Züblin increases operating profit, property values in Europe decline

Operating cash result increased by 25%

Year on year, operating cash profits from the rental business rose 25%, from CHF 15.5 million to CHF 19.4 million. This equates to cash earnings per share for the first six months of CHF 0.40. At CHF 66.4 million, rental income increased by 8%, due in large part to the increased portfolio. On a like-for-like basis, and excluding currency impacts, rental income would have increased by 1%. The consolidated vacancy rate remained stable at 9.4% despite of the sale of fully let buildings. The trend in operating costs continues to be positive, as total operating costs were reduced by 8%. Net financing costs rose roughly in the same absolute amount as rental income, driven by increased financing on an expanded portfolio. The Group realised a net profit of CHF 10.0 million (previous year CHF 14.7 million) on property sales during the first six months.

Real estate valuations affected by the international financial crisis

As of 30 September 2008, the value of the real estate portfolio stood at CHF 1,827.3 million, a decrease of approximately CHF 200.0 million compared with 31 March 2008. Property sales, net of currency fluctuations and investments, resulted in a net decrease of CHF 100.0 million, with negative valuations reducing the portfolio by a further CHF 100.3 million. Largely due to the fact that European real estate transactions have practically come to a standstill in the current economic environment, appraisers have adjusted real estate values sharply downwards, especially in France. After rising considerably over the last several years, the Group’s French portfolio was most affected by the valuation reductions, and was adjusted downwards by 10.4%, or CHF 66.8 million. Properties in Germany and The Netherlands were also adjusted downwards, each by 3.6%, which equated to CHF 33.3 million. In Switzerland, property values remained unchanged.

Solid long-term financing

The Group has secured its real estate financing on a long-term basis. Currently 77% of the mortgage portfolio, or CHF 916.0 million, is contractually secured for more than three years, 17% between one and three years, with only 6% due within one year. Interest costs are also fixed over the long term via interest rate swaps. The Group’s fully diluted equity ratio, taking into consideration the full conversion of outstanding convertible securities, currently stands at 33.1%.

93.3% of the 3.55% Convertible Bond converted as of 19 November 2008

As of 19 November 2008, the final conversion date for the 3.55% Convertible Bond 02/08, a total of CHF 93,326,000 bonds, or 93.3% of the original issue in the amount of CHF 100 million, were converted. The remaining CHF 6,674,000 will be redeemed on 19 December 2008.

Discount to NAV 44%

Fully diluted NAV per share declined to CHF 9.44 as of 30 September 2008. NAV declined in large part due to the earnings impact from the sharp decline in valuations. Further impacting NAV was the par value repayment in September 2008. NAV was positively impacted by the appreciation of the interest rate swap portfolio as well as currency translation adjustments. Based upon the closing share price on 19 November of CHF 5.30, the share traded at a discount of 44% to fully diluted NAV.

Züblin to focus on office properties in three countries

As part of its long-term planning process, the Board of Directors, together with the Group Management, has evaluated Züblin’s investment strategy. In the future, Züblin will invest exclusively in energy-efficient office properties in central locations. In addition to Switzerland, the regional focus will also include the two largest continental European countries, Germany and France. More specifically, within these countries, the Group will concentrate its investments in only a few selected cities. Züblin is therefore currently selling non-core assets and has made good progress since the year end.

Announcement of Extraordinary Shareholders' Meeting on 18 December 2008

- Capital Decrease by way of a Par Value Reduction with a Distribution in Kind

Züblin Immobilien Holding currently owns 68% of the shares of its French subsidiary, Züblin Immobilière France SA (“ZIF”). ZIF is a publicly listed company at Euronext – Paris (Compartiment C), and holds the status of a REIT (Real Estate Investment Trust), termed SIIC in France. As a result of a change in French tax legislation, as of 31 December 2008, an investor in a SIIC may only hold up to a maximum of 60% of the shares of the company. Should this condition not be met by the stated deadline, the company would lose its SIIC status, which might have a substantial negative financial impact for ZIF and its shareholders.

As a result of the sharp decline in the share price of ZIF, a sale of the 8% excess shareholdings in ZIF held by Züblin would not have been appropriate. In order to protect the interests of Züblin shareholders, the Company’s Board of Directors has therefore decided to propose the distribution of Züblin’s excess holding in ZIF shares directly to current Züblin shareholders in order for Züblin to meet the 60% ownership threshold by 31 December 2008. Therefore, the Board will call an extraordinary shareholders' meeting, to be held on 18 December 2008, to approve a share capital decrease by way of a par value reduction with a distribution in kind of ZIF shares. With this distribution, the Züblin shareholders will be able to participate in any future ZIF share price appreciation. An exact description of the planned transaction will follow in the invitation to the meeting, which will be distributed to Züblin shareholders on 27 November 2008.

- Change in the Board of Directors of Züblin Immobilien Holding AG Dr. Heinz Hackl has resigned from his position as a Member of the Board of Directors of Züblin Immobilien Holding AG for personal reasons. At the extraordinary shareholders' meeting on 18 December 2008, the Board of Directors will propose to elect Mr. Christian Bubb as of 1 February 2009 to replace Dr. Hackl for the remainder of his term. Mr. Bubb is currently the CEO of Implenia and will step down from this position at the end of January 2009.

Outlook As a result of the current financial crisis, the global economy is facing a recession, the severity and length of which cannot yet be predicted. However, with its focus on reducing the vacancy rate and reinforcing the quality and length of its leases, Züblin continues to expect solid operating results. On the other hand, further adjustments to real estate values cannot be ruled out. In addition to intensive management of the portfolio, Züblin will concentrate its efforts on positioning the Group for the challenging times that lie ahead.