The most important questions and answers about the auction of a property that is likely to cost well over a billion francs.
1. Where is the Üetlihof located and how big is the property?
The Üetlihof is located in the southwest of the city of Zurich not far from the Albisgüetli in the Brunau district. The site measures almost 56,000 square meters and is therefore almost four times the size of the Sechseläutenplatz. There is an office complex of Credit Suisse on the property, around 8,500 employees work there, mainly in the technical infrastructure and in the back office. The site is in the zone for five-storey residential buildings.
2. Who owns the Üetlihof today and how much is it worth?
Credit Suisse sold the complex to the Norwegian sovereign wealth fund in 2012 for CHF 1 billion. The bank has leased the building ever since. The Norwegians now want to clean up their portfolio and sell the Üetlihof. A bidding process will show for what price. The city of Zurich assumes that the sales price will be significantly higher than in 2012. The building insurance value of the Üetlihof is CHF 1.2 billion (excluding land).
3. What is the maximum amount the city wants to pay for the Üetlihof?
The city council did not answer this question during the bidding process so as not to give the competition an advantage. The government assumes that it will have to finance the purchase of the Üetlihof entirely with outside capital. To do this, it would place bonds on the capital market, for which it would have to pay interest. In return, however, rental income would accrue – around 45 million francs a year. Should the city of Zurich emerge as the highest bidder, the sale price would be published. Should another party win the auction, the highest bid should not be made public. It is not publicly known who the other interested parties are.
4. Why should the city buy the Üetlihof at all?
The city government regards the Üetlihof as a strategic land reserve for future generations. It is the second largest contiguous parcel in the residential area of the city of Zurich. There could still be offices on the site, or one day up to 1000 apartments, as well as urban buildings such as school buildings. However, the city does not have concrete construction plans for the Üetlihof. The lease with Credit Suisse runs until 2037, with an option to extend until 2052.
5. What are the risks of making a purchase?
There are a few. The city government lists in their template ten risks at once – all of which ultimately lie with the taxpayer. In particular, she assesses the risk of a valuation loss as high, for example in the event of interest rate changes. The question is also what will happen to Credit Suisse. The bank has to save and there are even takeover speculations. If Credit Suisse were to move out, this would mean that the city would have to find a new tenant for the Üetlihof or parts of it by 2037 at the latest – which would not be easy with such a large building complex. Or she would have to stamp a follow-up project out of the ground.
6. What do the people have to say about the city’s purchase intentions?
Nothing. The electorate cannot vote on the purchase; Real estate transactions are within the competence of the city government if, as is the case here, it is an acquisition into the city’s financial assets. However, if the city were to use the site directly for its own purposes, such as for city offices, apartments or schools, it would have to go to the administrative assets transferred, which would require a referendum.
7. What does Parliament have to say?
It can at least partially have a say. In principle, the city council can decide on the funds for urgent real estate transactions on its own and subsequently submit them to parliament for approval. In the case of the Üetlihof, it’s a bit more complicated. It costs so much that the city has to borrow a lot to buy it. For this, Parliament should speak a supplementary credit in the amount of 1.2 billion francs – this credit is what Parliament is about today. However, these CHF 1.2 billion are not the highest bid in the city. The government can submit a higher bid and then have the difference subsequently approved by Parliament.
8. How will the vote in Parliament end?
It could be close. SP, Greens and Center/EPP are in favor of the billion dollar loan. Together they hold a very narrow majority in the municipal council, 64 out of 125 seats. However, there are dissenters among them who reject the deal. FDP, SVP and GLP are against the loan, but even if they all vote no, they are still in the minority. The eyes therefore fall on the AL. The small left-wing party (8 parliamentarians) has not yet decided whether they are for or against the purchase. If she forms an unholy alliance with the commoners and the GLP, a no cannot be ruled out. If she goes together with the left-green council majority, the loan is very likely to come through.
9. What’s next?
If parliament rejects the loan, the matter is settled for the city of Zurich. She cannot participate in the bidding round and the Üetlihof goes to another buyer. If parliament approves the loan, the city government submits a bid. But the Üetlihof is by no means bought. It is quite possible that the city will be significantly outbid. This is exactly what has happened in the past: three years ago, the insurance company Swiss Life paid twice as much as the city offered for a property in the Leutschenbach. But the timing of the Üetlihof is clear: the sale should be completed in 2022.