Half-year results as per 30 June 2012

Real estate portfolio

At the end of June 2012, the real estate portfolio included 167 office and commercial properties in prime locations. In addition, there were seven development sites and three individual construction projects. The carrying value of the total portfolio stood at CHF 6.084 billion (end of 2011: CHF 5.958 billion).

Early 2012, a sub-building lease to construct a health spa on the grounds of the Lido in Locarno, for which there is already a building permit, was purchased. PSP Swiss Property will invest approximately CHF 26 million in this project. Construction of the building complex, which is already let, will presumably last until mid-2013. Furthermore, a property in Wabern was sold.

The ongoing site developments progressed as planned.

Vacancy rate

At the end of June 2012, the vacancy rate stood at 8.5% (end of 2011: 8.3%).  2.0 percentage points of the 8.5% were due to on-going renovation work on various properties. 0.6 percentage points related to the property on Route des Acacias 50/52 in Carouge. 0.5 percentage points were due to the renovation of the property on Aarbergstrasse 94 in Biel. 0.5 percentage points came from the property on Laupenstrasse 18/18a in Bern. The properties in Zurich West and Wallisellen (carrying value CHF 0.9 billion) contributed 3.4 percentage points to the overall vacancy rate. The remaining properties with a carrying value of CHF 4.7 billion (i.e. the total investment portfolio excluding the objects under renovation as well as those in Zurich West and Wallisellen) made up 3.1 percentage points.

Of the lease contracts maturing in 2012 (CHF 36.3 million), 80% had already been renewed respectively extended at the end of June 2012.

Half-year results 2012

Net income excluding changes in fair value increased from CHF 77.3 million to CHF 86.1 million compared to the previous year’s period. This increase was mainly due to the sale of the arts space on the Löwenbräu site in Zurich and lower financial expenses. Corresponding earnings per share amounted to CHF 1.95 (previous year’s period: CHF 1.81). For PSP Swiss Property, net income excluding changes in fair value is the basis for the distributions to shareholders. Net income including changes in fair value amounted to CHF 179.0 million (previous year’s period: CHF 198.2 million). The decrease resulted mainly from lower appreciations of the properties compared to the previous year’s period. Earnings per share including changes in fair value amounted to CHF 4.05 (previous year’s period: CHF 4.64).

Rental income remained stable at CHF 137.0 million (previous year’s period: CHF 136.9 million). Overall operating expenses also remained stable; in the first half of 2012 they totalled CHF 25.6 million (previous year’s period: CHF 25.8 million). Due to lower interest-bearing debt and a lower average interest rate, financial expenses declined by CHF 3.0 million to CHF 20.2 million compared to the previous year’s period.

At the end of June 2012, net asset value (NAV) per share was CHF 76.39 (end of 2011: CHF 75.28). NAV before deducting deferred taxes amounted to CHF 90.19 (end of 2011: CHF 89.02). It should also be mentioned that a dividend payment of CHF 3.00 per share was made mid of April 2012.

Strong capital structure, decreasing interest expenses

With a loan-to-value of 30.7% (end of 2011: 32.2%), the capital structure remains very solid. At the end of June 2012, unused credit lines amounted to CHF 590 million; currently, they amount to CHF 380 million, i.a. after the repayment of a CHF 250 million bond end of July 2012.

Due to interest rate hedging transactions, PSP Swiss Property will continue to benefit from the historically low interest rate levels in the medium term. At the end of June 2012, the average interest rate amounted to 2.46% (end of 2011: 2.49%) and the average fixed-interest period was 3.9 years (end of 2011: 2.9 years). No bank loans will mature until 2015.

At the end of March 2012, the rating agency Fitch confirmed PSP Swiss Property Ltd’s rating with an „A-„ and stable outlook.

Subsequent events

A total of 339 591 own shares were sold at an average price of CHF 85.20 each since 1 July 2012.

A CHF 250 million bond was repaid on 27 July 2012.

The sales of three investment properties were notarised in the first half of 2012, whereby transfer of ownership only will happen during the third resp. fourth quarter of 2012. According to IFRS, the income was recognised as gain from net changes in fair value of real estate investments as per 30 June 2012, as the sales had been contractually agreed prior to the end of June 2012.

Outlook 2012

PSP Swiss Property is confident about the medium- and long-term prospects due to its well-established market position, its strong capital base and the high quality of its property portfolio.

