During the reporting period January to September 2014, operating net income excluding changes in fair value fell by 4.1% to CHF 129.5 million compared to the previous year’s period (CHF 135.0 million). The Company is nevertheless satisfied with the results, in view of the extraordinary high apartment sales in 2013.
Press Release
for immediate publication
14 November 2014
Quarterly results as per 30 September 2014
PSP Swiss Property – Operating earnings in line with expectations. FY 2014 forecast confirmed, vacancy rate outlook per year-end improved.
During the reporting period January to September 2014, operating net income excluding changes in fair value fell by 4.1% to CHF 129.5 million compared to the previous year’s period (CHF 135.0 million). The Company is nevertheless satisfied with the results, in view of the extraordinary high apartment sales in 2013. At the end of September 2014, NAV per share amounted to CHF 83.00 (end of 2013: CHF 83.70; on 10 April 2014, a cash distribution of CHF 3.25 per share was made out of the capital contribution reserves).
Real estate portfolio
At the end of September 2014, the real estate portfolio included 161 office and commercial properties. In addition, there were five development sites and five construction projects. The carrying value of the total portfolio was CHF 6.558 billion (end of 2013: CHF 6.466 billion). At the end of April 2014, the investment property on Albulastrasse 57 in Zurich was sold. The sale resulted in a profit of CHF 2.0 million. At the beginning of September 2014, the investment property on Peter Merian-Strasse 88/90 in Basel was acquired.
The construction of the apartment tower “Black” on the Löwenbräu site in Zurich was completed in the first quarter of 2014. At the end of September 2014, 47 of the 58 freehold apartments were sold. During the reporting period, three apartments were transferred to the buyers (in the business year 2013: 44).
The apartment complex on the Gurten site in Wabern near Bern was completed in the second quarter of 2014. All 99 apartments and both studios have been sold; thereof, 98 apartments and both studios were transferred to the buyers in the reporting period. The last apartment will be transferred at the beginning of 2015. Until the end of 2014, all commercial areas on the site will be restructured. The industrial building with the former bottling plant is currently in the planning phase for renovation and conversion.
Work on the “Salmenpark” in Rheinfelden, the currently largest development project with an investment total of CHF 170 million (stage 1), proceeds according to plan. Construction began at the end of August 2013; completion is planned for 2016. 45% of the commercial units and 12 of the 36 rental apartments have been pre-let. At the end of September 2014, 40 of the 113 freehold apartments had been sold.
The latest construction project (“Grosspeter Tower” in Basel) started recently. The construction of this high-rise building (78 meters, 22 stories) will take about two years. The project (LEED Gold building, zero-emission operation) is designed for a mixed use with a hotel and offices. The total investment amounts to CHF 100 million.
Vacancy rate
At the end of September 2014, the vacancy rate stood at 8.8% (end of 2013: 8.0%). 1.0 percentage point of the 8.8% was due to ongoing renovation work at various properties. The properties in Zurich West and Wallisellen with a carrying value of CHF 0.8 billion contributed 3.6 percentage points to the overall vacancy rate. The remaining properties with a carrying value of CHF 5.2 billion (i.e. the total investment portfolio excluding the objects under renovation as well as those in Zurich West and Wallisellen) made up 4.2 percentage points.
Of the lease contracts maturing in 2014 (CHF 42.1 million), 62% were renewed respectively extended at the end of September 2014.
Quarterly results Q1 to Q3 2014
In the reporting period, net income excluding changes in fair value declined to CHF 129.5 million (previous year’s period: CHF 135.0 million). The reasons for this decline were lower rental income, which decreased by CHF 1.5 million, and lower income from the sale of freehold apartments, which fell by CHF 6.1 million. Corresponding earnings per share amounted to CHF 2.82 (previous year’s period: CHF 2.94). For PSP Swiss Property, net income excluding gains/losses on real estate investments is the basis for the distribution to shareholders.
Net income including changes in fair value amounted to CHF 138.9 million (previous year’s period: CHF 208.5 million). The decline is mainly due to the lower appreciation of the properties at mid-year 2014 (CHF 9.8 million) compared to the first half of 2013 (CHF 95.7 million). In the third quarter of 2014, an appreciation of CHF 1.2 million resulted due to the initial valuation of the investment property on Peter Merian-Strasse 88/90 in Basel, which was acquired at the beginning of September 2014. Earnings per share including changes in fair value amounted to CHF 3.03 (previous year’s period: CHF 4.55).
Strong capital structure
With a loan-to-value of 29.1% (end of 2013: 28.1%), the capital structure remains very solid. Currently, unused committed credit lines amount to CHF 580 million.
Thanks to interest rate hedging transactions, PSP Swiss Property will continue to benefit from the low interest rate levels in the medium term. At the end of September 2014, the passing average interest rate was 1.67% (end of 2013: 1.85%). The average fixed-interest period was 3.8 years (end of 2013: 3.4 years). No major committed bank loans will mature until 2019.
