is a competitive situation.
You know
that it will take some time to consolidate our market contracts, our medium term contracts. And so there is potential and there is pressure, but we'll have to wait and see and not rush things because retail always talks and complains until it really does get bad. So this is a negative spiral
And
so if you believe what but I think there is still a great deal of potential in offline retail. We believe in it. And of course, it is our task to check all of our options and to reassess them again and again.
That's our job.
Well, let me add. Well, we have the annual rental income is EUR 27,500,000 from the Almirall. And so the Almirall is interesting for us because we do earn well off the Almirall. It's still the most important property in our portfolio. And in operative terms, I believe that the city of Zurich
has
room for 2 good shopping malls. Globus only had 9,000 square meters, so and we have 23,000 square meters. So I think having the right brands in the right place does give us an opportunity to be successful in the market. We also pass with the luxury brands. So that means what does that mean for home living?
What does that mean for fashion and for sports? And I think that we there is room for everyone. And I am glad that we and Globus also has that solution because it may it keeps our inner city attractive. At the back? Thank you.
So a question about the outlook. You were optimistic at the same annual reviews, and now you are just talking about €60,000,000 in 2020. So what's changed?
Yes.
So who's euphoric? Well, everyone's euphoric, but well, you're talking about shifts, but I think you always have to see the entire period. The outlook 2020 says €32,000,000 at the half year conference, it was almost €16,000,000. That's Slide 32. Well, this we just update it all the time.
So it depends on when you get construction permits, when the building is finished. And so this always shifts a little. These are always our best guesses as our estimates. But more than €80,000,000 additional rental income are going to be added to our portfolio over the next few years. But the exact time may change.
And this is an important point. The time factor is never fully under control. Just one complaint can lead to 4 months delay in construction, for example. And another question on valuations. We saw EUR 40,000,000 negative valuation adjustments.
Maybe you can comment on those. Well, these are projects from retail, which where we need to be active. And so we made some adjustments and downward adjustments. And Stuki was a large part of that. And currently, we are able to say from for all we know, we should now have found some solid ground here.
But the other shopping centers have also for the other shopping centers, we also made these adjustments. And this is based on the current situation. Yes. And one last question on the EBIT of the asset management And of course, also some new acquisitions are very profitable. So what are you expecting for the next 3 years in terms of the EBIT contribution of the foundation?
Well, you should rephrase the question. It's the EBITDA of solutions. You talk about Swiss Prime Side Solutions, which does the access management. And we expect that the EBIT will grow again from 2021 onwards and will be at relatively level in 2020. And as you said, there are a lot of acquisitions which had an effect here.
1 was closed on the 3rd or 4th January, which maybe should have been accounting for 2018. So it's always about a date. So this is level, but the foundation is continuing to grow. We have EUR 1.35 billion in terms of transactions, And this is, of course, in steps of EUR 50,000,000 EUR 100,000,000. So it's approximately EUR 110,000,000.
So we can certainly see expect further positive development. And maybe we can open another vessel in the near future. And we are certainly looking into this with some we are open for new opportunities here. And that, of course, would be additional new EBIT. And that's what's important is that's not our solutions.
It's us. And the foundation is not us. And we are working with vessels that we manage ourselves, and that's important for the future of solutions.
Mr. Fry, wait for the microphone, please. As far as vacancy is concerned, you mentioned the development properties. Can you give us a figure? How much did they account for?
So how much is actually missing due to this development? You said it was positive, but this also gives you an idea of what how much is missing. Would you like to take that? Well, we presented in relatively simple terms. If a property is fully refurbished and cannot be used at all, then we take it out from the income calculations and once it's completed, then the rest that is not let yet will be part of the vacancy rate.
Yond, for instance, is a vacancy of 10% because 90% was late. In 2019, Yond was under construction as a project, so it didn't account for vacancy. Well, but the thing is you have 85% at the end of the year, but you didn't have the rental income throughout the year. So the question is, if I multiplied everything by 12, how much have I got in there? And of course, you could show how you restated it or how you accounted for that.
