Quarterly results as per 31 March 2018

Compared to the previous year’s period, net income (excluding changes in fair value) rose by 8.7% or CHF 3.5 million to CHF 43.2 million. Lower vacancies of around 7.5% are now expected at year-end 2018.

Press release

8 May 2018

Quarterly results as per 31 March 2018

PSP Swiss Property successfully started 2018. Lower vacancies expected for year-end 2018.

Compared to the previous year’s period, net income (excluding changes in fair value) rose by 8.7% or CHF 3.5 million to CHF 43.2 million. Lower vacancies of around 7.5% are now expected at year-end 2018.

Real estate portfolio

At the end March 2018, the carrying value of the total portfolio was CHF 7.272 billion (end of 2017: CHF 7.046 billion). In Q1 2018, the property portfolio purchased from Edmond de Rothschild (Suisse) S.A. consisting of nine high-quality office buildings was integrated. Furthermore, the new construction “Grosspeter Tower” in Basel was completed and reclassified to the investment portfolio. It has become one of the city’s most distinctive buildings with a hotel and state-of-the-art offices.

The development projects progressed as planned. At the renovation project opposite Zurich’s main train station at Bahnhofplatz 1, Bahnhofquai 9/11/15, a long-term lease was signed recently. As from the end of 2019, No18 (premium brand of International Workplace Group, IWG) will rent around 4 700 m2 to be used as premium co-working office space and lounges. The entire building complex will become very attractive due to the ongoing renovations and the prominent new tenants (i.a. Ruby Hotels & Resorts on the Beatenplatz side as from early 2021). Since April 2018, Westhive, another provider of co-working space, provides space mainly for start-ups as well as marketing and tech companies at Hardturmstrasse 161 / Förrlibuckstrasse 150 in Zurich-West.

At the end of March 2018, the vacancy rate stood at 8.5% (end of 2017: 8.2%). The slight rise is due to the completion and reclassification of the new construction “Grosspeter Tower” in Basel (vacancy rate end of Q1 2018: 68.4%). As of May 2018, the lease with the anchor tenant Bayer started, leading to a reduction of the vacancy rate in this building to around 30%. A further reduction of this figure is expected in the next months. 1.0 percentage points of all vacancies are due to ongoing renovations. Of the lease contracts maturing in 2018 (CHF 29.1 million), 64% were renewed respectively extended at the end of March 2018.

Quarterly results Q1 2018

Due to the initial application of IFRS 15, Revenue from Contracts with Customers, the previous year’s period Q1 2017 and FY 2017 were restated. Revenues relating to condominium sales are now recorded using the so-called percentage-of-completion-method. The application of IFRS 15 did not have any material impact on Q1 2017 resp. FY 2017 (for details see Q1 2018 report and presentation available on www.psp.info).

During the reporting period, net income (excluding changes in fair value) reached CHF 43.2 million (Q1 2017: CHF 39.7 million). The increase of 8.7% resulted mainly from a rise in capitalised own services related to the portfolio purchase (Edmond de Rothschild) and higher other income (overall up by CHF 2.9 million) as well as a decline in financial expenses by CHF 0.6 million. Rental income rose by CHF 0.7 million to CHF 69.1 million (Q1 2017: CHF 68.4 million).

Operating expenses increased by CHF 0.2 million to CHF 13.8 million (Q1 2017: CHF 13.6 million). Financial expenses declined by the above-mentioned CHF 0.6 million to CHF 6.0 million (Q1 2017: CHF 6.6 million). Net income (including changes in fair value) reached CHF 40.3 million (Q1 2017: CHF 39.7 million). The initial valuation of the purchased portfolio resulted in a valuation loss of CHF 3.9 million. Furthermore, tax expenses increased by CHF 0.2 million to CHF 10.3 million (Q1 2017: CHF 10.0 million). Earnings per share (including changes in fair value) amounted to CHF 0.88 (Q1 2017: CHF 0.87). EPS (excluding changes in fair value), which is the basis for the dividend distribution, amounted to CHF 0.94 (Q1 2017: CHF 0.87).

At the end of March 2018, net asset value (NAV) per share was CHF 87.94 (end of 2017: CHF 86.96). NAV before deducting deferred taxes amounted to CHF 105.37 (end of 2017: CHF 104.22).

Strong capital structure

With total equity of CHF 4.034 billion (end of 2017: CHF 3.989 billion) – corresponding to an equity ratio of 54.0% (end of 2017: 54.0%) – the capital base remains strong.

Interest-bearing debt amounted to CHF 2.531 billion, corresponding to 33.9% of total assets (end of 2017: CHF 2.491 billion respectively 33.7%). Excluding debt capital invested as fixed-term deposit totalling CHF 125 million, the debt ratio was 32.8%.

