Additional information Financial statements Overview. Half-year report H1

Transcription

1 2017 Half-year report H1 Additional information Financial statements Overview

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3 3 Contents 4 Key figures 6 H report 10 Portfolio summary 17 Financial statements Charts/tables Due to roundings, certain numbers presented in this report may not add up precisely to the totals provided. All key figures and changes were calculated using the precise numbers and not the presented, rounded ones. English translation of German original This is an English translation of the German original. Only the German original is legally binding. Sustainability For environmental reasons, there is no printed version of this half-year report. The half-year report is available as PDF on 51 Additional information 68 Contacts and important dates 69 Customer care EPRA reporting PSP Swiss Property is a member of EPRA (European Public Real Estate Association). Domiciled in Brussels, EPRA was founded in It is a non-profit organisation promoting and supporting the European public real estate industry. We apply EPRA s Best Practices Recommendations in the disclosure of our performance measures and in sustainability reporting. Additional information Financial statements Overview Further publications and information are available on

4 4 Key figures Key figures Key financial figures Unit 2016 Q Q H H /- 1 Rental income CHF % EPRA like-for-like change % Net changes in fair value of real estate investments CHF Income from property sales (freehold apartments) CHF Income from property sales (investment properties) CHF Total other income CHF Net income CHF % Net income excluding gains/losses on real estate investments 3 CHF % Ebitda excluding gains/losses on real estate investments CHF % Ebitda margin % Total assets CHF % Shareholders' equity CHF % Equity ratio % Return on equity % Interest-bearing debt CHF % Interest-bearing debt in % of total assets % Portfolio key figures Number of properties Number Carrying value properties CHF % Implied yield, gross 4 % Implied yield, net 4 % Vacancy rate (CHF) 4, 5 % Number of sites and development properties Number Carrying value sites and development properties CHF % Employees End of period People Full-time equivalents FTE Per share figures Earnings per share (EPS) 6 CHF % EPS excluding gains/losses on real estate investments 6 CHF % Distribution per share CHF n.a. n.a. n.a. n.a. Net asset value per share (NAV) 8 CHF % NAV per share before deduction of deferred taxes 8 CHF % Share price end of period CHF % 1 Change to previous year s period 2016 or carrying value as of 31 December 2016 as applicable. 2 Excl. property at Av. des Morgines 8/10 in Petit-Lancy: %. 3 See definition Net income excluding gains/losses on real estate investments on page 34, footnote 2. 4 For investment properties. 5 Equals the lost rental income in % of the potential rent, as per reporting date. 6 Based on average number of outstanding shares. 7 For the 2016 business year. Cash payment was made on 11 April Based on number of outstanding shares.

5 Key figures 5 Overview Real estate portfolio Shareholders equity % 10.0% 8.5% 9.3% 8.7% H Portfolio value in CHF billion Vacancy rate end of period in % Ebitda Net income components % 81.1% 7.2% 4.6% 4.9% 3.5% 4.9% H Shareholders equity in CHF billion Return on equity in % 81.8% 82.0% 81.3% H Ebitda excl. gains/losses on real estate investments in CHF million Ebitda margin in % H H Net income excl. gains/losses on real estate investments in CHF million Contribution gains/losses on real estate investments in CHF million H1 2017

