Annual Report 2014-2015

Members of the Board of Directors standing for re-election (from left) Dr. Wolfgang Zürcher, Vladislav Osipov, Dr. Iosif Bakaleynik, Iakov Tesis, Dr. Markus Wesnitzer

Letter to
our Shareholders

Dear Shareholders,
Ladies and Gentlemen,

Züblin Immobilien Holding AG (Züblin) had a challenging financial year 2014/15. Despite operational improvements in the core markets several exceptional factors impacted the results negatively. The French portfolio was affected by substantial valuation adjustments because of the adverse market conditions. Further, the French subsidiary was reclassified as discontinued operation and therefore the consolidated profit and loss statement includes only the core markets, Switzerland and Germany, while the result of Züblin Immobilière France is shown separately. At last the SNB decision to eliminate the floor against the Euro and to introduce negative interest rate affected the financial expenses significantly. 

Operational improvements in Switzerland and Germany

The strategic portfolio, covering commercial real estate in Switzerland and Germany, was strengthened in the period under review. Operational progress was achieved and highlighted by a reduction in vacancy rates as well as operational costs which declined by CHF 3 million or 24% compared to the previous year. The Swiss properties have been completely renovated in recent years and most of them are in prime locations. Currently, the Swiss portfolio consists of five buildings with a vacancy rate of 13.6%, down from 19.8% a year ago. The market value remained nearly unchanged within the last twelve months and reached CHF 190 million as of 31 March 2015. The vacancy rate of the strategic German portfolio declined to 8.4% from 15.9% a year ago. The German strategic portfolio consists of eleven properties with an estimated market value of CHF 122 million at the end of the reporting period.

Sale of non-strategic properties in the Netherlands completed 

Six non-strategic investment properties – one in Germany and five in the Netherlands – were sold in the reporting period resulting in a combined loss of CHF 1.8 million. The sale of the last property in the Netherlands triggered the reclassification of the currency differences of CHF 12 million from the equity to the income statement. For the four remaining non-strategic properties in Germany different sale solutions are evaluated.

SNB decision with significant negative impact 

Rental income was reduced to CHF 22 million in the period under review compared to CHF 33 million a year earlier following the sale of properties in the last two years. The difference is mainly explained by the sale of properties. The operating profit EBITDA reached CHF 13 million or 61% of the rental income. The decrease in market value of both strategic and non-strategic investment properties amounted to CHF 33 million largely resulting from revised assumptions. Further, the negative value adjustment of the interest rate swaps in the amount of CHF 14 million due to the introduction of negative interest rates as well as financial expenses of CHF 43 million, thereof CHF 18 million related to currency translation adjustments after the SNB decision, affected the result. Including the tax expenses of CHF 5 million this led to a loss from continuing operations of CHF 84 million. In combination with the loss of CHF 128 million from the French subsidiary disclosed as discontinued operation a net loss for the period of CHF 212 million resulted compared to a net loss of CHF 64 million in the previous year. The LTV (loan to value) increased from 61.3% in 2014 to 69.7% in the period under review and the NAV dropped to CHF 0.40 per share as of 31 March 2015.

Strategic reorientation in France 

The “Chaganne” building in Paris was successfully sold for EUR 31 million. Further, Züblin decided to discontinue the remaining operations in France in order to be able to access the public market in Switzerland. The process to find a strategic investor for the French subsidiary started in November 2014 and is well advanced. It is foreseen, that the investor will contribute fresh equity and subsequently become the new majority shareholder of Züblin Immobilière France. Furthermore, the investor would buy at a discount the shareholder loan granted by Züblin to its French subsidiary. The transaction is expected to be closed within the current financial year and would result in Züblin’s withdrawal from the French market. Until the closing of the transaction the result of the French subsidiary as well as possible adjustments to the sales price will impact the consolidated result 2015/16 of Züblin.

The total property valuation adjustment for 2014/15 in the amount of CHF 120 million in France is a reflection of several negative factors: a) the challenging commercial real estate market in Paris, b) valuation adjustments due to lower rental prices, c) an overall high vacancy rate despite the fact that the “Newtime” property reached 40% occupancy. At last the French subsidiary had operational losses of CHF 8 million which resulted in the overall loss of CHF 128 million. 

