In 2013, PSP Swiss Property has once again improved its operating results compared to last year net income excluding changes in fair value rose by 7.6% to CHF 173.6 million (2012: CHF 161.4 Mio.). Corresponding earnings per share amounted to CHF 3.79 (2012: CHF 3.60). At year-end 2013, NAV per share reached CHF 83.70 (end of 2012: CHF 80.48). NAV before deducting deferred taxes was CHF 99.25 (end of 2012: CHF 95.00). The positive development over the past several years will experience a temporary marginal correction during the current and the next business year as a result of higher renovation expenditures and a challenging market environment. The Board of Directors proposes a cash distribution of CHF 3.25 per share out of the capital contribution reserves (2012: CHF 3.20 per share).
Real estate portfolio
At the end of 2013, the real estate portfolio included 161 office and commercial properties in prime locations. In addition, there were five development sites and five individual construction projects. The carrying value of the total portfolio was CHF 6.466 billion (end of 2012: CHF 6.283 billion). During the reporting period, no investment properties were acquired nor sold.
The following new buildings were completed and transferred to the investment property portfolio: i) Brandschenkestrasse 152b in Zurich (office building “Kesselhaus”), ii) Limmatstrasse 250-254/264/266 in Zurich (Löwenbräu site, office building „Red“), iii) Theaterstrasse 22 in Zurich (restaurant and office building „Vorderer Sternen“) and iv) Via Respini 7/9 in Locarno (thermal bath “Bagni Salini & Spa”).
In June 2013, the construction of a health spa on the grounds of the “Genève Plage” in Geneva/Cologny, Port Noir started (investment sum approximately CHF 30 million). Construction of the building complex, which is already let to an expert operating company, will take until the end of 2015. This project follows the successfully completed spas in Zurich and Locarno.
Also in June 2013, construction at the property on Löwenstrasse 16 in Zurich began. The investment sum for this new building with mixed use (office and retail space) will be around CHF 7 million. Construction will take until the end of 2014.
End of August 2013, construction began on the first stage of the building complex “Salmenpark” in Rheinfelden (completion 2016). On this site, directly on the River Rhine, a complex (apartments, nursing home for the elderly, office and retail space) is planned in two 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.
And, since the end of 2013 several properties in central Zurich are in an extensive renovation process. The project “Bahnhofquai/Bahnhofplatz” (total renovation, particularly infrastructure and technical installations for approximately CHF 76 million) involves the following four properties: i) Bahnhofplatz 1, ii) Bahnhofplatz 2, iii) Bahnhofquai 9, 11, 15 and iv) Waisenhausstrasse 2/4, Bahnhofquai 7. The entire project will be carried out in several stages. Stage 1 will cost approximately CHF 33 million and covers the renovation of the two properties on Bahnhofplatz 1 and on Bahnhofquai 9, 11, 15, in 2014 and 2015. The property on Bahnhofstrasse 10/Börsenstrasse 18 will undergo a comprehensive renovation until summer 2015; the technical installations in particular will be brought up to date. As previously, a mixed use of retail areas and offices is being planned. The investment total amounts to approximately CHF 15 million.
The new developments and conversions on the other sites progressed as planned.
Vacancy rate
At the end of 2013, the vacancy rate stood at 8.9% (end of 2012: 8.0%) including the properties on Bahnhofquai/Bahnhofplatz as well as on Bahnhofstrasse 10/Börsenstrasse 18 in Zurich, which were all reclassified to development properties as from the end of 2013. The vacancy rate related to the relevant investment portfolio excluding above properties was 8.0%. 1.9 percentage points of the 8.9% were due to ongoing renovation work on various properties. The properties in Zurich West and Wallisellen (carrying value CHF 0.8 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 3.8 percentage points.
Annual results 2013
Net income excluding changes in fair value increased from CHF 161.4 million to CHF 173.6 million. Corresponding earnings per share amounted to CHF 3.79 (2012: CHF 3.60). 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 271.0 million (2012: CHF 368.4 million). Earnings per share including valuation differences amounted to CHF 5.91 (2012: CHF 8.21).
The rise in net income excluding changes in fair value by CHF 12.3 million resulted mainly from the following: i) CHF 6.3 million higher rental income (2012: CHF 272.8 million) and ii) CHF 6.4 million lower financial expenses (2012: CHF 37.2 million).
Rental income increased from CHF 272.8 million to CHF 279.1 million. The increase was mainly related to new lettings on following properties: new building „Red“ on the Löwenbräu site in Zurich, Laupenstrasse 18/18a in Bern, opening of the boutique hotel on the Hürlimann site in Zurich, Route des Acacias 50/52 in Geneva, reopening „Vorderer Sternen“ on Theaterstrasse 22 in Zurich, Bahnhofplatz 2 in Biel as well as Place Saint-François 15 and Rue du Grand-Chêne 2 in Lausanne.
