Real estate portfolio
Since end of June 2008, no investment properties were bought or sold. During the third quarter 2008, the new office building on the Hürlimann site, „DL 4" (Zurich, Brandschenkestrasse 152a) with approximately 2 500 m2 of usable floor space, was completed and occupied by PSP Swiss Property. As per end of September 2008, the real estate portfolio included 195 prime office and commercial buildings and 7 attractive development sites with a total carrying value of CHF 5.135 billion (end of 2007: CHF 5.001 billion).
During the third quarter 2008, the ongoing site developments progressed as planned. With regard to the Hürlimann site in Zurich, the following can be highlighted: i) Completion and occupation of the new office building "DL 4". ii) 14 free-hold apartments in the „Malzturm" were transferred to the buyers. The transfers of the remaining 6 sold apartments will be finalised by the end of 2008. iii) The building permit for the construction of a modern health spa combined with a 4-star boutique hotel has been granted. Construction work will start early 2009. The health spa will open for business in the autumn 2010, while the hotel is planned to open during spring 2011. The total investment for this project amounts to approximately CHF 55 million (excl. land and infrastructure).
Positive vacancy development
Since mid-year 2008, the vacancy rate has been reduced from 10.6% to 10.4%. Of the 10.4% vacancy rate, 3.2 percentage points are due to ongoing renovation work on various properties. The renovation work will be completed during the fourth quarter 2008 or during 2009.
Positive financial results January to September 2008
Net income excluding gains/losses on real estate investments increased from CHF 92.3 million to CHF 94.1 million. Corresponding earnings per share amounted to CHF 2.22 or 5.2% more than in the previous year's period (CHF 2.11). Net income including net changes in fair values amounted to CHF 150.2 million (previous year's period: CHF 179.7 million). During the reporting period revaluation at mid-year again resulted in a positive contribution to net income, which was, however, smaller than in the previous year's period. There are no external valuations of the properties at the end of March and the end of September. Earnings per share including valuation differences amounted to CHF 3.54 (previous year's period: CHF 4.11).
Operating income decreased by CHF 27.0 million or 9.1% to CHF 271.3 million. Thereby, the appreciation of the investment properties added CHF 72.4 million or CHF 37.7 million less than in the previous year's period. Rental income developed significantly and rose by 4.5% from CHF 184.1 million to CHF 192.4 million. This increase was mainly the result of the vacancy reduction.
Operating expenses decreased by CHF 6.5 million or 13.4% to CHF 42.0 million. Thereby, ordinary real estate operating expenses fell by CHF 1.4 million or 11.5% to CHF 10.6 million. The reason for these cost savings were lower operating and ancillary expenses due to lower vacancies. The position "Real estate maintenance and renovation expenses" also declined by CHF 1.1 million or 8.6% to CHF 11.2 million. General and administrative expenses lowered by CHF 3.3 million or 33.4% to CHF 6.6 million.
Positive earnings development and lower expenses resulted in an increase of EBITDA excluding gains/losses on real estate investments by 13.6% to CHF 157.9 million (previous year's period: CHF 139.0 million). Consequently, the EBITDA margin improved to 79.4% (previous year's period: 74.8%).
At the end of September 2008, net asset value (NAV) per share amounted to CHF 60.67, i.e. 1.6% more than at the end of 2007 (CHF 59.71). NAV before deferred taxes increased by 2.2% to CHF 70.47 (end of 2007: CHF 68.94). For a complete assessment, the distribution of a nominal value reduction in June 2008 of CHF 2.40 per share must be taken into consideration.
Strong capital structure
With total equity of CHF 2.576 billion - corresponding to an equity ratio of 49.4% (end of 2007: 49.4%) - PSP Swiss Property continues to have an extraordinary strong capital base. The financial situation has further been strengthened by expanding a number of credit agreements with selected banks, despite a difficult market environment. The loan-to-value ratio of 40.9% as per end of September 2008 (end of 2007: 40.7%) was below the industry average.
Share buyback programme
On 21 October 2008, a share buyback programme was communicated and two days later a second trading line was opened on the SIX Swiss Exchange. Share buybacks shall only be made - to the Company's benefit - if the price of the PSP share shows a strong negative spike compared to its net asset value (NAV) which stood at CHF 60.67 at the end of September 2008.
The shares which are repurchased within the framework of the share buyback programme will be proposed to the corresponding Annual General Meetings 2009 to 2011 for cancellation. Since 24 October 2008, a total of 262 000 shares were repurchased, corresponding to 0.56% of the voting rights. Together with the existing 4 448 746 treasury shares held by PSP Swiss Property Ltd, the Company held a total of 4 710 746 treasury shares (10.04% of the voting rights) as at 13 November 2008.
Outlook 2008
PSP Swiss Property reiterates its previously communicated forecast for the 2008 business year as follows. i) EBITDA excluding gains/losses on real estate investments: CHF 205 million (2007: CHF 193.9 million), ii) vacancy rate at year-end: ~ 9% (end of 2007: 10.6%).