6 6 H report H report Improved ebitda and lower vacancies are expected for FY Market environment Due to the continuing difficult market environment, the letting of commercial properties remained a challenge in H The market is competitive and location and quality of the properties are key. One positive aspect is the fact that the office market seems to be stabilising, especially in Zurich s city centre. Due to the optimistic eco - nomic growth forecasts for 2017 and 2018, the overall demand for office space is expected to recover to some degree. Real estate investments remain attractive. Investors demand for the purchase of prime commercial properties is unlikely to diminish due to the continuing low interest rates and the resulting investment plight. Letting market Office There is still an oversupply on the office letting market. In our main market, Zurich, new constructions and renovations are decreasing slightly, except in certain regions such as Zurich North. Here, between Zurich Oerlikon s train station and the airport, construction continues; as a result, vacancies keep growing marginally, while rents are declining moderately. The reduction of the vacancies is likely to take years, especially in peripheral regions. In contrast, the letting outlook for offices in central locations is significantly better. In Zurich, central office locations have been doing particularly well recently. The most difficult of the major markets is Geneva. Here, demand remains stagnant. In addition, the supply will continue expanding due to new construction projects, especially in outlying districts. Furthermore, Geneva is still behind Zurich with regard to the consolidation of the financial sector. Consequently, the trend for rents in Geneva is still negative. We do not expect office rents overall to recover soon, even though there are signs of a pickup in demand in central locations, especially Zurich s Central Business District. It remains to be seen, however, whether this will lead to a sustainable market recovery. In this challenging market environment, landlords may have to offer potential tenants diverse lease incentives. Retail The situation on the market for retail space remains tense. Demand has not picked up. Rents are still under pressure due to shopping tourism and continuously growing online shopping. Central locations ( high street retail ) are currently more resilient to this trend. Most of our retail properties are located in this more stable market segment.

7 H report 7 Overview Portfolio At the end of June 2017, our real estate portfolio included 160 office and commercial properties. In addition, there were four development sites and six individual projects. The carrying value of the total portfolio was CHF billion. Investment properties On 3 April 2017, we sold the property located at Eisenbahnstrasse 95 in Gwatt (Thun) for CHF 7.0 million. We did not purchase any investment properties in the reporting period. Along with regular smaller renovations in our investment portfolio, several of our buildings are going through an extensive modernisation process. Thereby, we are currently focusing on Zurich s city centre, in particular Bahnhofquai and Bahnhofplatz, several properties in Zurich West as well as one property each in Geneva and Lausanne. Furthermore, a replacement building, the Orion project, for two properties in Zurich West is in the planning phase. The new office property will be in line with today s requirements in terms of flexibility of use, site and architectural design as well as sustainability. In 2017 and 2018, we invest more than CHF 100 million overall for renovations and conversions in our investment properties. Vacancy At the end of June 2017, the vacancy rate stood at 8.7 % (end of 2016: 9.3 %). 0.6 percentage points of these 8.7 % were due to ongoing renovations. Of the lease contracts maturing in 2017 (CHF 31.4 million), 80 % were renewed respectively extended at the end of June As at year-end 2017, we now expect a lower vacancy rate of 8.5 % (previous forecast: around 9 %). Sites and development properties We develop four sites and six individual projects which are now under construction or in the planning phase. The ongoing work proceeded as planned during the reporting period. The most important developments in short: Construction of the Residenza Parco Lago in Paradiso (Lugano) with m 2 floor space (predominantly condominiums) started in March The investment total will amount to approximately CHF 80 million. Once completed, we will sell all units towards the end of The project Bahnhofquai/Bahnhofplatz in Zurich (total renovation, particularly infrastructure and technical installations) consists of several properties and will be carried out in three stages. Renovation work for stage 1 (Bahnhofplatz 1, Bahnhofquai 9/11/15) now will cost approximately CHF 51 million. Work began in June 2017 and is likely to take around two years. Most of the space will be dedicated to offices and retail use. For stage 2 (Waisenhausstrasse 2/4, Bahnhof - quai 7), we conducted an architectural contest with four teams. The selected project was ap - proved by the City Historical Building Committee in May The project includes a restaurant; for the remaining space, there are various options offices, retail or a hotel which are currently being assessed. From today's perspective, capital expenditure for stage 2 will amount to approximately CHF 33 million. We plan to submit the buil d- ing permission request in spring Stage 3 (Bahnhofplatz 2) is under review. Our cost estimate for the renovation is approximately CHF 12 million. Due to current leases we have not been able to start renovation work yet. For further information on the current projects see pages 64 to 65.

