Swiss Prime Site AG: Profit surges by more than 40%

As the leading real estate investment company in Switzerland, Swiss Prime Site AG reaped rewards in the first half-year 2011 from the generally robust economic environment, low interest rates and growing interest in indirect real estate investments. Earnings before interest and taxes (EBIT) surged by 18.1% to CHF 241.5 million (CHF 204.5 million), with revaluations contributing CHF 77.8 million (CHF 40.4 million). Profit including revaluation effects soared by 41.1% to CHF 152.4 million (CHF 108.0 million). Profit before revaluations jumped by 23.8% to CHF 105.1 million (CHF 84.9 million), resulting in weighted earnings per share of CHF 1.93 (CHF 1.57). Taking into account revaluations, realised earnings per share amounted to CHF 2.81 (CHF 2.00), up 40.5% versus the previous year’s period. “The first half-year was clearly marked by qualitative growth, as evidenced by the significant strengthening of profitability amid relatively modest portfolio expansion,” declares Swiss Prime Site CEO Markus Graf.

Net asset value (NAV) before deferred taxes amounted to CHF 72.04 as at 30 June 2011 (CHF 72.11 as at 31 December 2010), and NAV after deferred taxes came in at CHF 59.50 (CHF 60.14). The payout to shareholders on 28 April 2011 amounting to CHF 3.50 per share was carried out through a withholding-tax exempt distribution from capital contribution reserves. The distribution corresponds to a cash yield of 5.0%, based on the closing share price as at 31 December 2010. The Swiss Prime Site share turned in a performance of +8.5% in the reporting period, once again outperforming the Swiss Performance Index SPI (-1.8%).

The weighted average interest rate on all financial liabilities amounted to 2.8% (2.8%), with an average residual term to maturity of 4.2 (3.9) years.

Net rental income declined by 3.6% year-on-year to CHF 203.8 million (CHF 211.4 million). The decrease is attributable primarily to divestments within the scope of portfolio optimisation. The loss of earnings rate edged up from 4.0% to 4.9% as a result of sporadic vacancies at individual properties. Total operating income declined by 5.7% to CHF 279.1 million (CHF 295.9 million). This figure includes a 3.4% increase in net retail trade turnover of CHF 73.7 million (CHF 71.3 million) from the retail trade segment, of which CHF 68.8 million (CHF 66.6 million) in retail sales was realised by the Jelmoli – The House of Brands department store with its proprietary-managed floor space. Hotel Ramada Encore in Geneva contributed roughly CHF 5 million (CHF 4.7 million) to segment turnover. A comparison of the turnover in the retail trade segment should take into account the fact that the comparable previous year’s figure includes CHF 6.8 million in turnover from the credit card business of Jelmoli Bonus Card Ltd, which was divested in May 2010.

The balance sheet figures show just insignificant changes. Shareholders’ equity amounted to CHF 3 232.3 million (CHF 3 136.7 million as at 30 June 2010) and borrowed capital totalled CHF 5 300.7 million (CHF 5 387.0 million), resulting in a slightly higher equity ratio of 37.9% (36.8%) and borrowed capital ratio of 62.1% (63.2%). The return on equity (ROE) surged noticeably from 6.8% to 9.4%.

On 21 June 2011, Swiss Prime Site issued a second convertible bond amounting to CHF 190.4 million with an interest rate of 1.875% and term to maturity of five years. The bond of the former Jelmoli Group amounting to CHF 175.0 million was redeemed after the balance sheet date, on 5 July 2011.

Real estate portfolio
The real estate portfolio was valued at CHF 8.18 billion as at 30 June 2011 (CHF 8.02 billion as at 31 December 2010), comprising 175 existing properties, 12 building land plots and the 5 development projects: Prime Tower, Platform and Maaghof in Zurich, Stücki Business Park in Basel as well as the SkyKey development site in Zurich, which was acquired in January 2011. Seven properties that did not conform to company strategy were divested at a profit, including the commercial building located at Fegistrasse in Spreitenbach and another commercial building at Kreuzstrasse in Zurich.

The value of the real estate portfolio grew by 2.0% versus the level at end-2010, or by CHF 160.9 million. The increase was attributable to value changes and investments in the projects located at the Maag site in Zurich (CHF +71.1 million) as well as Stücki site (Stücki Business Park) in Basel (CHF +5.4 million), investments and value changes for existing properties (CHF +69.4 million) and building land plots (CHF +1.8 million), and the acquisition of the SkyKey development project in Zurich North (CHF +44.5 million), in addition to the aforementioned divestments (CHF -31.3 million). The value of existing properties increased by 0.9% in the reporting period.

The interior design and tenant improvements at Prime Tower are progressing on schedule, with the first tenants taking up residence in their floor space in the reporting period. On the top floors of the tower, interior construction is moving along briskly for the unique restaurant, lounge and bar as well as conference areas, featuring the fine-dining “Clouds” restaurant. On 23 June 2011, roughly 1 000 employees of Ernst & Young moved into their new company headquarters in the Platform corporate building. Rental income generated from the building projects located at the Maag site – which will be completed in the second half-year and are practically fully leased – should have a positive impact on the earnings picture.

Contact
Swiss Prime Site AG Froburgstrasse 1 Postfach 4601 Olten Tel. 062 213 06 06 Fax 062 213 06 09 info@swiss-prime-site.ch