Quarterly results as per 30 September 2013

Real estate portfolio

At the end of September 2013, the real estate portfolio included 166 office and commercial properties in prime locations. In addition, there were five development sites and three individual construction projects. The carrying value of the total portfolio was CHF 6.403 billion (end of 2012: CHF 6.283 billion). During the reporting period, no investment properties were acquired nor sold.

Already during the first quarter of 2013, the following new constructions in Zurich were successfully completed and transferred to the investment property portfolio:
i) Brandschenkestrasse 152b (“Kesselhaus”), ii) Limmatstrasse 250-254/264/266 (Löwenbräu site “Red“) and iii) Theaterstrasse 22 („Vorderer Sternen“). At the beginning of May 2013, the decision was made to invest approximately CHF 30 million in the construction of a health spa on the grounds of the “Genève Plage” in Geneva/Cologny, Port Noir. Construction of the building complex (construction start was in June 2013), which is already let to an expert operating company, will take until 2015. This project follows the successfully completed spas in Zurich (Thermalbad & Spa Zürich, Hürlimann site) and Locarno (Termali Salini & Spa, Lido Locarno). In June 2013, demolition of the property at Löwenstrasse 16 in Zurich and construction of a new building began. The investment sum for this new building with mixed use (office and retail spaces) will be around CHF 7 million. Construction will take until the end of 2014. Furthermore, construction began on the first stage of the building complex “Salmenpark” in Rheinfelden at the end of August 2013 (planned completion 2016). On this site, directly on the River Rhine and close to the historic centre, a complex with the main use residential as well as retail businesses, a nursing home for the elderly and offices is planned in several stages. The investment volume amounts to a total of around CHF 240 million; thereof, the first stage alone will account for approximately CHF 170 million.

The new developments and conversions on the other sites progressed as planned.

Vacancy rate

At the end of September 2013, the vacancy rate stood at 9.0% (end of 2012: 8.0%). 1.7 percentage points of the 9.0% were due to ongoing renovation work on various properties. Thereof 1.4 percentage points related to the total renovation of the properties at Bahnhofplatz/Bahnhofquai in Zurich, which will be classified as development properties at year-end. The properties in Zurich West and Wallisellen (carrying value CHF 0.9 billion) contributed 3.2 percentage points to the overall vacancy rate. The remaining properties with a carrying value of CHF 5.1 billion (i.e. the total investment portfolio excluding the objects under renovation as well as those in Zurich West and Wallisellen) made up 4.1 percentage points. Of the lease contracts maturing in 2013 (CHF 42.0 million), 83% had already been renewed respectively extended at the end of September 2013.

Quarterly results Q1 to Q3 2013

Net income excluding changes in fair value rose by CHF 12.7 million from CHF 122.3 million (previous year’s period) to CHF 135.0 million. The main reasons for the increase were: i) CHF 4.2 million higher rental income; in part due to new rentals after completed renovations, ii) CHF 1.0 million higher income from property sales (inventories); mainly from sales/transfers of 43 condominiums on the Löwenbräu site in Zurich, iii) CHF 1.5 million lower real estate maintenance and renovation expenses and iv) CHF 5.7 million lower financial expenses; compared to the previous year’s period, these declined by 19.9% to CHF 23.2 million due to the benign interest rate environment and the positive effect of interest rate swaps. Corresponding earnings per share amounted to CHF 2.94 (previous year’s period: CHF 2.74). It should be noted that the sale of own shares in 2012 had a corresponding diluting effect. For PSP Swiss Property, net income excluding gains/losses on real estate investments is the basis for the distribution to shareholders.

Net income including net changes in fair value amounted to CHF 208.5 million (previous year’s period: CHF 215.3 million). The decline resulted mainly from the lower appreciation of the properties as at mid-year 2013 compared to the first half of 2012. Earnings per share including net changes in fair value amounted to CHF 4.55 (previous year’s period: CHF 4.82).