Financial expenses decreased by CHF 6.4 million to CHF 30.9 million thanks to the benign interest rate environment and the positive effect of new interest rate swaps as well as the expiry of a CHF 150 million 2.875% bond.
At the end of 2013, net asset value (NAV) per share was CHF 83.70 (end of 2012: CHF 80.48). NAV before deducting deferred taxes amounted to CHF 99.25 (end of 2012: CHF 95.00).
Strong capital structure, low interest expenses
With a loan-to-value of 28.1% (end of 2012: 28.4%), the capital structure remains very solid. Currently, unused committed credit lines amount to CHF 850 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 2013, the passing average interest rate amounted to 1.85% (end of 2012: 2.20%) and the average fixed-interest period was 3.4 years (end of 2012: 3.7 years). No major committed bank loans will mature until 2018.
In December 2013, the rating agency Fitch confirmed PSP Swiss Property Ltd’s rating with an “A-” and stable outlook.
Material proposals to the Annual General Meeting on 3 April 2014
For the business year 2013, the Board of Directors will propose a distribution out of the capital contribution reserves of CHF 3.25 per share (2012: 3.20 per share). In relation to net income excluding changes in fair value, this amount corresponds to a payout ratio of 85.8%; in relation to the current share price, it corresponds to a yield of 4%.
All members of the Board of Directors as well as Mr. Günther Gose as Chairman of the Board of Directors stand for re-election. The Board of Directors proposes the election of Mr. Adrian Dudle as additional Board member. Mr. Adrian Dudle, born in 1965, Swiss citizen, domiciled at Kilchberg/ZH, lic.iur, attorney-at-law and notary public, is working as Chief Legal Officer with Ringier Ltd, Zofingen/Zurich. Before that, he was performing advising and management functions with several companies, such as Mövenpick Hotels & Resorts Ltd and Orascom Development Holding Ltd.
Amendments to the Articles of Association will be proposed in order to implement the ordinance against excessive compensations in listed corporations [Verordnung gegen übermässige Vergütungen bei börsenkotierten Aktiengesellschaften (“VegüV”)].
Subsequent events
For the refinancing of financial liabilities, a 1.375% bond, 2014 to 2020, with a volume of CHF 200 million was issued on 4 February 2014.
There were no further material subsequent events.
Outlook 2014
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. In any case, 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 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 expects an EBITDA excluding changes in fair value of CHF 230 million for 2014 (2013: CHF 242.5 million). The decrease is mostly due to a slight decline in rental income, lower income from the sale of condominiums, the fading out of VAT recovery and higher renovation expenditures.
With regard to vacancies, a rate of approximately 11% is expected at year-end 2014 (end of 2013: 8.0%). The strong increase compared to year-end 2013 results mainly from two larger vacancies, which will arise during the fourth quarter of 2014 at one property in Zurich (Central Business District) and one property in Zurich West.
Real estate portfolio
At the end of 2013, the real estate portfolio included 161 office and commercial properties in prime locations. In addition, there were five development sites and five individual construction projects. The carrying value of the total portfolio was CHF 6.466 billion (end of 2012: CHF 6.283 billion). During the reporting period, no investment properties were acquired nor sold.
The following new buildings were completed and transferred to the investment property portfolio: i) Brandschenkestrasse 152b in Zurich (office building “Kesselhaus”), ii) Limmatstrasse 250-254/264/266 in Zurich (Löwenbräu site, office building „Red“), iii) Theaterstrasse 22 in Zurich (restaurant and office building „Vorderer Sternen“) and iv) Via Respini 7/9 in Locarno (thermal bath “Bagni Salini & Spa”).
In June 2013, the construction of a health spa on the grounds of the “Genève Plage” in Geneva/Cologny, Port Noir started (investment sum approximately CHF 30 million). Construction of the building complex, which is already let to an expert operating company, will take until the end of 2015. This project follows the successfully completed spas in Zurich and Locarno.
Also in June 2013, construction at the property on Löwenstrasse 16 in Zurich began. The investment sum for this new building with mixed use (office and retail space) will be around CHF 7 million. Construction will take until the end of 2014.
End of August 2013, construction began on the first stage of the building complex “Salmenpark” in Rheinfelden (completion 2016). On this site, directly on the River Rhine, a complex (apartments, nursing home for the elderly, office and retail space) is planned in two 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.
And, since the end of 2013 several properties in central Zurich are in an extensive renovation process. The project “Bahnhofquai/Bahnhofplatz” (total renovation, particularly infrastructure and technical installations for approximately CHF 76 million) involves the following four properties: i) Bahnhofplatz 1, ii) Bahnhofplatz 2, iii) Bahnhofquai 9, 11, 15 and iv) Waisenhausstrasse 2/4, Bahnhofquai 7. The entire project will be carried out in several stages. Stage 1 will cost approximately CHF 33 million and covers the renovation of the two properties on Bahnhofplatz 1 and on Bahnhofquai 9, 11, 15, in 2014 and 2015. The property on Bahnhofstrasse 10/Börsenstrasse 18 will undergo a comprehensive renovation until summer 2015; the technical installations in particular will be brought up to date. As previously, a mixed use of retail areas and offices is being planned. The investment total amounts to approximately CHF 15 million.
