Annual results as per 31 December 2015

Real estate portfolio

At the end of 2015, the real estate portfolio included 163 office and commercial properties and several development projects. The carrying value of the total portfolio stood at CHF 6.724 billion (end of 2014: CHF 6.608 billion). During the reporting period, PSP Swiss Property purchased a property at Heinrich-Stutz-Strasse 23/25 in Urdorf and sold the property at Altstetterstrasse 124/Herrligstrasse 21 in Zurich.

Constructions of “Salmenpark” in Rheinfelden (investment total approximately CHF 250 million) and “Grosspeter Tower” in Basel (investment total approximately CHF 110 million) are proceeding according to plan. Work began for the comprehensive renovation of the property at Hardturmstrasse 161/Förrlibuckstrasse 150 in Zurich West (investment total approximately CHF 50 million). The total refurbishment of various properties at Bahnhofquai/Bahnhofplatz in Zurich is being clarified with the local authorities for the preservation of historical monuments with regard to technical issues.

The new construction “Löwenstrasse 16” in Zurich was completed in 2015 (office and retail areas as well as one apartment). Also completed was the total renovation of the property at Bahnhofstrasse 10/Börsenstrasse 18 in Zurich (retail and office areas). On 14 November 2015, “Bain Bleu Hammam & Spa” in Geneva/Cologny was opened.

At the “Paradiso” site in Lugano, construction approval is expected in summer 2016. The intention is to realise a project with freehold apartments as well as offices and retail areas. The planned overall investment amounts to approximately CHF 65 million.

Planning for the replacement of the two buildings at Förrlibuckstrasse 178/180 and Hardturmstrasse 181/183/185 in Zurich West is underway. The new construction shall be in line with today’s requirements in terms of flexibility of use and sustainability. The building application for this project shall be submitted in autumn 2016; the replacement building is then planned to be constructed from 2017 to 2020. From today’s perspective, the investment total will amount to approximately CHF 120 million.

Vacancy rate

At the end of 2015, the vacancy rate stood at 8.5% (end of 2014: 10.0%). 0.5 percentage points of the 8.5% were due to ongoing renovation work at various properties. The properties in Zurich West and Wallisellen (carrying value CHF 0.6 billion) contributed 2.9 percentage points to the overall vacancy rate. The remaining properties with a carrying value of CHF 5.5 billion (i.e. the total investment portfolio excluding the objects under renovation as well as those in Zurich West and Wallisellen) made up 5.1 percentage points.

Annual results 2015

In 2015, net income (excluding changes in fair value) reached CHF 161.3 million (2014: CHF 169.3 million). This result is in line with expectations. The reasons for the decline were lower rental income (a decrease by CHF 2.1 million due to ongoing renovations and the sale of one investment property at the beginning of September 2015) as well as lower income from apartment sales (a decrease by CHF 3.6 million – in 2015, only 17 apartments were transferred to the buyers, while there were 101 transfers in 2014). Furthermore, other income declined by CHF 2.4 million. Corresponding earnings per share (excluding changes in fair value) amounted to CHF 3.52 (2014: CHF 3.69). For PSP Swiss Property, net income excluding changes in fair value is the basis for the distribution to shareholders.

Net income (including changes in fair value) amounted to CHF 187.7 million (2014: CHF 175.3 million). Earnings per share (including changes in fair value) amounted to CHF 4.09 (2014: CHF 3.82).

Strong capital structure

With total equity of CHF 3.870 billion (end of 2014: CHF 3.841 billion) – corresponding to an equity ratio of 57.0% (end of 2014: 57.5%) – PSP Swiss Property had a strong capital base at the end of 2015. Interest-bearing debt amounted to CHF 1.969 billion, corresponding to 29.0% of total assets (end of 2014: CHF 1.929 billion respectively 28.9%). Currently, unused committed credit lines amount to CHF 650 million. No major committed bank loans will be due until 2019.

At the end of 2015, the passing average interest rate was 1.53% (end of 2014: 1.70%). The average fixed-interest period was 3.4 years (end of 2014: 3.9 years).

In April 2015, the rating agency Fitch confirmed PSP Swiss Property Ltd’s rating with an “A-” and stable outlook.