I do understand your system. Actually, you would be presenting a better situation. Well, the rental income increases slowly and gradually and you can only make one cut, either it's too late or too early or at the right point in time and we make it when the property is ready to for tenants to move in. Any further questions? Over there, please.
No, over
here.
How important is cultural engagement for you like on the mark side? Well, a town developer once told me we have a cultural mission, but let's be serious. I think it is essential for us to always have be in a position to develop space, not only buildings. And number 2, we are carrying out an architectural contest at the moment. You will have read about this.
A daily newspaper in Zurich described it in detail and the time axis that was described there applies. So we're not going to comment on that today. And thirdly, just as a side a personal note I would like to make is if the city and the mayor keeps addressing me like she did recently, and that's one thing. But the city itself ought to take a decision and make a commitment to this subject matter. So it cannot be up to us to come up with a blueprint of operating some sort of building or all form of factory, but the city would have to take the lead.
They commissioned a study. We're all familiar with this, but my personal opinion is that the city could perhaps take the lead in this not our mission to develop a blueprint for a cultural program. I think you share my opinion. Yes, absolutely. We're not focused on what the Tornhall is going to do, but on what we're going to do with the Malte side and we're going to make the best possible use of what's available by maximizing the value of the site and whether this includes more or less culture, that's a different question.
And that's really only a means to achieve an end, but we focus on the quality the entire site. Culture, of course, contributes to increasing the value or the quality of a site, but a third party needs to come up with a blueprint for it. You cannot always keep asking the same questions for 2 years and carry out studies. Now this may be a mean comment. Yes, please.
There's someone at the back. On Ghelmoli, it was said here in the past that you were incurring a loss due to the launch at the airport. Now if you assume that El Morley would have to come up with breakeven or a positive EBIT within 2 years, well, this still apply. I can still confirm this breakeven by 2022. We said it was going to be 1 year earlier once, but then things shifted backward.
The opening of the circle was delayed by half year, and we have made investments, especially in circle, that we incurred, some of it in 2019 and certainly in 2020 in view of the opening in September. That's one thing. And the other thing is the relaunch of the online shop that we're financing at the same time and the relaunch of the online shop will occur in Q4 2020, requiring investment. Now until all this has a positive impact on the books, we will be in 2022, but I can confirm this. Last year, you said that certain retail properties were sold.
Do you think you have streamlined the portfolio by now? Or can we expect more sales of such properties? No, well, portfolio is never finished being streamlined. Otherwise, we wouldn't be doing our job. So we decide on a case by case basis on what the market opportunities are for properties that may be problem ridden.
And when we see opportunities, we will grasp and sell the properties. But we will do that from a very calm point of view and grasp the opportunities. We will certainly continue along the pathway of continuously reducing the retail share. Within 5 years, we have reduced it by around 10%. It will not be the same steep curve in the years to come, but we would we will rather decrease it than increase it.
Next question, I have the technical one. You yourself said next year, you can expect relatively high one off gain from the sale of Tercionum. The incentive plan of the management is based on EPS. Is driven by EPS. Now revaluation and deferred taxes are not used for calculating the incentive plan.
Now what about the one off gain from Tersyanum? Will that have an impact on the long term incentive plan or not? Well, Lucas Streger will benefit from all of this. No, seriously, Rene or Marcus, would like to take that? Well, at the end of the day, it's a decision by the Board of Directors, it's management compensation, and this has not been decided yet.
We haven't taken a decision yet. So it's still open. Could go either way. Well, open means it's open. Just a quick question on solutions.
You said that growth is driven by new vehicles. How about the pace? And what pace can we expect? And what's the strategic thrust for these new vehicles? Are you planning for organic or for buying in?
Yes. Well, we don't buy a vehicle. The vehicle is owned by the foundation. We don't buy the vehicle. Well, just to be precise again, we are looking into further growth through other vehicles.
