Annual results as per 31 December 2012

In 2012, PSP Swiss Property has once again improved its operating results compared to last year: net income excluding changes in fair value rose by 8.5% to CHF 161.6 million (2011: CHF 149.0 Mio.). Corresponding earnings per share amounted to CHF 3.60 (2011: CHF 3.47). At year-end 2012, NAV per share reached CHF 80.64 (end of 2011: CHF 75.28). NAV before deducting deferred taxes was CHF 95.21 (end of 2011: CHF 89.02). The Board of Directors proposes a cash distribution of CHF 3.20 per share out of the capital contribution reserves; this corresponds to an increase of 6.7% compared to the payment in the previous year (2011: CHF 3.00).

Real estate portfolio

At the end of 2012, the real estate portfolio included 163 office and commercial properties in prime locations. In addition, there were six development sites and three individual construction projects. The carrying value of the total portfolio was CHF 6.283 billion (end of 2011: CHF 5.958 billion). During the reporting period, no investment properties were bought, however five small investment properties were sold as part of our continuous optimisation process for a total consideration of CHF 19.5 million, resp. 17.8% above the last valuation. Early 2012, PSP Swiss Property decided to invest approximately CHF 26 million in a health spa on the grounds of the Lido Locarno. Construction of the building complex, which is already let to an expert operating company, will presumably last until mid-2013. The ongoing site developments progressed as planned.

The revaluation of the portfolio resulted in an appreciation of CHF 266.9 million (2011: CHF 325.1 million). This appreciation was mainly due to property specific changes of discount rates, closing of new leases at higher rents than expected as well as slightly higher market rents for high-street retail spaces, particularly in the centre of Zurich.

Vacancy rate

At the end of 2012, the vacancy rate stood at 8.0% (end of 2011: 8.3%). The decrease was mainly the result of larger lettings at the following properties: Wallisellen, Richtistrasse 9; Bern, Laupenstrasse 18/18a; Biel, Aarbergstrasse 94 and Zurich West, Hardturmstrasse 131, 133, 135. 1.3% points of the 8.0% were due to ongoing renovation work on various properties: thereof 0.6% points related to the property on Route des Acacias 50/52 in Carouge and 0.4% points concerned the renovation of the property on Aarbergstrasse 94 in Biel. The properties in Zurich West and Wallisellen (carrying value CHF 0.9 billion) contributed 3.3% points to the overall vacancy rate. The remaining properties with a carrying value of CHF 4.9 billion (i.e. the total investment portfolio excluding the objects under renovation as well as those in Zurich West and Wallisellen) made up 3.4% points.

Of the lease contracts maturing in 2013 (CHF 42.0 million), 45% had already been renewed respectively extended at the end of 2012.

Annual results 2012

Net income excluding changes in fair value increased from CHF 149.0 million to CHF 161.6 million. Corresponding earnings per share amounted to CHF 3.60 (2011: CHF 3.47). For PSP Swiss Property, net income excluding changes in fair value is the basis for the distribution to shareholders. Net income including changes in fair value amounted to CHF 368.6 million (2011: CHF 404.0 million). Earnings per share including changes in fair value amounted to CHF 8.21 (2011: CHF 9.40).

The rise in net income excluding changes in fair value by CHF 12.6 million resulted mainly from the following: i) CHF 2.2 million higher rental income (2011: CHF 270.7 million), ii) CHF 9.5 million higher income from the sale of self-developed properties (2011: CHF 3.3 million) and iii) CHF 7.0 million lower financial expenses (2011: CHF 44.3 million).

Rental income increased from CHF 270.7 million to CHF 272.8 million. The increase was mainly due to the following: i) new lettings on Richtistrasse 9 and 11 in Wallisellen and on Aarbergstrasse 94 in Biel, ii) rental income from the boutique hotel on the Hürlimann site in Zurich, which was opened in March 2012 and iii) additional rental income due to several new smaller lettings. It must be kept in mind that extraordinary rental income in the amount of CHF 2.2 million occurred last year.

Financial expenses decreased by CHF 7.0 million respectively 15.9% to CHF 37.2 million due to the favourable interest rate environment respectively the attractive interest rate swaps now showing effect.

At the end of 2012, net asset value (NAV) per share was CHF 80.64 (end of 2011: CHF 75.28). NAV before deducting deferred taxes amounted to CHF 95.21 (end of 2011: CHF 89.02).

Strong capital structure

With a loan-to-value of 28.5% (end of 2011: 32.2%), the capital structure remains very solid. Currently, unused committed credit lines amount to CHF 635 million.

