Quarterly results as per 31 March 2014

Real estate portfolio

At the end of March 2014, the real estate portfolio included 161 office and commercial properties in prime locations. In addition, there were five development sites and five individual construction projects. The carrying value of the total portfolio was CHF 6.452 billion (end of 2013: CHF 6.466 billion). During the reporting period, no investment properties were acquired nor sold.

The apartment complex on the Gurten site in Wabern near Bern (99 freehold apartments and two studios) will be completed in the coming weeks. At the end of March 2014, 97 apartments and both studios were sold. Thereof, 55 apartments and one studio were transferred to their buyers in Q1 2014. Work on the “Salmenpark” in Rheinfelden, the currently largest development project with an investment total of CHF 170 million (stage 1), proceeds according to plan. Construction began at the end of August 2013; completion is planned for 2016. 45% of the commercial units have already been pre-let, and marketing for the remaining approximately 3 600 m² of sales areas, approximately 4 400 m² of office space and 36 rental apartments began at the end of March 2014. At the end of March 2014, 28 of the 113 freehold apartments had been sold.

New constructions and conversions on the other sites progressed as planned.

Vacancy rate

At the end of March 2014, the vacancy rate stood at 8.9% (end of 2013: 8.0%). 1.3 percentage points of the 8.9% were due to ongoing renovation work on various properties. The properties in Zurich West and Wallisellen contributed 3.3 percentage points to the overall vacancy rate. The remaining properties with a carrying value of CHF 5.0 billion (i.e. the total investment portfolio excluding the objects under renovation as well as those in Zurich West and Wallisellen) made up 4.3 percentage points.

Of the lease contracts maturing in 2014 (CHF 42.1 million), 50% were already renewed respectively extended at the end of March 2014.

Quarterly results Q1 2014

In Q1 2014, net income excluding changes in fair value increased to CHF 43.8 million (Q1 2013: CHF 41.2 million). Corresponding earnings per share amounted to CHF 0.96 (Q1 2013: CHF 0.90). For PSP Swiss Property, net income excluding changes in fair value is the basis for the distribution to shareholders.

During the reporting period, there were no revaluations and no sales of investment properties. As a result, net income including changes in fair value also was CHF 43.8 million (Q1 2013: CHF 53.0 million). Earnings per share including changes in fair value amounted to CHF 0.96 (Q1 2013: CHF 1.15).

Rental income increased by CHF 1.9 million to CHF 69.9 million (Q1 2013: CHF 68.0 million). Income from the sale of freehold apartments amounted to CHF 2.9 million (Q1 2013: CHF 0.1 million); in the reporting period, 55 freehold apartments and one studio on the Gurten site in Wabern near Bern were transferred to their buyers. Total other income decreased to CHF 2.4 million (Q1 2013: CHF 3.4 million).

With CHF 12.4 million, operating expenses virtually remained at the level of the previous year’s period (CHF 12.8 million). With CHF 8.3 million, financial expenses also remained at the previous year’s level (CHF 8.2 million).

At the end of March 2014, net asset value (NAV) per share was CHF 84.41 (end of 2013: CHF 83.70). NAV before deducting deferred taxes amounted to exactly CHF 100.00 (end of 2013: CHF 99.25).

Strong capital structure

With a loan-to-value of 28.3% (end of 2013: 28.1%), the capital structure remains very solid. Currently, unused committed credit lines amount to CHF 550 million.

Thanks to interest rate hedging transactions, PSP Swiss Property will continue to benefit from the low interest rate levels in the medium term. At the end of March 2014, the passing average interest rate was 1.90% (end of 2013: 1.85%). The average fixed-interest period was 3.8 years (end of 2013: 3.4 years). No major committed bank loans will mature until 2018.

In March 2014, the rating agency Fitch confirmed PSP Swiss Property Ltd’s rating with an “A-” and stable outlook.

Subsequent events

On 1 April 2014, a CHF 250 million bond was repaid.

