Real estate portfolio
As at the end of 2011, the real estate portfolio included 168 office and commercial properties in prime locations as well as seven attractive development sites and two development projects; the carrying value of the total portfolio amounted to CHF 5.958 billion (end of 2010: CHF 5.518 billion). During the reporting period, no properties were bought, however six small assets from the investment portfolio were sold as part of our continuous optimisation process for a total consideration of CHF 55.4 million, resp. 16.7% above the last valuation (IFRS: 8.4%).
The revaluation of the portfolio resulted in an appreciation of CHF 325.1 million (2010: CHF 180.6 million). This appreciation was mainly due to changes in the discount rates, successful closing of new leases and lease extensions at higher rents.
Work on the development sites progressed as planned. Particularly worth mentioning is the construction start on the Gurten site in Wabern near Bern, where 48 out of 101 units were already reserved as per year-end 2011. Construction of the new „Vorderer Sternen“ at Bellevue Theaterstrasse 22 in Zurich began in July 2011. The new building offering a restaurant and office space will be built by spring 2013. The investment sum amounts to approximately CHF 12 million. Furthermore, the conversion of the “Kesselhaus” on the Hürlimann site in Zurich started recently; the investment sum for this office building with approximately 700 m2 floor space amounts to approximately CHF 5 million. On 1 March 2012, the Boutique Hotel “B2” opens on the Hürlimann site in Zurich.
Vacancy rate
At the end of 2011, the vacancy rate stood at 8.3 % (end of 2010: 8.5 %). The slight decrease was mainly due to successful partial lettings in the two new buildings in Wallisellen (Richtistrasse 9 and 11), which were completed in 2010. 1.6 percentage points of the 8.3 % were due to ongoing renovation work on various properties. Thereof, 0.9 percentage points related to the property on Aarbergstrasse 94 in Biel. 0.6 percentage points came from the property on Laupenstrasse 18/18a in Bern. The properties in Zurich West and Wallisellen (carrying value CHF 0.8 billion) contributed 4.1 percentage points to the overall vacancy rate. The remaining properties with a carrying value of CHF 4.7 billion (i.e. the total investment portfolio excluding the objects under renovation as well as those in Zurich West and Wallisellen) made up 2.6 percentage points.
Annual results 2011
Net income excluding changes in fair value rose from CHF 139.8 million to CHF 149.0 million; earnings per share amounted to CHF 3.47 (2010: CHF 3.30). Net income including changes in fair value amounted to CHF 404.0 million (2010: CHF 280.8 million); per share CHF 9.40 (2010: CHF 6.62).
The rise in net income excluding gains/losses on real estate investments by CHF 9.2 million resulted mainly from the following factors: i) CHF 7.7 million higher rental income (2010: CHF 263.0 million), ii) CHF 2.5 million higher income from the sale of freehold apartments (2010: CHF 0.8 million), iii) CHF 2.0 million higher other income (2010: CHF 5.2 million), iv) CHF 2.8 million lower maintenance and renovation expenses (2010: CHF 19.3 million) and v) CHF 2.0 million lower financial expenses (2010: CHF 46.3 million). It should also be mentioned in this context that in the previous year there was an additional income of CHF 4.9 million from discontinued operations, which no longer applied in the reporting year.
EBITDA excluding changes in fair value increased by 4.1% to CHF 232.5 million (2010: CHF 223.3 million). The EBITDA margin improved to 81.5% (2010: 80.3%).
Strong capital structure, decreasing interest expenses
With a loan-to-value of 32.2% (end of 2010: 35.7%), the capital structure remains very solid. During the reporting period, interest rate hedging transactions were concluded, which will allow PSP Swiss Property to continue benefiting from the historically low interest rate levels in the medium term. Bonds totalling CHF 290 million will mature in 2012, but no bank loans will be due.
As per 31 December 2011, the average interest rate was 2.49% (end of 2010: 2.61%), while the average fixed-interest period was 2.9 years (end of 2010: 3.2 years).
PSP Swiss Property has unused credit lines of CHF 780 million. This substantial amount provides the Company a high flexibility.
Proposals to the Annual General Meeting on 3 April 2012
For the business year 2011, the Board of Directors will propose a distribution out of the capital contribution reserves of CHF 3.00 per share (2010: nominal value reduction of CHF 2.80 per share). In relation to net income excluding gains/losses on real estate investments, this amount corresponds to a payout ratio of 86.5 %; in relation to the current share price, it corresponds to a yield of 3.9%.
Furthermore, all Board Members are available for re-election of another one-year term.
Subsequent events
On 3 January 2012, the property on Seftigenstrasse 259 in Wabern was sold. According to IFRS, the income was recognised as profit from net changes in fair value of real estate investments as per 31 December 2011, as the sale had been contractually agreed at that time.
On 27 January 2012, the purchase of a building lease to construct a health spa, which already has a building permit, on the grounds of the Lido Locarno, was notarised. PSP Swiss Property will invest approximately CHF 26 million in this project. Construction of the spa, which has already been leased, will probably last until mid-2013.
A total of 107 000 own shares were sold at an average price of CHF 78.22 each since 1 January 2012.
Outlook 2012
PSP Swiss Property is confident about the medium- and long-term future due to its strong market position, its solid capital base and the high quality of its property portfolio.
All in all, the Company is guardedly optimistic about 2012. PSP Swiss Property has been observing the economic environment – in Switzerland, in Europe and globally – very carefully not only since the subprime and financial crisis of 2007. Even if Switzerland has been able to avoid the bigger problems of many Eurozone countries so far, the issues related to the international sovereign debt problems associated with the strong franc could affect the country’s economy in the future. Therefore, the Company will stick to its prudent acquisition strategy and our conservative financing policy.
In the current year, the further sites and projects developments, investments in the portfolio as well as targeted letting activities are at the top of the agenda. With a view to optimising the portfolio, significant investments are again planned in 2012 in individual properties to enhance their attractiveness.
Based on the assumption of an unchanged property portfolio, an EBITDA excluding gains/losses on real estate investments of above CHF 230 million is expected for 2012 (2011: CHF 232.5 million).
With regard to vacancies in our investment portfolio, a stabilisation of the vacancy rate is targeted; thereby, a rate of approximately 9% at the end of 2012 is expected (end of 2011: 8.3%).