8 8 H report Valuation of properties The revaluation of the properties resulted in an overall appreciation of CHF 17.7 million (there of CHF 14.5 million were related to the investment portfolio and CHF 3.2 million to the project developments). Mid-2017, the portfolio s weighted average nominal discount rate stood at 3.73 % (year-end 2016: 3.82 %). The discount rate reduction by 9 basis points and successful new lettings had a positive effect on valuations, compensating the depreciations due to selective lower market rents and higher renovation expenses at various properties. Resolutions of the Annual General Meeting 2017 The ordinary Annual General Meeting on 5 April 2017 approved all proposals of the Board of Directors. Among other resolutions, the payment of an ordinary dividend of CHF 3.35 per share for the 2016 business year was approved (previous year: CHF 3.30 per share, thereof CHF 1.80 out of the capital contribution reserves and CHF 1.50 as ordinary dividend). The payout totalling CHF million was made on 11 April Luciano Gabriel was elected as Chairman of the Board of Directors (one-year term); he had laid down his office as CEO as per the end of March All remaining six current members of the Board of Directors and the four current members of the Compensation Committee were re-elected (one-year terms of office). The Compensation Committee and the Audit Committee consist of Peter Forstmoser (Chairman), Adrian Dudle, Nathan Hetz and Josef Stadler. Ernst & Young AG, Zurich, was newly elected as Statutory Auditors for the 2017 business year. Consolidated half-year results (January to June 2017) In H1 2017, we achieved a net income (excluding gains/losses on real estate investments) 1 of CHF 80.4 million (H1 2016: CHF 89.0 million). The decline was expected and reflects mainly the lower income from condominium sales compared to the previous year s period. This income decreased by CHF 8.7 million to CHF 1.9 million (H1 2016: CHF 10.5 million). Moreover, rental income decreased by CHF 2.0 million. Particularly the lost income caused by the lease termination of a single tenant at the property located at Av. des Morgines 8/10 in Petit-Lancy could not be compensated by new lettings. Corresponding earnings per share amounted to CHF 1.75 (H1 2016: CHF 1.94). Net income (excluding gains/losses on real estate investments) forms the basis for the distribution to shareholders. Net income (including gains/losses on real estate investments) was CHF 94.5 million (H1 2016: CHF 65.0 million). Higher net income was mainly caused by the revaluation of the properties which resulted in an overall appreciation by CHF 17.7 million (H1 2016: depreciation by CHF 31.8 million). Corresponding earnings per share (including gains/losses on real estate investments) amounted to CHF 2.06 (H1 2016: CHF 1.42). In the reporting period, operating expenses de creased, mainly because of lower personal expenses, by CHF 1.6 million to CHF 27.1 million (H1 2016: CHF 28.8 million). Financial expenses decreased by CHF 0.3 million to CHF 13.1 million (H1 2016: CHF 13.3 million). At the end of June 2017, net asset value (NAV) per share was CHF (end of 2016: CHF 84.30); the mentioned dividend payment of CHF 3.35 per share must be pointed out in this regard. NAV before deducting deferred taxes amounted to CHF (end of 2016: CHF ). 1 See definition on page 34, note 2.

9 H report 9 Overview Capital management With total equity of CHF billion (end of 2016: CHF billion) corresponding to an equity ratio of 53.8 % (end of 2016: 54.9 %) our capital base remained strong at the end of June Interest-bearing debt amounted to CHF billion, corresponding to 33.6 % of total assets (end of 2016: CHF billion respectively 31.9 %). At the end of June 2017, the passing average interest rate was 1.23 % (end of 2016: 1.28 %). The average fixed-interest period was 3.8 years (end of 2016: 4.3 years). No major committed bank loans will be due until At the end of June 2017, we had unused committed credit lines of CHF 680 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 Moodyʼs. Subsequent events On 24 July 2017, the CHF 100 million % private placement (maturing 2021) issued in December 2016 was increased by CHF 50 million to CHF 150 million. On 17 August 2017, the Salmenpark II residential project in Rheinfelden was sold for CHF 27.6 million. Outlook While the forecasts for Switzerland s economy as a whole are positive, the property market will remain a challenge, especially in peripheral locations. The market is competitive and location and quality of the properties are key. Landlords that offer state-of-the-art new buildings or comprehensively renovated and upgraded properties in good locations have a competitive advantage. This holds true for both office buildings and the retail sector. Our focus remains on the renovation and modernisation of selected properties, the further development of our sites and projects as well as the letting activities We expect the acquisition market for good objects to remain highly competitive. This is due to the continuing low interest rates and the resulting investment plight of institutional investors. For the 2017 business year, we now expect an improved ebitda (excluding gains/losses on real estate investments) of above CHF 240 million (previous forecast: approximately CHF 225 million; 2016: CHF million). This increase reflects the gain realised through the sale of the Salmenpark II residential project in Rheinfelden. With regard to the vacancies at year-end 2017, we now expect a lower rate of 8.5 % (previous forecast: around 9 %; end of June 2017: 8.7 %). The Executive Board, August 2017 There were no further material subsequent events.