There are various options, but there is no specific plan. And if there was a plan, I would certainly not reveal it at this point. So we are in this phase of looking into the matter. We are pleased to manage this investment foundation, but what else can you do with solutions? Of course, you may extend the area of activity of it.
Quick question on Wincas. How about the CS Asset Management contract? Where do you stand in this regard? Well, would you like to take this? No, I can answer this.
We've got this agreement. It expired at the end of 2020 or will expire at the end of 2020. It's been prolonged to by the end of 2021. And we have also taken up negotiations for the new contract at the moment, but it will be continued on a like for like basis until or by the end of 2021. Maybe you can give more precise information.
Well, no, I have a final question. Peter Lehmann announced that he would step down. Will he be Wait for the microphone. Thank you. If I understood properly, Swiss Prime Side Solutions and for the Investment Foundation purchased a MIGRO portfolio, including properties, including retail.
Now why do you think this is appealing and not in other places? Well, that's Migro Food. Well, that's a small detail that you need to take into account. It's food. More than 85% that we bought of was food, several buildings in excellent locations that also provide room for development.
Well, let me talk about retail again. Well, it's a matter of site location. If you have high street location, even A or good B locations, they're not a problem. And if you're then in food or near food, it's not a problem either. So retail is not retail.
You shouldn't put them all in the same basket. And if we have reduced it with C locations and you called it fast fashion like OBSE, for instance, that's the business that we will continue to probably rather decrease than increase than other retail spaces, particularly in food, keep growing. So we don't think this is a problem. So what then is your decision making process? Why do you buy something for this portfolio, but you are not so much interested in that in other places?
Well, we have our own acquisition and sales unit. That's where all the portfolios come in with Swiss Prime Side Solutions. And the managing director looks at the files and decides which ones are going to be pursued. And if it goes one step further, then the Board of Trustees decides about investment. The Investment Foundation has a managing director.
We're not the managing director of the Investment Foundation. That's important to know. In terms of size, that's not the buildings we buy And there's a residential share, so that's not our objective. Well, what is important is that in terms of corporate governance, we entirely separated units. And this portfolio is not part of Peter Liman's business.
It came in with solutions. That's why we didn't submit a quotation. And if we were interested ourselves, then there's only one good way. Both of us would submit a quotation and the client would then pick their choice. Certainly, what we never do would to make an agreement between the 2 units, and we didn't even receive this file.
It went to solutions and that's why they took it on.
Okay.
Okay, fair enough. Yes, please. Mark Schultes of Vontobel. I have a specific question on Stuckey and the cause of the down valuation and lease incentives, 6 months was required, I heard, with Atmos to be successful in rental income. What do you think about this?
What's your sentiment? Well, for Stuki, in the process of construction work or deconstruction, certain technical defaults have been detected, which had to be remedied and they couldn't be detected a year and a half ago, and that's why this additional demand was caused. 2nd question, what was that again?
Rent holidays.
Rent holidays that you have to grant. Rent free periods. Well, we have become very guarded doing that because, a, it's really a malpractice in the market. You just grant fringe benefits, although it perhaps wouldn't be necessary. I'm convinced that if a building has its quality, tenants will accept it, no matter whether they have 2, 3 or 4 months of rent free period.
In Stuki, we still have 7,500 square meters of shopping that is not let, and we are consciously doing that because we wait until the cinema is opened and only when the axis works, we will then be able to rent or to let the surfaces and for good prices, not for dumping prices at cheap interest rate, but we prefer to keep waiting for another half year or a full year get the best possible price. Any more questions? No more questions? So okay. I would like to thank you for your attention.
Well, I was really wondering that one subject matter didn't give rise to any questions. And I believe it ought to be taken really seriously. And that's seeing the total cost of ownership as a building. I think this is the biggest challenge that we're going to have as a property company. We need to adopt a long term view to secure profitability.
Everyone can do it in the short term, but securing it in the long term and complying with increasing legal demands and perhaps even being proactive in this regard, that would be the biggest challenge. So I would like to thank you very much for your attention and invite you to the upper Irish upstairs and have a good time.