All in all, the Company remains guardedly optimistic about the second half of 2012. The economic environment will be kept observed – in Switzerland, in Europe and globally. Even if Switzerland has been able to avoid the bigger problems of many Eurozone countries so far, the turbulences on the financial markets, the issues related to the international sovereign debt problems and the strong franc might adversely affect the country’s economy in the future. Therefore, PSP Swiss Property will stick to its prudent acquisition strategy and conservative financing policy.

Due to the positive earnings development during the second quarter of 2012, the last forecast is improved: based on the assumption of an unchanged property portfolio, an EBITDA excluding changes in fair value  of “approximately CHF 235 million” (so far: “in excess of CHF 230 million”) is expected for the 2012 business year (2011: CHF 232.5 million).

During the remaining months until year-end 2012, the further development of the sites and projects, investments in the portfolio as well as the management of vacancies will be at the top of the agenda.

Concerning the sites and projects, the focus will be on two sites in Zurich, the Hürlimann site (conversion of the “Kesselhaus” as final stage) and the Löwenbräu site, the Gurten site in Wabern near Bern, the new construction “Vorderer Sternen” in Zurich as well as the new project “Lido” in Locarno. The other sites are partly still in the planning phase.

With regard to the vacancies in the investment portfolio, the expected vacancy rate of approximately 9% at the end of 2012 is being confirmed (end of June 2012: 8.5%).

 

Key figures

Key financial figures	Unit	2011	H1 2011	H1 2012	Δ in %1
Rental income	CHF 1 000	270 675	136 880	136 964	0.1
EPRA like-for-like rental growth	%	2.0	2.8	2.1
Net changes in fair value of real estate investments	CHF 1 000	325 068	152 816	119 309
Income from property sales	CHF 1 000	7 504	6 563	11 689
Total other income	CHF 1 000	10 337	5 745	4 651
Net income	CHF 1 000	403 994	198 242	179 007	- 9.7
Net income excl. gains/losses on real estate investments2	CHF 1 000	149 020	77 259	86 115	11.5
EBITDA excl. gains/losses on real estate investments	CHF 1 000	232 532	120 171	128 074	6.6
EBITDA margin	%	81.5	82.5	83.5
Total assets	CHF 1 000	6 050 916	5 791 574	6 174 462	2.0
Shareholders’ equity	CHF 1 000	3 268 894	3 023 849	3 473 876	6.3
Equity ratio	%	54.0	52.2	56.3
Return on equity	%	13.0	13.3	10.6
Interest-bearing debt	CHF 1 000	1 946 894	2 086 071	1 897 792	- 2.5
Interest-bearing debt in % of total assets	%	32.2	36.0	30.7
Portfolio key figures
Number of properties	Number	168	170	167
Carrying value properties	CHF 1 000	5 611 591	5 429 183	5 824 151	3.8
Implied yield, gross3	%	4.9	5.1	4.8
Implied yield, net3	%	4.2	4.4	4.1
Vacancy rate end of period (CHF)3, 4	%	8.3	8.9	8.5
Number of sites and development properties	Number	9	8	10
Carrying value sites and development properties	CHF 1 000	346 879	265 685	259 610	- 25.2
Employees
End of period	Posts	84	81	85
Equal full-time employees	Posts	77	77	78
Per share figures
Earnings per share (EPS)5	CHF	9.40	4.64	4.05	- 12.8
EPS excl. gains/losses on real estate investments5	CHF	3.47	1.81	1.95	7.7
Distribution per share	CHF	3.006	n.a.	n.a.
Net asset value per share (NAV)7	CHF	75.28	70.77	76.39	1.5
NAV share before deducting deferred taxes7	CHF	89.02	83.66	90.19	1.3
Share price end of period	CHF	78.60	79.85	83.65	6.4

1	Change to H1 2011 or carrying value as of 31 December 2011 as applicable.
2	“Consolidated annual net income excluding gains/losses on real estate investments” corresponds to the consolidated annual net income excluding net changes in fair values of the real estate investments, realised income on investment property sales and all of the related taxes. Income from the sale of properties which were developed by the Company itself is, however, included in the net income excluding gains/losses on real estate investments.
3	For properties.
4	Equals the lost rental income in % of the potential rent, as per reporting date.
5	Based on average number of outstanding shares.
6	For the 2011 business year. Cash payment was made on 12 April 2012.
7	Based on number of outstanding shares.