10 10 Portfolio Portfolio summary H C A D E 2 B 4 5 Areas 4 Sites 6 Projects Project pipeline 1 1 Basel, project Grosspeter Tower CHF 120 million 2 Lausanne, project Rue Saint-Martin CHF 12 million 3 Zurich, project Hardturmstrasse / Förrlibuckstrasse CHF 60 million 4 Geneva, project Rue du Marché CHF 30 million 5 Paradiso, Residenza Parco Lago CHF 80 million 6 Rheinfelden, Salmenpark II (in planning) CHF 70 million 7 Zurich, project Bahnhofquai/-platz (stages 2 & 3 under review) CHF 51 million (stage 1) CHF 45 million (stages 2 & 3) 8 Zurich, project Orion (in planning) CHF 120 million 1 Details see on pages 64 to

11 Portfolio 11 Portfolio value by area 9% Sites and development properties 6% Other locations Overview 5% Lausanne 4% Bern 8% Basel 58% Zurich 11% Geneva Portfolio key figures A Zurich area B Geneva area Portfolio value CHF 4.0 billion Portfolio value CHF 0.7 billion Rental income CHF 81.5 million Rental income CHF 13.0 million Implied yield, net 3.6 % Vacancy rate 6.8 % Rentable area m² Implied yield, net 2.7 % Vacancy rate 17.8 % Rentable area m² C Basel area D Bern area Portfolio value CHF 0.5 billion Portfolio value CHF 0.3 billion Rental income CHF 12.4 million Rental income CHF 6.4 million Implied yield, net 4.0 % Vacancy rate 2.1 % Rentable area m² Implied yield, net 3.7 % Vacancy rate 10.9 % Rentable area m² E Lausanne area Other locations Portfolio value CHF 0.3 billion Portfolio value CHF 0.4 billion Rental income CHF 8.6 million Rental income CHF 10.1 million Implied yield, net 4.3 % Vacancy rate 6.8 % Rentable area m² Implied yield, net 4.2 % Vacancy rate 16.2 % Rentable area m²

12 12 Portfolio Rent by use 6% Parking 4% Gastronomy 11% Other 17% Retail 62% Office Rent by type of tenant 17% Other 20% Retail 6% Government 8% Gastronomy 18% Services 9% Financial services 10% Technology 12% Telecommunication Rent by largest tenants 9% Next five largest tenants 2% Bär & Karrer 2% Schweizer Post 2% Roche 5% Google 10% Swisscom 69% Other

13 Portfolio 13 Overview Hottingerstr , Zurich

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15 Portfolio 15 Overview Brandschenkestr. 152 b, Zurich (Kesselhaus)

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17 17 Financial statements 18 Consolidated financial statements 18 Consolidated statement of profit or loss (April to June) 19 Consolidated statement of comprehensive income (April to June) 20 Consolidated statement of profit or loss (January to June) 21 Consolidated statement of comprehensive income (January to June) 22 Consolidated statement of financial position 23 Consolidated cash flow statement (January to June) 25 Consolidated statement of shareholders equity 26 Notes to the consolidated interim financial statements as of 30 June 2017 Financial statements 36 Review report 37 Property valuation report 44 EPRA Reporting

18 18 Consolidated financial statements Consolidated statement of profit or loss (April to June) (in CHF 1 000) Q Q Note Rental income Net changes in fair value of real estate investments Income from property sales (inventories) Expenses from sold properties (inventories) Income from other property sales Income from investments in associated companies 3 3 Capitalised own services Other income Total operating income Real estate operating expenses Real estate maintenance and renovation expenses Personnel expenses Fees to subcontractors General and administrative expenses Impairment charge properties Depreciation Total operating expenses Operating profit (ebit) Financial income Financial expenses Profit before income taxes Income taxes Net income attributable to shareholders of PSP Swiss Property Ltd Earnings per share in CHF (basic and diluted) The notes are part of these condensed consolidated financial information.

