Half-year results as per 30 June 2019

Net income reached CHF 258.8 million, exceeding the previous year’s period by CHF 100.5 million or 63.5% (H1 2018: CHF 158.3 million). For the business year 2019, PSP Swiss Property now expects an improved ebitda excluding gains/losses on real estate investments of above CHF 250 million. Supported by good demand for office space and thanks to the ongoing portfolio optimisation, the vacancy rate was reduced to 4.0% at the end of June 2019 (end of 2018: 5.0%). As per year-end 2019, a rate of around 4% is now expected.

Press release

15 August 2019

Half-year results as per 30 June 2019

PSP Swiss Property with very pleasing half-year results. Improved ebitda and vacancy rate guidance for the business year 2019.

Net income reached CHF 258.8 million, exceeding the previous year’s period by CHF 100.5 million or 63.5% (H1 2018: CHF 158.3 million). For the business year 2019, PSP Swiss Property now expects an improved ebitda excluding gains/losses on real estate investments of above CHF 250 million. Supported by good demand for office space and thanks to the ongoing portfolio optimisation, the vacancy rate was reduced to 4.0% at the end of June 2019 (end of 2018: 5.0%). As per year-end 2019, a rate of around 4% is now expected.

Real estate portfolio

At the end of June 2019, the carrying value of the total portfolio was CHF 7.820 billion (end of 2018: CHF 7.442 billion). Early in 2019, a number of properties in Bern’s city centre and in Bern-Liebefeld were acquired. As part of the portfolio streamlining process, two properties were sold, one in Zurich-Altstetten and one in Fribourg. Two development projects were successfully completed in the second quarter of 2019. The properties located at Rue Saint-Martin 7 in Lausanne and at Hardturmstrasse 161/Förrlibuckstrasse 150 in Zurich West were reclassified to the investment portfolio.

The valuation in the reporting period resulted in a portfolio appreciation of CHF 124.7 million. CHF 102.5 million thereof are related to the investment portfolio and CHF 22.2 million to the project developments. Of the CHF 102.5 million, CHF 7.5 million are related to the first-time valuation of the properties acquired in Bern. And of the CHF 22.2 million, CHF 18.5 million are related to the development project “Rue du Marché” in Geneva. At the end of June 2019, the portfolio’s weighted average nominal discount rate stood at 3.41% (year-end 2018: 3.50%). Along with a lower discount rate, various lettings, improved earnings expectations from planned investments and the vacancy development had a positive impact on valuations.

At the end of June 2019, the vacancy rate stood at 4.0% (end of 2018: 5.0 %). The improvement was the result of several new lettings and the saleof the two properties located in Zurich-Altstetten and Fribourg. One percentage point of all vacancies is due to ongoing renovations. Of the lease contracts maturing in 2019 (CHF 31.0 million), 87% were renewed at the end of June 2019. The Wault (weighted average unexpired lease term) of the total portfolio was 4.5 years. The Wault of the ten largest tenants contributing around 30% of the rental income was 6.2 years.

Sites and development properties

At the beginning of the year, the last condominium on the Löwenbräu site in Zurich was sold. Furthermore, seven units of the “Residenza Parco Lago” project in Paradiso, which is still under construction, were sold in the reporting period. The new "ATMOS" building in Zurich West is proceeding according to plan. Various negotiations are underway for larger rental spaces.

Half-year results H1 2019

Net income excluding gains/losses on real estate investments amounted to CHF 115.3 million (H1 2018: CHF 85.6 million). This corresponds to an increase of CHF 29.7 million or 34.7% compared to the previous year’s period. Operationally, higher rental income (+ CHF 6.3 million), increased profit from condominium sales (+ CHF 1.1 million), lower operating expenses (- CHF 1.4 million) as well as lower financial expenses (- CHF 1.5 million) contributed to the improved overall result. Furthermore, deferred taxes in the amount of CHF 58.0 million were released; CHF 21.6 million thereof had a positive effect on net income excluding gains/losses on real estate investments. The release of deferred taxes was related to the reduction in total profit tax rates in the cantons of Geneva and Basel-Stadt. Earnings per share excluding gains/losses on real estate investments, which is the basis for the dividend distribution, amounted to CHF 2.51 (H1 2018: CHF 1.87).

Net income reached CHF 258.8 million (H1 2018: CHF 158.3 million). The increase of CHF 100.5 million compared to the previous year’s period resulted mainly from the portfolio appreciation of CHF 124.7 million (H1 2018: CHF 91.5 million). In addition, there was a profit of CHF 15.0 million from the sale of two investment properties (H1 2018: CHF 2.3 million). At the same time, the aforementioned release of deferred taxes in the amount of CHF 58.0 million led to in a tax income of CHF 5.1 million (H1 2018: tax expenses of CHF 40.5 million). Earnings per share amounted to CHF 5.64 (H1 2018: CHF 3.45).

At the end of June 2019, net asset value (NAV) per share was CHF 92.68 (end of 2018: CHF 90.63); the dividend payment of CHF 3.50 per share made on 10 April 2019 must be taken into consideration in this regard. NAV before deducting deferred taxes amounted to CHF 110.77 (end of 2018: CHF 109.20).