At the end of September 2013, net asset value (NAV) per share was CHF 82.33 (end of 2012: CHF 80.48). NAV before deducting deferred taxes amounted to CHF 97.61 (end of 2012: CHF 95.00). It should be mentioned that a dividend payment of CHF 3.20 per share was made in mid-April 2013.

Strong capital structure, low interest expenses

With a loan-to-value of 28.9% (end of 2012: 28.4%), the capital structure remains very solid. Currently, unused committed credit lines amount to CHF 470 million.

Thanks 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 September 2013, the passing average interest rate amounted to 1.84% (end of 2012: 2.20%) and the average fixed-interest period was 3.3 years (end of 2012: 3.7 years). No major committed bank loans will mature until 2018.

In March 2013, the rating agency Fitch confirmed PSP Swiss Property Ltd’s rating with an “A-” and stable outlook.

Subsequent events

There were no material subsequent events.

Outlook 2013

Despite all the economic imponderabilities, 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 renovation and modernisation of selected properties as well as on the development of the sites and projects.

Based on the assumption of an unchanged property portfolio, PSP Swiss Property still expects an EBITDA excluding changes in fair value of approximately CHF 240 million for 2013 (2012: CHF 238.3 million). A lower vacancy rate than originally expected of “less than 9.5%” is foreseen for the end of the year (previously: “approximately 10%”).

Key figures

Key financial figures	Unit	20121	Q1-3 20121	Q1-3 2013	Δ in %2
Rental income	CHF 1 000	272 849	204 337	208 568	2.1
EPRA like-for-like change	%	1.5	1.8	0.5
Net changes in fair value of real estate investments	CHF 1 000	266 851	119 309	95 735
Income from property sales	CHF 1 000	12 924	12 105	12 851
Total other income	CHF 1 000	8 351	6 265	5 283
Net income	CHF 1 000	368 385	215 277	208 522	- 3.1
Net income excl. gains/losses on real estate investments3	CHF 1 000	161 367	122 348	135 001	10.3
EBITDA excl. gains/losses on real estate investments	CHF 1 000	238 308	181 799	187 317	3.0
EBITDA margin	%	81.0	81.6	82.6
Total assets	CHF 1 000	6 356 255	6 183 229	6 492 723	2.1
Shareholders’ equity	CHF 1 000	3 691 551	3 530 176	3 776 268	2.3
Equity ratio	%	58.1	57.1	58.2
Return on equity	%	10.6	4.8	4.2
Interest-bearing debt	CHF 1 000	1 808 286	1 828 039	1 878 583	3.9
Interest-bearing debt in % of total assets	%	28.4	29.6	28.9
Portfolio key figures
Number of properties	Number	163	164	166
Carrying value properties	CHF 1 000	5 968 097	5 827 889	6 219 834	4.2
Implied yield, gross	%	4.7	4.7	4.5
Implied yield, net	%	3.9	4.0	3.9
Vacancy rate end of period (CHF)	%	8.0	9.2	9.0
Number of sites and development properties	Number	9	10	8
Carrying value sites and development properties	CHF 1 000	314 430	273 287	183 148	- 41.8
Employees
End of period	Posts	84	85	86
Equal full-time employees	Posts	78	79	79
Per share figures
Earnings per share (EPS)4	CHF	8.21	4.82	4.55	- 5.8
EPS excl. gains/losses on real estate investments4	CHF	3.60	2.74	2.94	7.4
Distribution per share	CHF	3.205	n.a.	n.a.
Net asset value per share (NAV)6	CHF	80.48	77.05	82.33	2.3
NAV per share before deducting deferred taxes6	CHF	95.00	90.78	97.61	2.7
Share price end of period	CHF	86.55	85.45	78.50	- 9.3

1	Adjusted, due to initial application of IAS 19 (revised).
2	Change to Q1-3 2012 or carrying value as of 31 December 2012 as applicable.
3	“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 net income excluding gains/losses on real estate investments.
4	Based on average number of outstanding shares.
5	For the 2012 business year. Cash payment was made on 16 April 2013.
6	Based on number of outstanding shares.