Real estate portfolio
At the end of June 2010, the real estate portfolio included 177 office and commercial properties in prime locations as well as 8 attractive development sites with a total carrying value of CHF 5.335 billion (end of 2009: CHF 5.216 billion). During the reporting period, a property in Zurich was bought for CHF 45.1 million and four small assets from the investment portfolio were sold for a total consideration of CHF 13.0 million, 23.1% above the last valuation.
The revaluation gain of the properties as at the end of June 2010 amounted to CHF 47.6 million. This appreciation was manly driven by new leases at higher rents, slightly higher market rents for retail surfaces (both comments relate to the center of Zurich) as well as the valuation gain on the property bought.
Work on the development sites progressed as planned. The following developments are worth mentioning: i) Gurten site, Wabern near Bern: the building application for this project (conversion of existing properties and construction of new buildings) was submitted at the end of February 2010. Construction is scheduled to begin in mid-2011; this means that the project should be completed by the end of 2013. ii) Löwenbräu site, Zurich: following the placement of the general contractor order, the final preparations for the dismantling and the construction start are now underway. The whole project will be realised stepwise by 2013. The first expansions and conversions are likely to be completed in 2011. The marketing of the freehold apartments began in the second quarter of 2010 and is off to an excellent start.
Vacancy rate
At the end of June 2010, the vacancy rate stood at 8.2% (end of 2009: 7.5%). Thereof, 1.8 percentage points were due to ongoing renovation work on various properties. The portfolio in Zurich West with a carrying value of CHF 0.6 billion contributes 3.8 percentage points to the overall vacancy rate. The core investment portfolio (i.e. excluding the properties under renovation and the portfolio in Zurich West) with a carrying value of CHF 4.4 billion has a vacancy rate of just 3.2%.
Half-year results 2010
Net income excluding changes in fair value increased by CHF 6.4 million to CHF 74.9 million. Corresponding earnings per share amounted to CHF 1.77 or 7.3% more than in the previous year's period (CHF 1.65).
The improved results compared to the previous year's period was mainly driven by the following factors: income from discontinued operations, income from the voluntary VAT opting-in of a larger rental contract, lower operating expenses thanks to strict cost management as well as lower interest expenses.
As forecasted, rental income declined by CHF 4.7 million to CHF 130.3 million due to the properties sold in 2009.
Solid capital structure, low interest expenses
With a loan-to-value of 38.3% (end of 2009: 37.2%), the capital structure remains very solid. In April 2010, a CHF 250 million bond was issued with a coupon of 1.875% respectively all-in cost of 2.03%. In addition, we were able to conclude interest rate hedging transactions during the first half of 2010, which will allow PSP Swiss Property to continue benefiting from the historically low interest rate levels in the medium term. No bank loans will be due until 2013; bonds totalling CHF 290 million will mature in 2012. As per mid-year, PSP Swiss Property had unused credit lines of CHF 555 million. This substantial amount allows the Company to continue to flexibly manage its capital and is an excellent basis for acquisitions.
In the reporting period, the average interest rate was 2.58% (first half of 2009: 2.48% resp. 2.54% for the whole 2009 business year). At the end of June 2010, the average fixed-interest period was 3.6 years (end of 2009: 3.0 years).
Outlook 2010
PSP Swiss Property confirms the EBITDA forecast of approximately CHF 215 million for the entire 2010 business year.
The vacancy rate will be approximately 9% at year-end; this figure includes 1.2 percentage points from the Businesspark Richtistrasse in Wallisellen, which will be completed during the second half of 2010.
