Real estate portfolio
At the end of June 2011, the real estate portfolio included 170 office and commercial properties in top locations. In addition, there were eight sites with attractive development projects. The carrying value of the total portfolio stood at CHF 5.695 billion (end of 2010: CHF 5.518 billion). During the first six months of 2011, no acquisitions were made; four properties were sold for CHF 42.7 million, 20.5% above the last valuation.
The revaluation of the properties done by the external valuer resulted in an appreciation of CHF 152.8 million. The main drivers of this appreciation were: i) lower average weighted discount rate by 8 basis points, ii) new leases at higher rents and iii) slightly higher market rents for retail surfaces, mainly in the center of Zurich. At the end of June 2011, the portfolio's average weighted nominal discount rate was 5.36% (end of 2010: 5.44%).
Work on the development sites progressed as planned. Particularly worth mentioning are the construction start on the Gurten site in Wabern near Bern and the submission of the renewed building application for the "Paradiso" site in Lugano.
Vacancy rate
At the end of June 2011, the vacancy rate stood at 8.9% (end of 2010: 8.5%). 1.8 percentage points of the 8.9% were due to ongoing renovation work on various properties. The properties in Zurich West and Wallisellen (carrying value CHF 0.8 billion) contributed 4.5 percentage points to the overall vacancy rate; excluding these sub-portfolios, the investment portfolio with a carrying value of CHF 4.5 billion made up 2.6 percentage points only.
Of the lease contracts maturing in 2011 (CHF 39.0 million), 90% had already been renewed respectively extended on average at slightly better conditions at the end of June 2011.
Half-year results 2011
Compared to the previous year's period, net income excluding changes in fair value increased from CHF 74.9 million to CHF 77.3 million. Corresponding earnings per share amounted to CHF 1.81 (H1 2010: CHF 1.77).
Rental income went up by CHF 6.6 million to CHF 136.9 million. This rise resulted from: i) rental income generated by the property on Seestrasse 353 in Zürich acquired in April 2010, ii) rental income generated by the thermal bath on the Hürlimann site in Zürich completed in December 2010 and iii) additional rental income as a result of successful new leases as well as extraordinary income in the second quarter of 2011.
With CHF 25.8 million, operating expenses increased slightly (H1 2010: CHF 24.7 million). Financial expenses decreased slightly to CHF 23.1 million (H1 2010: CHF 23.5 million).
At the end of June 2011, net asset value (NAV) per share was CHF 70.77 (end of 2010: CHF 68.87). NAV per share before deferred taxes amounted to CHF 83.66 (end of 2010: CHF 80.86).
Solid capital structure, low interest expenses
With a loan-to-value of 36.0% (end of 2010: 35.7%), the capital structure remains very solid. The amount of unused credit lines is CHF 640 million. No bank loans will be due until 2013; a CHF 250 million bond and a CHF 40 million private placement will mature in 2012.
In the reporting period, the average interest rate was 2.61% (H1 2010: 2.58%). At the end of June 2011, the average interest rate stood at 2.53% (end of 2010: 2.61%) and the average fixed-interest period was 2.7 years (end of 2010: 3.2 years).
Outlook 2011
PSP Swiss Property remains confident for the 2011 earnings development. Based on the assumption of an unchanged property portfolio, the forecast for EBITDA excluding gains/losses on real estate investments has been increased from "approximately CHF 220 million" to "CHF 225 million" (2010: CHF 223.3 million). The reasons for this increase are extraordinary rental income of CHF 2.2 million in the second quarter of 2011 as well as higher than expected other income resulting from VAT recovery due to the opting in of several properties.
The expected overall vacancy rate at the end of 2011 has been improved to "below 9%", from "around 9%".
With regard to the sites, the focus will be on two sites in Zurich, the Hürlimann site (hotel completion as well as conversion of the "Kesselhaus" as final stages) and the Löwenbräu site, as well as the Gurten site in Wabern near Bern, where construction started recently. The other sites are interesting long-term projects which are partly still in the planning phase.