At the end of March 2018, the passing average interest rate was 0.97% (end of 2017: 0.99%). The average fixed-interest period was 3.7 years (end of 2017: 3.6 years). Currently, unused committed credit lines amount to CHF 770 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

The ordinary Annual General Meeting on 5 April 2018 approved all proposals of the Board of Directors. Among other resolutions, the payment of an ordinary dividend of CHF 3.40 per share for the 2017 business year was approved (previous year: CHF 3.35 per share). The payout totalling CHF 156.0 million was made on 11 April 2018. Luciano Gabriel was re-elected as Chairman of the Board of Directors (one-year term of office). All remaining six current members of the Board of Directors were also re-elected (one-year terms of office). Ernst & Young AG, Zurich, was re-elected as Statutory Auditors for the 2018 business year. Proxy Voting Services GmbH, Zurich, was re-elected as independent shareholder representative (one-year term of office). The Compensation Committee and the Audit Committee consist of Peter Forstmoser (Chairman), Adrian Dudle, Nathan Hetz and Josef Stadler. The Nomination Committee consists of Josef Stadler (Chairman), Corinne Denzler and Adrian Dudle.

There were no further material subsequent events.

Market environment and outlook 2018

PSP Swiss Property expects that the predicted economic expansion will have a positive impact on the demand for office space, at least in central locations. The outlook for retail space in central locations is also significantly better than for objects on the periphery. With regard to the investment market, demand for investments in prime commercial properties will hardly diminish.

The focus of PSP Swiss Property remains on the modernisation of selected properties, the further development of the sites and projects as well as reinforced letting activities resp. vacancy reduction. Acquisitions in the strategic investment areas only are aimed for in case of potential added value in the long-term.

For FY 2018, an ebitda (excluding changes in fair value) of above CHF 235 million is still expected (2017: CHF 242.2 million). While rental income is likely to increase by around CHF 8 million, income from condominium sales will fall. The predicted decline in ebitda therefore mainly reflects the lower expected income from condominium sales.

With regard to the vacancies, a rate of around 7.5% is now expected at year-end 2018 (previous guidance: 8.5%; end of March 2018: 8.5%).

Key figures

Key financial figures

Unit

20171

Q1 20171

Q1 2018

+/-2

Rental income

CHF 1 000

272 454

68 375

69 123

1.1%

EPRA like-for-like change3

%

-1.1

-2.9

0.3

Net changes fair value real estate investments

CHF 1 000

83 253

0

-3 873

Income property sales (condominiums)

CHF 1 000

19 614

860

1 481

Income property sales (investment properties)

CHF 1 000

627

0

0

Total other income

CHF 1 000

5 043

708

3 583

Net income

CHF 1 000

256 890

39 744

40 257

1.3%

Net income excl. real estate gains4

CHF 1 000

177 738

39 744

43 204

8.7%

Ebitda excl. real estate gains

CHF 1 000

242 187

56 533

60 600

7.2%

Ebitda margin

%

81.5

80.8

81.7

Total assets

CHF 1 000

7 384 243

7 465 391

1.1%

Shareholders’ equity

CHF 1 000

3 988 560

4 033 539

1.1%

Equity ratio

%

54.0

54.0

Return on equity

%

6.6

4.0

Interest-bearing debt

CHF 1 000

2 491 087

2 530 504

1.6%

Interest-bearing debt in % of total assets

%

33.7

33.95

Portfolio key figures

Number of investment properties

Number

157

167

Carrying value investment properties

CHF 1 000

6 383 901

6 706 780

5.1%

Implied yield, gross

%

4.2

4.3

4.1

Implied yield, net

%

3.5

3.6

3.5

Vacancy rate end of period (CHF)

%

8.2

8.5

Number of sites/development properties

Number

12

11

Carrying value sites/development properties

CHF 1 000

661 892

564 802

-14.7%

Employees

End of period/Equal FTE

People

86/81

89/85

Per share figures

Earnings per share (EPS)6

CHF

5.60

0.87

0.88

1.3%

EPS excl. real estate gains6

CHF

3.87

0.87

0.94

8.7%

Distribution per share

CHF

3.407

n.a.

n.a.

Net asset value per share (NAV)8

CHF

86.96

87.94

1.1%

NAV per share before deferred taxes8

CHF

104.22

105.37

1.1%

Share price end of period

CHF

92.35

93.20

0.9%

1

Restated due to initial application of IFRS 15, Revenue from Contracts with Customers.

2

Change to Q1 2017 or carrying value as of 31 December 2017 as applicable

3

Excl. property Av. des Morgines 8/10 in Petit-Lancy, FY 2017: +0.4%, Q1 2017: -0.1%.

4

“Net income excluding gains/losses on real estate investments” corresponds to the consolidated net income excluding net changes in fair value of the real estate investments, realised 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”.

5

Excluding debt capital invested as fixed-term deposit totalling CHF 125 million: 32.8%.

6

Based on average number of outstanding shares.

7

For the business year 2017. Cash payment was done on 11 April 2018.

8

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, 10:30 hrs (CET): conference call (Q&A only) held in English

Switzerland / Europe · +41 (0)58 310 50 00

Great Britain · +44 (0)207 107 0613

USA · +1 (1)631 570 56 13

Other international numbers · https://media.choruscall.ch/documents/Attended_DI_numbers.pdf

Agenda

Publication H1 2018 · 17 August 2018

Publication Q1-Q3 2018 · 13 November 2018

Publication FY 2018 · 26 February 2019

Annual General Meeting 2019 · 4 April 2019

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