Resilient real estate portfolio
As at the end of June 2009, the real estate portfolio of PSP Swiss Property included 187 office and commercial properties in prime locations as well as 7 attractive development sites with a carrying value of CHF 5.227 billion (end of 2008: CHF 5.149 billion). In the first six months of the year, several acquisition opportunities were evaluated, but no purchases were made.
Two investment properties were sold for CHF 30.1 million and the sale of four further objects for CHF 53.6 million was agreed; the closing of these four properties will take place during the second half of 2009. Net sales revenue from all six properties totalling CHF 83.7 million is 11.9% above the last external valuation.
The revaluation gain of the properties as at the end of June 2009 amounted to CHF 62.5 million. Main drivers of this appreciation are new leases at higher rents and an adjustment of the market rents.
The ongoing site developments progressed as planned. The following developments are worth mentioning: i) Hürlimann site, Zurich: construction started at the beginning of 2009 for a health spa combined with a boutique hotel. The health spa is planned to open at the end of 2010, while the hotel opening is planned for spring 2011. The total investment for this project amounts to approximately CHF 60 million (excl. land and infrastructure). ii) Wädenswil site: all fifteen freehold apartments of the apartment complex „SeeSicht" have been sold.
Positive vacancy and rental development
As at the end of June 2009, the vacancy rate was 9.0% (end of 2008: 8.3%), whereof 2.2%-points relate to renovation work on several properties: 0.7%-points relate to the property on Bleicherweg 10 in Zurich which is again fully let after completion of the renovation work (as per 1 December 2009). 0.5%-points relate to the property on Route des Acacias 52 in Carouge, which is also fully let after renovation (as per mid-2010). 0.6%-points relate to the renovation of the property on Aarbergstrasse 94 in Biel, which will be completed in 2010.
Strong operating results
Rental income rose by 5.9% to CHF 135.0 million. This increase of CHF 7.6 million was a result of the reduction of vacancies in the previous year, higher rents and two one-offs (the release of accounts receivable provisions of CHF 1.3 million that are no longer required, the settlement of a balance-sheet position of CHF 1.1 million after final negotiations of a lease agreement). Operating expenses fell by 3.8% to CHF 27.6 million. This decrease was mainly due to lower real estate operating expenses and lower general and administrative expenses.
Positive earnings development and lower expenses resulted in an increase of EBITDA excluding gains/losses on real estate investments by 7.1% to CHF 109.8 million (first half of 2008: CHF 102.6 million). Consequently, the EBITDA margin improved to 80.3% (first half of 2008: 78.6%).
Ongoing solid capital structure
With a loan-to-value of 40.7% (end of 2008: 40.5%), the capital structure remains very solid. Currently, the amount of unused credit lines is CHF 450 million and no credit lines are due to be refinanced for the years 2009 and 2010. During the first half of 2009, the average interest rate was 2.48% (first half of 2008: 2.77%). As at the end of June 2009, the average fixed-interest period was 2.8 years (end of 2008: 3.1 years).
Early termination of the share buy-back programme
As per 17 August 2009, PSP Swiss Property Ltd has early terminated its share buy-back programme 2008/2011 on a second trading line. In total, 1'034'000 registered shares - representing 2.2% of the issued share capital - have been bought back under the share buy-back programme started on 23 October 2008.
The 628'000 registered shares bought back between 23 October 2008 and 31 December 2008 have already been cancelled, based on the resolution by the Annual General Meeting of 2 April 2009. It is envisaged to propose to the next Annual General Meeting the cancellation of the remaining 406'000 bought back shares, by means of a capital reduction.
Outlook 2009
As a result of the outstanding results and the positive outlook, the forecast for the entire business year 2009 published in February 2009 has been revised upwards, taking into account the reduced net rental income of approx. CHF 1.6 million due to property sales, expected higher renovation expenses in the second half of 2009 as well as positive one-offs which took place in the first half of 2009:
- EBITDA excluding gains/losses on real estate investments of approx. CHF 215 million (original forecast: over CHF 210 million; 2008: CHF 208.4 million).
- Vacancy rate at year-end 2009 of approx. 8% (original forecast: below 9%; June 2009: 9%).
