Real estate portfolio
During 2008, PSP Swiss Property purchased one property in the centre of Aarau for CHF 12.6 million and a development project with building permit in Wallisellen for CHF 8.2 million. During the third quarter 2008, the new office building „DL 4" on the Hürlimann site in Zurich was completed and occupied by PSP Swiss Property itself. During the second half of 2008, 4 non-strategic buildings were sold for CHF 58.7 million; overall, the sales price exceeded the fair value as at the end of June 2008 by 17.1%. As at the end of 2008, the carrying value of the 191 properties and 7 sites amounted to CHF 5.149 billion (end of 2007: CHF 5.001 billion).
The revaluation of the investment properties resulted in an appreciation of CHF 121.5 million. The majority of this appreciation was the result of the successful vacancy reduction as well as of new leases at higher rents.
Vacancy
As per year-end 2008, the vacancy was lowered by another 2.3 percentage points to 8.3% (end of 2007: 10.6%). Instrumental for this success were the improved quality of the space offered and the further strengthening of rental activities initiated in 2007. Despite the difficult economic environment, PSP Swiss Property expects to be able to lower vacancies in the next years. For 2009, a basically sideward movement of the vacancy rate is foreseen.
Solid capital structure
With an equity ratio of 49.1% (end of 2007: 49.4%) and a financial leverage of 40.5% (end of 2007: 40.7%), the capital structure continues to be strong. During the reporting period, average borrowing costs were 2.75% (2007: 2.73%); the remaining weighted average term to maturity of all financial liabilities was 3.1 years (end of 2007: 3.7 years). 74.2% of all financial liabilities had fixed interest rates for over one year (end of 2007: 83.0%). PSP Swiss Property considers its financial situation as very solid and adequate.
Proposal for a nominal value reduction
The Board of Directors proposes a cash payment in the form of a nominal value reduction of CHF 2.50 per share (previous year: CHF 2.40) to the Annual General Meeting on 2 April 2009. Compared to net income excluding gains/losses on real estate investments (CHF 2.94), this amount corresponds to a payout ratio of 85.0%; in relation to yesterday's PSP-share closing price of CHF 43.75 this corresponds to a payout yield of 5.7%.
Changes in the Board of Directors
The Annual General Meeting of 2 April 2009 is proposed to reduce the term of office of the Members of the Board of Directors from 3 years to 1 year, and that with immediate effect and termination of the running terms of office as per 2 April 2009. All current Members of the Board of Directors, with the exception of Max Zollinger, are proposed for re-election for a 1-year term each. In addition, the Board of Directors proposes the election of Josef Stadler and Aviram Wertheim, also for a 1-year term of office each.
Josef Stadler and Aviram Wertheim (Chairman of Alony Hetz Properties & Investment Ltd) have many years of experience in the financial and real estate sector; they shall support PSP's Board of Directors in strategic respectively investor and real estate topics.
Given these changes, the Board of Directors will be increased from 5 to 6 Members and, as from 2 April 2009, will consist of: Günther Gose (Chairman), Luciano Gabriel (Delegate and CEO), Nathan Hetz (Member), Gino Pfister (Member), Josef Stadler (Member), Aviram Wertheim (Member).
Outlook 2009
Despite the difficult economic environment, PSP Swiss Property is rather positive about the medium- and long-term future. This is due to its market position, its strong capital base and its high-quality real estate portfolio. In the current year, the evaluation of acquisition opportunities as well as the stabilisation of vacancies will be at the top of the agenda.
Based on an unchanged property portfolio, a further increase in the EBITDA excluding gains/losses on real estate investments is expected and shall exceed CHF 210 million (2008: CHF 208.4 million). By the end of 2009, the vacancy rate is expected to be below 9%.