In March 2014, the rating agency Fitch confirmed PSP Swiss Property Ltd’s rating with an “A-” and stable outlook.
Outlook 2014
PSP Swiss Property remains confident about the future: the Company is well established in the Swiss real estate market with a strong capital base and a high-quality property portfolio. The Company sticks to its long-term, value-oriented and judicious acquisition strategy and to its conservative financing policy.
Focus will be kept on extensive renovations of selected properties as well as on the development of the sites and projects. In future, large-scale renovation projects are being planned as part of the portfolio optimisation strategy, which may also encompass the replacement with new buildings. Concrete plans for replacement buildings in Zurich West are already being elaborated.
PSP Swiss Property still expects an Ebitda excluding changes in fair value of approximately CHF 235 million for 2014 (2013: CHF 242.5 million). The decrease compared to last year is mostly due to a decline in rental income and lower income from the sale of condominiums.
With regard to vacancies, a rate of approximately 10% is now expected at year-end 2014 (previous estimate: approximately 11%). The increase compared to the end of September 2014 (8.8%) results mainly from two larger vacancies, which will arise during the fourth quarter of 2014 at one property in Zurich (Central Business District) and one property in Zurich West.
Key figures
Key financial figures | Unit | 2013 | Q1-3 2013 | Q1-3 2014 | Δ in %1 |
Rental income | CHF 1 000 | 279 143 | 208 568 | 207 080 | -0.7 |
EPRA like-for-like rental change | % | 1.7 | 0.5 | 0.2 | |
Net changes in fair value of real estate investments | CHF 1 000 | 128 144 | 95 735 | 10 977 | |
Income from property sales | CHF 1 000 | 13 048 | 12 851 | 8 824 | |
Total other income | CHF 1 000 | 6 088 | 5 283 | 6 087 | |
Net income | CHF 1 000 | 270 993 | 208 522 | 138 936 | -33.4 |
Net income excl. gains/losses on real estate investments2 | CHF 1 000 | 173 643 | 135 001 | 129 496 | -4.1 |
Ebitda excl. gains/losses on real estate investments | CHF 1 000 | 242 480 | 187 317 | 181 472 | -3.1 |
Ebitda margin | % | 81.3 | 82.6 | 82.4 | |
Total assets | CHF 1 000 | 6 541 812 | 6 492 723 | 6 631 127 | 1.4 |
Shareholders’ equity | CHF 1 000 | 3 839 230 | 3 776 268 | 3 806 859 | -0.8 |
Equity ratio | % | 58.7 | 58.2 | 57.4 | |
Return on equity | % | 7.2 | 7.4 | 4.8 | |
Interest-bearing debt | CHF 1 000 | 1 838 784 | 1 878 583 | 1 928 530 | 4.9 |
Interest-bearing debt in % of total assets | % | 28.1 | 28.9 | 29.1 | |
Portfolio key figures | |||||
Number of properties | Number | 161 | 166 | 161 | |
Carrying value properties | CHF 1 000 | 6 033 930 | 6 219 834 | 6 137 758 | 1.7 |
Implied yield, gross | % | 4.6 | 4.5 | 4.5 | |
Implied yield, net | % | 3.9 | 3.9 | 3.9 | |
Vacancy rate end of period (CHF) | % | 8.0 | 9.0 | 8.8 | |
Number of sites and development properties | Number | 10 | 8 | 10 | |
Carrying value sites and development properties | CHF 1 000 | 431 647 | 183 148 | 420 266 | -2.5 |
Employees | |||||
End of period | Posts | 86 | 86 | 85 | |
Equal full-time employees | Posts | 79 | 79 | 79 | |
Per share figures | |||||
Earnings per share (EPS)3 | CHF | 5.91 | 4.55 | 3.03 | -33.4 |
EPS excl. gains/losses on real estate investments3 | CHF | 3.79 | 2.94 | 2.82 | -4.1 |
Distribution per share | CHF | 3.254 | n.a. | n.a. | |
Net asset value per share (NAV)5 | CHF | 83.70 | 82.33 | 83.00 | -0.8 |
NAV share before deducting deferred taxes5 | CHF | 99.25 | 97.61 | 98.74 | -0.5 |
Share price end of period | CHF | 75.50 | 78.50 | 80.20 | 6.2 |
1 | Change to previous year’s period or carrying value as of 31 December 2013 as applicable. |
2 | “Net income excluding gains/losses on real estate investments” corresponds to the consolidated net income excluding net changes in fair values of the real estate investments, realised income on investment property sales 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. |
3 | Based on average number of outstanding shares. |
4 | For the 2013 business year. Cash payment was made on 10 April 2014. |
5 | Based on number of outstanding shares. |