Despite a difficult renting environment for the office real estate market, PSP Swiss Property's operational results are again very positive: net income excluding gains/losses on real estate investments rose by 16.9% from CHF 51.4 million (approx. 35m) to CHF 60.0 million (approx. 40m) compared to the previous year's period.
Increase in rental income and EBITDA
Rental income rose by 19.3% from CHF 95.4 million to CHF 113.9 million compared to the first half of 2004. EBITDA excluding gains/losses on real estate investments was up by 15.5% from CHF 81.7 million to CHF 94.4 million. The EBITDA margin was improved to 74.0% (first half of 2004: 71.7%), which is a result of the increased efficiency after the completed integration of REG. In the first half of 2005, net income was CHF 45.1 million. The reported net income for the first half of 2004 amounted to CHF 111.9 million, which was positively affected by several one-off items in the context of the REG acquisition. Net income excluding gains/losses on real estate investments (and excluding one-off items for the first half of 2004) rose by 16.9% from CHF 51.4 million to CHF 60.0 million. Corresponding earnings per share amounted to CHF 1.36 (first half of 2004: CHF 1.38) - the slight decrease was due to the diluting effect (higher average number of outstanding shares) caused by the capital increase of May 2004 in the context of the REG acquisition.
Stable real estate portfolio
During the reporting period, no properties were purchased. Conversely, 30 non-strategic prop-erties were sold for CHF 141.1 million, whereby the average selling price exceeded the last valuation of these properties by 2.9%. The market valuation of the investment properties as of midyear 2005 showed an adjustment of CHF -15.4 million, which is insignificant compared to the size of the portfolio. At midyear 2005, the real estate portfolio amounted to CHF 4.2 billion (end of 2004: CHF 4.3 billion); the vacancy rate was 13.3% (end of 2004: 11.7%). Excluding investments properties being vacant because of renovation works, the vacancy rate was 12.5%.
Solid financial structure
At midyear 2005, equity stood at CHF 2.2 billion (end of 2004: CHF 2.3 billion). The equity ratio was 51.5%. With this strong equity base, the company's financial flexibility for future growth is secure.
Positive share price trend
During the reporting period, the PSP share price rose by 12.6% from CHF 49.40 to CHF 55.60. While the PSP share had been trading at a discount of 4.6% to its net asset value (NAV) at the end of 2004, this had turned into a premium of 9.7% by midyear 2005. Trading volumes and the liquidity of the PSP share also continued their positive trend. The average daily trading vol-ume reached 110 708 shares worth CHF 5.8 million in the first half of 2005 (first half of 2004: 60 074 shares worth CHF 2.7 million). Due to the listing of the PSP share in the SMIM index as of October 2005, the positive trend in the share's trading volume is likely to continue.
Subsequent events
With the purchase of 35% of the share capital of GFG Gesellschaft für Grundeigentum (GFG), Zurich, as announced on 1 July 2005, the first step in the acquisition of a first-class property portfolio (17 commercial properties) worth approximately CHF 230 million was done. The trans-action is to be concluded by the end of September 2005 and will integrate GFG into PSP Swiss Property. The purchase of 100% of the shares is paid by approximately 33% in cash and by approximately 67% through a share swap. Provisional calculations come to a fair value of the acquired net assets of approximately CHF 90.7 million. As this amount equals more of less the purchase price, only a minor positive or negative goodwill is expected. At the beginning of July 2005, a CHF 250 million, 2.25%, 7-year bond was issued with a maturity date of 27 July 2012. The proceeds are used to redeem all existing mortgages and for general financing activities.
Source: PSP Swiss Property