Subsequent events

For the refinancing of financial liabilities, a 0.50% bond with a duration from 2016 to 2024 and a volume of CHF 225 million was issued on 16 February 2016.

On 24 February 2016, Steiner AG – according to its own statement – has lodged a complaint with the Commercial Court of the Canton of Zurich against the group subsidiary PSP Properties Ltd and Löwenbräu-Kunst AG (complaint amount of CHF 58.5 million). PSP Swiss Property has not yet received a copy of the complaint. PSP Swiss Property has always rejected the additional claims by Steiner AG related to the Löwenbräu construction project in Zurich West. The statement of Steiner AG in its press release dated 24 February 2016 is not in accordance with the facts; PSP Swiss Property rejects additional claims by Steiner AG.

There were no further material subsequent events.

Material proposals to the annual General Meeting on 31 March 2016

For the business year 2015, the Board of Directors proposes a cash payment of CHF 3.30 per share (thereof CHF 1.80 out of the capital contribution reserves and CHF 1.50 as ordinary dividend) to the annual General Meeting on 31 March 2016 (previous year: CHF 3.25 per share out of the capital contribution reserves). In relation to net income (excluding changes in fair value), this amount corresponds to a payout ratio of 93.8%; in relation to the 2015 year-end share price of CHF 88.00, it corresponds to a yield of 3.8%.

Apart from Mr. Gino Pfister, all members of the Board of Directors as well as Mr. Günther Gose as Chairman of the Board of Directors stand for re-election. The Board of Directors proposes the election of Ms. Corinne Denzler as new Board member. Ms. Corinne Denzler, born in 1966, Swiss citizen, domiciled in Baar, business graduate, is working as Chief Executive Officer of the Tschuggen Hotel Group, with hotels and spas in Ascona, Arosa and St. Moritz. Before that, she was performing management functions with several companies and organisations, such as the Swiss Snowsports School Davos and the Grand Resort Bad Ragaz. Mr. Peter Forstmoser, Mr. Nathan Hetz and Mr. Josef Stadler stand for re-election as members of the Compensation Committee; the Board of Directors proposes the election of Mr. Adrian Dudle as new member of the Compensation Committee, in replacement of Mr. Gino Pfister. PSP Swiss Property thanks Mr. Gino Pfister for his very valuable support since PSP Swiss Property's IPO in the year 2000.

Change in the Executive Board

At the meeting dated 29 February 2016, the Board of Directors has appointed Mr. Adrian Murer as Chief Investment Officer (CIO) and member of the Executive Board (starting on 1 July 2016). Mr. Murer is dipl. Ing. ETH, M.A. HSG and Attorney-at-Law. After several engagements as project engineer and legal counsel, Mr. Murer has been working as a partner at the law firm Baur Hürlimann AG in Zurich since mid-2013 until today.

Market environment

The demand, mainly from Swiss institutional investors, for high-class commercial properties in sought-after locations remains high. Foreign investors rather concentrate on niche products such as hotels or shopping centres.

In certain geographical areas, there is a structural oversupply of office space. Crowding out intensifies further, particularly for badly located properties with poor transportation links as well as objects with limited utilisation options. On the other hand, demand for centrally located buildings with good access to public transport as well as modern buildings with flexible office space is satisfactory. Overall, the absorption of the oversupply of office space, which has been built up over the past years (especially in peripheral areas of Zurich and Geneva), will take time.

In the retail sector, stores are increasingly rivalled by shopping trips abroad and the expanding online trade. Well frequented and prestigious locations are more resistant; although the market environment remains challenging, even in prime locations.

Outlook 2016

Due to the continuing strong demand for commercial properties and low interest rates, the acquisition market remains highly competitive. When evaluating possible acquisition targets, PSP Swiss Property sticks to its conservative acquisition strategy focusing on prime properties in top locations with prospects of long-term capital appreciation.

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

For 2016, an ebitda (excluding changes in fair value) of approximately CHF 240 million is expected (2015: CHF 232.7 million). With regard to vacancies, a rate of around 11% at the end of 2016 is expected, mainly because of expiries towards year-end (end of 2015: 8.5%).

Key figures