Strong capital structure

With total equity of CHF 4.251 billion (end of 2018: CHF 4.157 billion) – corresponding to an equity ratio of 52.8% (end of 2018: 54.6%) – the equity base remains strong. Interest-bearing debt amounted to CHF 2.870 billion, corresponding to 35.6% of total assets (end of 2018: CHF 2.511 billion respectively 33.0%). Excluding financial debt invested as fixed-term deposit totalling CHF 125 million, the debt ratio was 34.6%. At the end of June 2019, the passing average cost of debt was 0.73% (end of 2018: 0.87 %). The average fixed-interest period was 4.0 years (end of 2018: 3.0 years). Currently, unused committed credit lines amount to CHF 890 million.

PSP Swiss Property has ratings from two international rating agencies: Senior Unsecured Rating A- (outlook stable) from Fitch and A3 Issuer Rating (outlook stable) from Moody’s.

Subsequent events

On 24 July 2019, the existing bond maturing in 2024 was increased by a nominal amount of CHF 75 million to CHF 300 million. All-in, the cost of this bond increase amounts to -0.0322% p.a.

Market environment and outlook 2019

PSP Swiss Property expects good demand for office space. However, the demand will focus primarily on central and easily accessible locations. The retail space market at good locations is stable.

The focus of PSP Swiss Property remains on the modernisation of selected properties, the further development of sites and projects as well as ongoing letting activities. Acquisitions are considered primarily in the strategic investment areas.

For the business year 2019, an ebitda excluding gains/losses on real estate investments of above CHF 250 million is now expected (previous guidance: CHF 250 million; 2018: CHF 241.7 million). With regard to the vacancies, a rate of around 4% is now expected at year-end 2019 (previous guidance: 4.5%; end of June 2019: 4.0%).

Key figures

Key financial figures

Unit

2018

H1 2018

H1 2019

+/-1

Rental income

CHF 1 000

279 373

138 688

144 985

4.5%

EPRA like-for-like change

%

0.9

0.2

1.9

Net changes fair value real estate investments

CHF 1 000

166 692

91 524

124 688

Income property sales (condominiums)

CHF 1 000

10 484

1 683

2 806

Income property sales (investment properties)

CHF 1 000

2 472

2 346

14 961

Total other income

CHF 1 000

8 172

5 031

3 846

Net income

CHF 1 000

308 152

158 274

258 762

63.5%

Net income excl. real estate gains2

CHF 1 000

176 250

85 601

115 305

34.7%

Ebitda excl. real estate gains

CHF 1 000

241 743

117 675

125 718

6.8%

Ebitda margin

%

80.8

80.5

82.3

Total assets

CHF 1 000

7 619 283

7 515 079

8 056 962

5.7%

Shareholders’ equity

CHF 1 000

4 156 908

3 998 519

4 251 153

2.3%

Equity ratio

%

54.6

53.2

52.8

Return on equity

%

7.6

7.9

12.3

Interest-bearing debt

CHF 1 000

2 511 212

2 590 740

2 869 522

14.3%

Interest-bearing debt in % of total assets

%

33.0

34.5

35.63

Portfolio key figures

Number of investment properties

Number

163

166

165

Carrying value investment properties

CHF 1 000

6 778 932

6 729 952

7 151 574

5.5%

Implied yield, gross

%

4.1

4.1

4.0

Implied yield, net

%

3.5

3.5

3.5

Vacancy rate end of period (CHF)

%

5.0

6.8

4.0

Number of sites/development properties

Number

11

11

11

Carrying value sites/development properties

CHF 1 000

663 174

612 535

668 235

0.8%

Headcount

Employees/FTE

People

91/86

90/85

Per share figures

Earnings per share (EPS)4

CHF

6.72

3.45

5.64

63.5%

EPS excl. real estate gains4

CHF

3.84

1.87

2.51

34.7%

Distribution per share

CHF

3.505

n.a.

n.a.

Net asset value per share (NAV)6

CHF

90.63

87.17

92.68

2.3%

NAV per share before deferred taxes6

CHF

109.20

105.14

110.77

1.4%

Share price end of period

CHF

96.85

92.00

114.10

17.8%

1

Change to H1 2018 or carrying value as of 31 December 2018 as applicable.

2

“Net income excluding gains/losses on real estate investments” corresponds to the net income excluding net changes in fair value of the real estate investments, net income on sales of investment properties 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

Excluding debt capital invested as fixed-term deposit totalling CHF 125 million: 34.6%.

4

Based on average number of outstanding shares.

5

For the business year 2018. Payment was made on 10 April 2019.

6

Based on number of outstanding shares.

Further information

Giacomo Balzarini, CEO · Phone +41 (0)44 625 59 59 · Mobile +41 (0)79 207 32 40

Vasco Cecchini, CCO · Phone +41 (0)44 625 57 23 · Mobile +41 (0)79 650 84 32

Report and presentation are available on www.psp.info

www.psp.info/reports

www.psp.info/presentations

Today, 10:30am (CET): conference call (Q&A only)

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Agenda

Publication Q1-Q3 2019 · 12 November 2019

Publication FY 2019 · 25 February 2020

Annual General Meeting 2020 · 9 April 2020

Publication Q1 2020 · 5 May 2020

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