Restructuring measures to be proposed to the AGM 

The losses in the year under review reduced the consolidated equity to 4.8% or CHF 27 million. In addition, as far as the statutory equity is concerned, one-half of the share capital and the legal reserves are no longer covered. Under Swiss law, Züblin is therefore obliged to propose financial restructuring measures at the upcoming Annual General Meeting, which will take place on 30 June 2015. It is foreseen that the Board of Directors will propose a cut in the company’s share capital by reducing the nominal value of each share immediately followed by a capital increase to strengthen the balance sheet enabling Züblin to repay the Lamesa loan used to repay the outstanding bonds. The AGM will vote on the proposed capital measures. The capital increase involves a discounted rights offering in the amount of around CHF 72 million, which may be fully underwritten by the main shareholder Lamesa. The contemplated capital restructuring is subject to receipt of a waiver by the takeover board of any mandatory offer obligation that could apply to Lamesa.

Changes to strategy 

The Board of Directors initiated a strategic refocus in the year under review. The new strategy consists of three main stages: a concentration on core competencies, the stabilisation of the business and once that has been achieved, a new expansion phase. In the near term, the company will focus on office properties in the German-speaking markets. As a consequence, the operations in France will be divested as mentioned above.

New appraiser appointed 

The Board of Directors appointed JLL in October 2014 as new appraiser for the entire Züblin portfolio, in order to obtain a consistent view of the portfolio. JLL appraised all property values as of 31 March 2015, and the results thereof are reflected in the full-year figures.

Bond partially repaid in 2015 

Due to the non-compliance of some terms, Züblin made an offer to the holders of the 4% bond maturing on 20 July 2015 for an early redemption of their bonds. The offer was made at the nominal value and bonds in the amount of CHF 22 million were tendered. The outstanding bonds in the amount of CHF 38 million will be repaid on 20 July 2015. The majority shareholder Lamesa has granted a loan to Züblin in order to finance both the early repayment as well as the remaining balance.

Changes in the Board of Directors 

In June 2014, Lamesa Holding SA became the major shareholder of Züblin with a 33% stake. As a consequence, former chairman Pierre N. Rossier and Andrew N. Walker did not stand for re-election at the Ordinary Annual General Meeting while the other two members Vladislav Osipov and Dr. Markus Wesnitzer were re-elected. At the Extraordinary General Meeting on 22 July 2014, the shareholders elected Dr. Iosif Bakaleynik and Iakov Tesis as representatives of Lamesa Holding S.A. alongside the existing members. Dr. Wolfgang Zürcher and Urs Ledermann were elected as new independent members of the Board of Directors. The assembly elected Dr. Iosif Bakaleynik as new Chairman of the Board. All current members of the Board of Directors, except Urs Ledermann, will stand for re-election at the upcoming Ordinary General Meeting later this month. 

Newly composed Management Team 

Former CEO Bruno Schefer resigned from his function at the end of July 2014 and was replaced by CFO Thomas Wapp, who was appointed CEO ad interim. On 1 October 2014 the Board of Directors appointed Dr. Iosif Bakaleynik as the new CEO of Züblin Immobilien Holding AG. The former CEO ad interim, Thomas Wapp, continues to serve as CFO and also as the new COO of Züblin. Pierre Essig, CEO of the French subsidiary, is newly not part of the Group management anymore since the French operation is being divested.

Compensation policies 

The newly composed Board of Directors, among other things, re-assessed the principles of compensation of the Group management as laid down in the articles of Züblin Immobilien Holding AG. It concluded that some of these principles needed to be adjusted to align the interests of Züblin with those of the Group management. Therefore, the Board will propose amendments of Züblin’s articles of association to the AGM concerning certain principles of compensation.

Outlook 2015 

The main focus of activities in the current business year will be a successful capital increase, the completion of the sale of the French division within the next four months, implementing the new strategy, and the strengthening of our core portfolio in Switzerland and Germany. We are confident that these measures will stabilize the company and allow Züblin to expand the portfolio again in the years to come. 

Dr. Iosif Bakaleynik

Chairman & CEO

Thomas Wapp


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Annual Report 2014-2015

Annual Report 2014-2015 (13.83 MB)