In 2007, PSP Swiss Property has improved its earnings substantially compared to the previous year: net income rose by 29.3% to CHF 291.2 million, earnings per share increased by 35.3% to CHF 6.71. The Board of Directors proposes a cash payment of CHF 2.40 per share, 9.1% more than last year. Again, this payment will be in the form of a nominal value reduction. The vacancy of the property portfolio was lowered to 10.6%, which is a reduction by 3.3 percentage points compared to the end of the previous year.
Real estate portfolio
The revaluation of the investment properties resulted in an appreciation of CHF 218.5 million. A significant part of this appreciation derives from a strong market environment for commercial properties in prime locations, which further improved in the second half of the year and reflects the very high quality of PSP's properties. Furthermore, the successful reduction of vacant space in several properties also contributed to the value appreciation.
During the reporting year, one property was taken over and a new property was completed in the City of Zurich. 12 non-strategic properties were sold for CHF 46.8 million. As at the end of 2007, the carrying value of the 194 properties and 6 sites reached the 5-billion-hurdle and amounted to CHF 5.001 billion (end of 2006: CHF 4.757 billion).
Vacancy and rental situation
The vacancy rate was reduced to 10.6% during the reporting year (from 13.9% as per end of 2006 respectively 14.7% as per mid-2007). Instrumental for this success were the following measures introduced early 2007: i) the sale of the "property management business for third parties", ii) the strengthening of rental activities as well as iii) the use of synergies between the asset management and the property management units. PSP Swiss Property is confident to lower the vacancy going forward.
Solid capital structure
With an equity ratio of 49.4% (end of 2006: 52.1%) and a financial leverage of 40.7% (end of 2006: 38.6%), the capital structure continues to be strong. Average borrowing costs reduced to 2.73% (2006: 2.76%); the average weighted remaining term to maturity of all financial liabilities was 3.7 years (end of 2006: 3.8 years). 83.0% of all financial liabilities had fixed interest rates for over one year (end of 2006: 76.4%). PSP Swiss Property considers its financial situation as solid and comfortable.
Proposal for a nominal value reduction
The Board of Directors proposes a cash payment in the form of a nominal value reduction of CHF 2.40 per share (previous year: nominal value reduction of CHF 2.20 per share) to the Annual General Meeting on 9 April 2008. Compared to net income excluding gains/losses on real estate investments (CHF 2.78), this amount corresponds to a payout ratio of 86.3%; in relation to the 2007 year-end closing price of CHF 57.20 it corresponds to a payout yield of 4.2%.
Proposal for a share buy-back programme
A share buy-back programme will also be proposed to the Annual General Meeting on 9 April 2008. In order to maintain optimal capital management flexibility, up to a maximum amount of 5% of the issued shares (i.e. maximum 2'345'000 shares) shall be bought back via a second trading line on the SWX Swiss Exchange. However, buy-backs will only occur in case of strong share price drops driven by market factors.
Board of Directors
Fritz Jörg will resign from his position as Member of the Board of Directors of PSP Swiss Property by end of February 2008. Nick van Ommen and Martin Wetter will not be available for a re-election at the Annual General Meeting on 9 April 2008.
Given these changes, the Board of Directors will be reduced to 5 Members and as from April 2008 will consist of: Günther Gose (Chairman), Luciano Gabriel (Delegate and CEO), Nathan Hetz (Member), Gino Pfister (Member), Max Zollinger (Member).
Outlook 2008
In consideration of its position as a market leader, the good market environment, its strong equity base and the Company's prime real estate portfolio, PSP Swiss Property is confident about its medium- and long-term prospects. In the current year, the evaluation of acquisition opportunities as well as the further reduction of vacancies will remain at the top of the agenda.
Based on an unchanged property portfolio, an EBITDA excluding gains/losses on real estate investments of approximately CHF 205 million (2007: CHF 193.9 million) is expected for 2008. By the end of 2008, the vacancy rate is expected to fall to approximately 9%.
