10  Investment real estate

The changes in the first half of 2018 can be summarised as follows:

The value-enhancing investments relate to the yield-producing properties Schiffbaustrasse 2, Zurich (CHF 2.2 million), Vulkanstrasse 106, Zurich (CHF 1.3 million), Engstringermatte, Schlieren (CHF 0.9 million), Grüngasse 27–31 / Badenerstrasse 119–133, Zurich (CHF 0.7 million), and two other properties (CHF 0.5 million).

The reclassifications relate to two properties at the Grünhof site in Zurich (CHF 33.9 million) and Hardstrasse 301 at the Escher-Wyss site in Zurich (CHF 6.7 million).

Largest tenants, commercial real estate

Share in total rental income from commercial real estate:

In the first half of 2018, the five largest tenants accounted for a lower share of around 34% of total rental income from all yield-producing properties (commercial and residential).

The weighted remaining term of fixed-term rental contracts for commercial real estate is 6.5 years (31.12.2017: 6.8 years).

Fangletenstrasse, Bülach ZH

Four new-build four-floor apartment buildings with a total of 76 rental apartments to Minergie-Eco standard on the 11,250 square metre plot on Fangletenstrasse in Bülach-Nord. The rentable area is 7,387 square metres. The project is being built by the Projects & Development division and, upon completion in the second half of 2018, will be reported in the portfolio of yield-producing properties. For the market valuation as at the balance sheet cut-off date, nominal discount and capitalisation rates of 4.20% and 3.70% were applied (31.12.2017: 4.40% and 3.90%).

Grünhof site, Zurich

New-build six-floor apartment building with 80 rental apartments in the inner courtyard (previously used for commercial purposes) plus realisation of a replacement new-build containing eight rental apartments in addition to office and commercial space on Badenerstrasse. The rentable residential, office and commercial area in the new-builds on the 7,870 square metre plot in Zurich Aussersihl is 8,022 square metres in total. The project is being built by the Projects & Development division and, upon completion in 2020, will be reported in the portfolio of yield-producing properties. For the first-time market valuation as at the balance sheet cut-off date, nominal discount and capitalisation rates of 4.10 / 3.90% and 3.60 / 3.40% were applied.

Hardstrasse 301, Zurich

New-build six-floor commercial building with lettable floor space of 5,800 square metres, comprising 4,900 square metres of office space on the upper floors, 580 square metres of commercial space on the ground floor, 320 square metres of storage area in the basement as well as an underground garage with 21 parking spaces. The project is being built by the Projects & Development division and, upon completion in 2020, will be reported in the portfolio of yield-producing properties. For the first-time market valuation as at the balance sheet cut-off date, nominal discount and capitalisation rates of 4.50% and 4.00%, respectively, were applied.

The three investment real estate properties under construction are 100% solely owned by Allreal.

Recognised at fair value as at 30 June 2018, yield-producing properties (CHF 3901.9 million) and investment real estate under construction (CHF 83.0 million) qualify as category 3 fair values. No adjustments were made to valuation techniques or processes during the period under review.