Due to interest rate hedging transactions, PSP Swiss Property will continue to benefit from the historically low interest rate levels in the medium term. At the end of 2012, the passing average interest rate amounted to 2.20% (end of 2011: 2.49%) and the average fixed-interest period was 3.7 years (end of 2011: 2.9 years). No bank loans will mature until 2015.

In September 2012, the rating agency Fitch confirmed PSP Swiss Property Ltd’s rating with an “A-” and stable outlook.

Proposals to the Annual General Meeting on 9 April 2013

For the business year 2012, the Board of Directors will propose a distribution out of the capital contribution reserves of CHF 3.20 per share (2011: 3.00). In relation to net income excluding changes in fair value, this amount corresponds to a payout ratio of 88.9%; in relation to the current share price, it corresponds to a yield of 3.8%.

Furthermore, all Board Members are available for re-election of another one-year term.

Subsequent events

The investment property on Chemin du Rionzi 52 in Lausanne was notarised for sale in the reporting period. Transfer of ownership will take place during the business year 2013.

For the refinancing of financial liabilities, a 1.0%bond, 2013 to 2019, with a volume of
CHF 120 million was issued on 8 February 2013.

Outlook 2013

Despite all the economic imponderabilities, PSP Swiss Property remains confident about the future: the Company is well established on the Swiss real estate market, with a strong capital base and a high-quality property portfolio.

The Company will stick to its long-term, value oriented and judicious acquisition strategy and to its conservative financing policy.

In 2013, financial resources will mainly be used for the renovation and modernisation of selected properties to further enhance their attractiveness as well as the development of the sites and projects.

Based on the assumption of an unchanged property portfolio, PSP Swiss Property expects an EBITDA excluding changes in fair value of approximately CHF 240 million for 2013 (2012: CHF 238.6 million). With regard to vacancies, a rate of approximately 10% at year-end 2013 is expected (end of 2012: 8.0%); the increase will mainly be caused by renovation work on Bahnhofplatz and Bahnhofquai in Zurich.

 

Key figures

Financial key figures	Unit	2011	2012	Δ in %1
Rental income	CHF 1 000	270 675	272 849	0.8
EPRA like-for-like growth	%	2.0	1.5
Net changes in fair value of real estate investments	CHF 1 000	325 068	266 851
Income from property sales	CHF 1 000	7 504	12 924
Total other income	CHF 1 000	10 337	8 351
Net income	CHF 1 000	403 994	368 631	- 8.8
Net income excluding gains/losses on real estate investments2	CHF 1 000	149 020	161 614	8.5
EBITDA excluding gains/losses on real estate investments	CHF 1 000	232 532	238 624	2.6
EBITDA margin	%	81.5	81.1
Total assets	CHF 1 000	6 050 916	6 354 173	5.0
Shareholders‘ equity	CHF 1 000	3 268 894	3 698 934	13.2
Equity ratio	%	54.0	58.2
Return on equity	%	13.0	10.6
Interest-bearing debt	CHF 1 000	1 946 894	1 808 286	- 7.1
Interest-bearing debt in % of total assets	%	32.2	28.5
Portfolio key figures
Number of investment properties	Number	168	163
Carrying value investment properties	CHF 1 000	5 611 591	5 968 097	6.4
Implied yield, gross	%	4.9	4.7
Implied yield, net	%	4.2	3.9
Vacancy rate end of period (CHF)	%	8.3	8.0
Number of sites and development properties	Number	9	9
Carrying value sites and development properties	CHF 1 000	346 879	314 430	- 9.4
Employees
End of period	Posts	84	84
Full-time equivalents	Posts	77	78
Per share figure
Earnings per share (EPS)3	CHF	9.40	8.21	- 12.6
EPS excluding gains/losses on real estate invesments3	CHF	3.47	3.60	3.9
Distribution per share	CHF	3.00	3.204	6.7
Net asset value per share (NAV)5	CHF	75.28	80.64	7.1
NAV per share before deduction of deferred taxes5	CHF	89.02	95.21	7.0
Share price end of period	CHF	78.60	86.55	10.1

1	Change to previous year’s period 2011 or carrying value as of 31 December 2011.
2	“Annual net income excluding gains/losses on real estate investments” corresponds to the consolidated annual 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 annual net income excluding gains/losses on real estate investments.
3	Based on average number of outstanding shares.
4	Proposal to the Annual General Meeting on 9 April 2013.
5	Based on number of outstanding shares.