Swiss Prime Site AG: Profit surges by more than 20%

Amid a growth-friendly environment, Swiss Prime Site turned in a very positive performance in the first quarter of 2011. Profit surged by 21.2% on a year-on-year basis to CHF 57.8 million (CHF 47.7 million). Operating profit (EBIT) increased by 2.8% or CHF 2.6 million, from CHF 91.4 million to CHF 94.0 million. Revaluations of properties under construction and development sites contributed CHF 12.2 million (CHF 7.7 million) to EBIT.

“The very pleasing earnings performance is attributable to our dynamic portfolio management, the optimisation of the financing structure and the synergies achieved after the merger with Jelmoli Group,” declares Swiss Prime Site CEO Markus Graf.

Rental income edged down by 3.6% to CHF 100.8 million (CHF 104.6 million) as a result of divestments and a slight increase in vacancies as well as loss of earnings rate, which amounted to 5.1% (3.8%). Operating income reached the CHF 139.1 million mark (CHF 144.7 million), of which CHF 41.8 million (CHF 44.1 million) is attributable to the retail trade segment, comprising for the most part Jelmoli – The House of Brands department store on Zurich’s Bahnhofstrasse, which generated net retail trade turnover of CHF 36.5 million (CHF 35.0 million).

Net asset value (NAV) before deferred taxes edged up by 1.8%, from CHF 72.03 to CHF 73.36, and after deferred taxes by the same 1.8%, from CHF 60.17 to CHF 61.23. According to the resolution of the Annual General Meeting of 19 April 2011, shareholders received an unchanged distribution of CHF 3.50 per share. The payout on 28 April 2011 was carried out through a withholding tax-exempt distribution from capital contribution reserves. The distribution resulted in a very attractive cash yield of 5.0%, based on the closing price of CHF 69.75 at year-end 2010.

Real estate portfolio
The real estate portfolio was valued at CHF 8.08 billion as of 31 March 2011 (CHF 8.10 billion), which also takes into account the divestment of four properties in the reporting period with a total value of CHF 30.0 million (fair value of CHF 28.5 million as of 31 December 2010). CHF 24.6 million of the sales proceeds related to divestments of a commercial building located on Kreuzstrasse in Zurich and a commercial property on Fegistrasse in Spreitenbach. The divestitures are within the scope of the already previously announced divestment programme which started last year.

In January 2011, Swiss Prime Site acquired the SkyKey real estate project in Zurich North, in which the company will invest roughly CHF 230 million. The commercial building, comprising 18 upper floors and rental floor space of 40,000 square metres, will be ready for occupancy in summer 2014. The complex is being constructed according to the LEED standard and is being leased by Zurich Insurance Company Ltd. under a long- term agreement.

The final construction phase for Prime Tower and the two annex buildings Cubus and Diagonal is winding down at the Maag site in Zurich. The first office tenants will move into their floor space in summer 2011, according to plan. The occupancy rate currently amounts to 94%. Swiss Prime Site anticipates full occupancy by year-end, based on the tremendous interest. Construction of the restaurant/bar/lounge and conference areas situated on the top two floors of the building has kicked off. The opening of the Clouds restaurant is planned to coincide with the official inauguration of Prime Tower at the end of November 2011. Preparations are already underway in the neighbouring Platform corporate building for Ernst & Young to take up residence; the company is leasing the entire building.

Outlook
The positive economic prospects offer strategically well-positioned and broadly diversified real estate investment companies a prevailing very favourable environment. Swiss Prime Site estimates a loss of earnings rate of 4.5% to 5.0% for the full-year 2011 and an improved result (excluding extraordinary effects), as already announced at the press conference.