Real estate portfolio

At the end March 2018, the carrying value of the total portfolio was CHF 7.272 billion (end of 2017: CHF 7.046 billion). In Q1 2018, the property portfolio purchased from Edmond de Rothschild (Suisse) S.A. consisting of nine high-quality office buildings was integrated. Furthermore, the new construction “Grosspeter Tower” in Basel was completed and reclassified to the investment portfolio. It has become one of the city’s most distinctive buildings with a hotel and state-of-the-art offices.

The development projects progressed as planned. At the renovation project opposite Zurich’s main train station at Bahnhofplatz 1, Bahnhofquai 9/11/15, a long-term lease was signed recently. As from the end of 2019, No18 (premium brand of International Workplace Group, IWG) will rent around 4 700 m² to be used as premium co-working office space and lounges. The entire building complex will become very attractive due to the ongoing renovations and the prominent new tenants (i.a. Ruby Hotels & Resorts on the Beatenplatz side as from early 2021). Since April 2018, Westhive, another provider of co-working space, provides space mainly for start-ups as well as marketing and tech companies at Hardturmstrasse 161 / Förrlibuckstrasse 150 in Zurich-West.

At the end of March 2018, the vacancy rate stood at 8.5% (end of 2017: 8.2%). The slight rise is due to the completion and reclassification of the new construction “Grosspeter Tower” in Basel (vacancy rate end of Q1 2018: 68.4%). As of May 2018, the lease with the anchor tenant Bayer started, leading to a reduction of the vacancy rate in this building to around 30%. A further reduction of this figure is expected in the next months. 1.0 percentage points of all vacancies are due to ongoing renovations. Of the lease contracts maturing in 2018 (CHF 29.1 million), 64% were renewed respectively extended at the end of March 2018.

Quarterly results Q1 2018

Due to the initial application of IFRS 15, Revenue from Contracts with Customers, the previous year’s period Q1 2017 and FY 2017 were restated. Revenues relating to condominium sales are now recorded using the so-called percentage-of-completion-method. The application of IFRS 15 did not have any material impact on Q1 2017 resp. FY 2017 (for details see Q1 2018 report and presentation available on www.psp.info).

During the reporting period, net income (excluding changes in fair value) reached CHF 43.2 million (Q1 2017: CHF 39.7 million). The increase of 8.7% resulted mainly from a rise in capitalised own services related to the portfolio purchase (Edmond de Rothschild) and higher other income (overall up by CHF 2.9 million) as well as a decline in financial expenses by CHF 0.6 million. Rental income rose by CHF 0.7 million to CHF 69.1 million (Q1 2017: CHF 68.4 million).

Operating expenses increased by CHF 0.2 million to CHF 13.8 million (Q1 2017: CHF 13.6 million). Financial expenses declined by the above-mentioned CHF 0.6 million to CHF 6.0 million (Q1 2017: CHF 6.6 million). Net income (including changes in fair value) reached CHF 40.3 million (Q1 2017: CHF 39.7 million). The initial valuation of the purchased portfolio resulted in a valuation loss of CHF 3.9 million. Furthermore, tax expenses increased by CHF 0.2 million to CHF 10.3 million (Q1 2017: CHF 10.0 million). Earnings per share (including changes in fair value) amounted to CHF 0.88 (Q1 2017: CHF 0.87). EPS (excluding changes in fair value), which is the basis for the dividend distribution, amounted to CHF 0.94 (Q1 2017: CHF 0.87).

At the end of March 2018, net asset value (NAV) per share was CHF 87.94 (end of 2017: CHF 86.96). NAV before deducting deferred taxes amounted to CHF 105.37 (end of 2017: CHF 104.22).

Strong capital structure

With total equity of CHF 4.034 billion (end of 2017: CHF 3.989 billion) – corresponding to an equity ratio of 54.0% (end of 2017: 54.0%) – the capital base remains strong.

Interest-bearing debt amounted to CHF 2.531 billion, corresponding to 33.9% of total assets (end of 2017: CHF 2.491 billion respectively 33.7%). Excluding debt capital invested as fixed-term deposit totalling CHF 125 million, the debt ratio was 32.8%.

At the end of March 2018, the passing average interest rate was 0.97% (end of 2017: 0.99%). The average fixed-interest period was 3.7 years (end of 2017: 3.6 years). Currently, unused committed credit lines amount to CHF 770 million.

PSP Swiss Property has ratings from two international rating agencies: Senior Unsecured Rating A- (outlook stable) from Fitch and A3 Issuer Rating (outlook stable) from Moody’s.

Subsequent events

The ordinary Annual General Meeting on 5 April 2018 approved all proposals of the Board of Directors. Among other resolutions, the payment of an ordinary dividend of CHF 3.40 per share for the 2017 business year was approved (previous year: CHF 3.35 per share). The payout totalling CHF 156.0 million was made on 11 April 2018. Luciano Gabriel was re-elected as Chairman of the Board of Directors (one-year term of office). All remaining six current members of the Board of Directors were also re-elected (one-year terms of office). Ernst & Young AG, Zurich, was re-elected as Statutory Auditors for the 2018 business year. Proxy Voting Services GmbH, Zurich, was re-elected as independent shareholder representative (one-year term of office). The Compensation Committee and the Audit Committee consist of Peter Forstmoser (Chairman), Adrian Dudle, Nathan Hetz and Josef Stadler. The Nomination Committee consists of Josef Stadler (Chairman), Corinne Denzler and Adrian Dudle.

There were no further material subsequent events.

Market environment and outlook 2018

PSP Swiss Property expects that the predicted economic expansion will have a positive impact on the demand for office space, at least in central locations. The outlook for retail space in central locations is also significantly better than for objects on the periphery. With regard to the investment market, demand for investments in prime commercial properties will hardly diminish.

The focus of PSP Swiss Property remains on the modernisation of selected properties, the further development of the sites and projects as well as reinforced letting activities resp. vacancy reduction. Acquisitions in the strategic investment areas only are aimed for in case of potential added value in the long-term.

For FY 2018, an ebitda (excluding changes in fair value) of above CHF 235 million is still expected (2017: CHF 242.2 million). While rental income is likely to increase by around CHF 8 million, income from condominium sales will fall. The predicted decline in ebitda therefore mainly reflects the lower expected income from condominium sales.

With regard to the vacancies, a rate of around 7.5% is now expected at year-end 2018 (previous guidance: 8.5%; end of March 2018: 8.5%).

Key figures

Further information

Giacomo Balzarini, CEO · Phone +41 (0)44 625 59 59 · Mobile +41 (0)79 207 32 40

Vasco Cecchini, CCO · Phone +41 (0)44 625 57 23 · Mobile +41 (0)79 650 84 32

Report and presentation are available on www.psp.info

www.psp.info/reports

www.psp.info/presentations

Today, 10:30 hrs (CET): conference call (Q&A only) held in English

Switzerland / Europe · +41 (0)58 310 50 00

Great Britain · +44 (0)207 107 0613

USA · +1 (1)631 570 56 13

Other international numbers · https://media.choruscall.ch/documents/Attended_DI_numbers.pdf

Agenda

Publication H1 2018 · 17 August 2018

Publication Q1-Q3 2018 · 13 November 2018

Publication FY 2018 · 26 February 2019

Annual General Meeting 2019 · 4 April 2019