The new developments and conversions on the other sites progressed as planned.
Vacancy rate
At the end of 2013, the vacancy rate stood at 8.9% (end of 2012: 8.0%) including the properties on Bahnhofquai/Bahnhofplatz as well as on Bahnhofstrasse 10/Börsenstrasse 18 in Zurich, which were all reclassified to development properties as from the end of 2013. The vacancy rate related to the relevant investment portfolio excluding above properties was 8.0%. 1.9 percentage points of the 8.9% were due to ongoing renovation work on various properties. The properties in Zurich West and Wallisellen (carrying value CHF 0.8 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 3.8 percentage points.
Annual results 2013
Net income excluding changes in fair value increased from CHF 161.4 million to CHF 173.6 million. Corresponding earnings per share amounted to CHF 3.79 (2012: CHF 3.60). 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 271.0 million (2012: CHF 368.4 million). Earnings per share including valuation differences amounted to CHF 5.91 (2012: CHF 8.21).
The rise in net income excluding changes in fair value by CHF 12.3 million resulted mainly from the following: i) CHF 6.3 million higher rental income (2012: CHF 272.8 million) and ii) CHF 6.4 million lower financial expenses (2012: CHF 37.2 million).
Rental income increased from CHF 272.8 million to CHF 279.1 million. The increase was mainly related to new lettings on following properties: new building „Red“ on the Löwenbräu site in Zurich, Laupenstrasse 18/18a in Bern, opening of the boutique hotel on the Hürlimann site in Zurich, Route des Acacias 50/52 in Geneva, reopening „Vorderer Sternen“ on Theaterstrasse 22 in Zurich, Bahnhofplatz 2 in Biel as well as Place Saint-François 15 and Rue du Grand-Chêne 2 in Lausanne.
Financial expenses decreased by CHF 6.4 million to CHF 30.9 million thanks to the benign interest rate environment and the positive effect of new interest rate swaps as well as the expiry of a CHF 150 million 2.875% bond.
At the end of 2013, net asset value (NAV) per share was CHF 83.70 (end of 2012: CHF 80.48). NAV before deducting deferred taxes amounted to CHF 99.25 (end of 2012: CHF 95.00).
Strong capital structure, low interest expenses
With a loan-to-value of 28.1% (end of 2012: 28.4%), the capital structure remains very solid. Currently, unused committed credit lines amount to CHF 850 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 2013, the passing average interest rate amounted to 1.85% (end of 2012: 2.20%) and the average fixed-interest period was 3.4 years (end of 2012: 3.7 years). No major committed bank loans will mature until 2018.
In December 2013, the rating agency Fitch confirmed PSP Swiss Property Ltd’s rating with an “A-” and stable outlook.
Material proposals to the Annual General Meeting on 3 April 2014
For the business year 2013, the Board of Directors will propose a distribution out of the capital contribution reserves of CHF 3.25 per share (2012: 3.20 per share). In relation to net income excluding changes in fair value, this amount corresponds to a payout ratio of 85.8%; in relation to the current share price, it corresponds to a yield of 4%.
All members of the Board of Directors as well as Mr. Günther Gose as Chairman of the Board of Directors stand for re-election. The Board of Directors proposes the election of Mr. Adrian Dudle as additional Board member. Mr. Adrian Dudle, born in 1965, Swiss citizen, domiciled at Kilchberg/ZH, lic.iur, attorney-at-law and notary public, is working as Chief Legal Officer with Ringier Ltd, Zofingen/Zurich. Before that, he was performing advising and management functions with several companies, such as Mövenpick Hotels & Resorts Ltd and Orascom Development Holding Ltd.
Amendments to the Articles of Association will be proposed in order to implement the ordinance against excessive compensations in listed corporations [Verordnung gegen übermässige Vergütungen bei börsenkotierten Aktiengesellschaften (“VegüV”)].
Subsequent events
For the refinancing of financial liabilities, a 1.375% bond, 2014 to 2020, with a volume of CHF 200 million was issued on 4 February 2014.
There were no further material subsequent events.
Outlook 2014
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. In any case, 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 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 expects an EBITDA excluding changes in fair value of CHF 230 million for 2014 (2013: CHF 242.5 million). The decrease is mostly due to a slight decline in rental income, lower income from the sale of condominiums, the fading out of VAT recovery and higher renovation expenditures.
With regard to vacancies, a rate of approximately 11% is expected at year-end 2014 (end of 2013: 8.0%). The strong increase compared to year-end 2013 results mainly from two larger vacancies, which will arise during the fourth quarter of 2014 at one property in Zurich (Central Business District) and one property in Zurich West.
Edmond de Rothschild Real Estate: plus besoin d’augmenter le capital de la SICAV suisse