Based on a resolution of the Annual General Meeting on 3 April 2014, a cash payment of CHF 3.25 per outstanding share (totaling CHF 149.1 million) was made out of the capital contribution reserves on 10 April 2014.

On 30 April 2014, the investment property on Albulastr. 57 in Zurich was sold (transfer as per 1 May 2014).

There were no further subsequent events.

Outlook 2014

PSP Swiss Property remains confident about the future: the Company is well established in the Swiss real estate market with a strong capital base and a high-quality property portfolio. In any case, the Company sticks to its long-term, value-oriented and judicious acquisition strategy and to its conservative financing policy.

Focus will be kept on renovation of selected properties as well as on the development of the sites and projects.

Based on the assumption of an unchanged property portfolio, PSP Swiss Property expects an EBITDA excluding changes in fair value of CHF 230 million for 2014 (2013: CHF 242.5 million). The decrease is mostly due to a slight decline in rental income, lower income from the sale of condominiums, lower income from VAT recovery and presumably higher renovation expenditures.

With regard to vacancies, a rate of approximately 11% is expected at year-end 2014 (end of March 2014: 8.9%). The increase results mainly from two larger vacancies, which will arise during the fourth quarter of 2014 at one property in Zurich (Central Business District) and one property in Zurich West.

Key figures

Key financial figures	Unit	2013	Q1 2013	Q1 2014	Δ in %1
Rental income	CHF 1 000	279 143	67 982	69 861	2.8
EPRA like-for-like rental change	%	1.7	- 0.4	1.9
Net changes in fair value of real estate investments	CHF 1 000	128 144	15 389	0
Income from property sales	CHF 1 000	13 048	75	2 858
Total other income	CHF 1 000	6 088	3 428	2 427
Net income	CHF 1 000	270 993	52 967	43 805	- 17.3
Net income excl. gains/losses on real estate investments2	CHF 1 000	173 643	41 191	43 805	6.3
EBITDA excl. gains/losses on real estate investments	CHF 1 000	242 480	58 875	62 874	6.8
EBITDA margin	%	81.3	82.4	83.7
Total assets	CHF 1 000	6 541 812	6 396 334	6 599 385	0.9
Shareholders’ equity	CHF 1 000	3 839 230	3 752 586	3 871 568	0.8
Equity ratio	%	58.7	58.7	58.7
Return on equity	%	7.2	5.7	4.5
Interest-bearing debt	CHF 1 000	1 838 784	1 818 182	1 868 252	1.6
Interest-bearing debt in % of total assets	%	28.1	28.4	28.3
Portfolio key figures
Number of properties	Number	161	166	161
Carrying value properties	CHF 1 000	6 033 930	6 104 637	6 042 124	0.1
Implied yield, gross	%	4.6	4.5	4.6
Implied yield, net	%	3.9	3.9	4.0
Vacancy rate end of period (CHF)	%	8.0	8.8	8.9
Number of sites and development properties	Number	10	7	10
Carrying value sites and development properties	CHF 1 000	431 647	219 643	409 549	- 5.1
Employees
End of period	Posts	86	86	89
Equal full-time employees	Posts	79	79	81
Per share figures
Earnings per share (EPS)3	CHF	5.91	1.15	0.96	- 17.3
EPS excl. gains/losses on real estate investments3	CHF	3.79	0.90	0.96	6.3
Distribution per share	CHF	3.254	n.a.	n.a.
Net asset value per share (NAV)5	CHF	83.70	81.81	84.41	0.8
NAV share before deducting deferred taxes5	CHF	99.25	96.51	100.00	0.8
Share price end of period	CHF	75.50	86.50	83.10	10.1

1	Change to Q1 2013 or carrying value as of 31 December 2013 as applicable.
2	“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	Based on average number of outstanding shares.
4	For the 2013 business year. Cash payment was made on 10 April 2014.
5	Based on number of outstanding shares.