19 Consolidated financial statements 19 Consolidated statement of comprehensive income (April to June) (in CHF 1 000) Q Q Note Net income attributable to shareholders of PSP Swiss Property Ltd Items that may be reclassified subsequently to profit or loss: Changes in interest rate hedging Income taxes Items that will not be reclassified subsequently to profit or loss: Changes in pension schemes Income taxes Comprehensive income attributable to shareholders of PSP Swiss Property Ltd The notes are part of these condensed consolidated financial information. Financial statements

20 20 Consolidated financial statements Consolidated statement of profit or loss (January to June) (in CHF 1 000) H H Note Rental income Net changes in fair value of real estate investments Income from property sales (inventories) Expenses from sold properties (inventories) Income from other property sales Income from investments in associated companies 2 2 Capitalised own services Other income Total operating income Real estate operating expenses Real estate maintenance and renovation expenses Personnel expenses Fees to subcontractors General and administrative expenses Impairment charge properties Depreciation Total operating expenses Operating profit (ebit) Financial income Financial expenses Profit before income taxes Income taxes Net income attributable to shareholders of PSP Swiss Property Ltd Earnings per share in CHF (basic and diluted) The notes are part of these condensed consolidated financial information.

21 Consolidated financial statements 21 Consolidated statement of comprehensive income (January to June) (in CHF 1 000) H H Note Net income attributable to shareholders of PSP Swiss Property Ltd Items that may be reclassified subsequently to profit or loss: Changes in interest rate hedging Income taxes Items that will not be reclassified subsequently to profit or loss: Changes in pension schemes Income taxes Comprehensive income attributable to shareholders of PSP Swiss Property Ltd The notes are part of these condensed consolidated financial information. Financial statements

22 22 Consolidated financial statements Consolidated statement of financial position (in CHF 1 000) 1 January December June 2017 Note Cash and cash equivalents Accounts receivable Deferrals Current tax assets Sites and development properties for sale Investment properties for sale Total current assets Tangible assets Intangible assets Derivative financial instruments /7 Accounts receivable Financial investments Investments in associated companies Sites and development properties Own-used properties Investment properties Deferred tax assets Total non-current assets Total assets Accounts payable Deferrals Current tax liabilities Bonds Derivative financial instruments /7 Total current liabilities Debt Bonds Derivative financial instruments /7 Pension liabilities Deferred tax liabilities Total non-current liabilities Share capital Capital reserves Retained earnings Revaluation reserves Total shareholdersʼ equity Total liabilities and shareholders equity The notes are part of these condensed consolidated financial information.

23 Consolidated financial statements 23 Consolidated cash flow statement (January to June) (in CHF 1 000) H H Note Net income attributable to shareholders of PSP Swiss Property Ltd Net changes in fair value of investment properties Capitalised/released rent-free periods Income from other property sales Income from investments in associated companies 2 2 Capitalised own services Impairment charge properties Changes in pension liabilities recorded in the statement of profit or loss Depreciation Financial result Income taxes Changes in sites and development properties for sale Changes in accounts receivable Changes in accounts payable Changes in deferrals (assets) Changes in deferrals (liabilities) Interest paid Interest received Taxes paid Cash flow from operating activities Financial statements Capital expenditures on investment properties Capital expenditures on own-used properties Capital expenditures on sites and development properties Sales of properties Payout of loans Repayment of loans Investments in tangible assets 19 0 Investments in intangible assets Cash flow from investing activities (Continued on next page)

24 24 Consolidated financial statements (Continued from previous page) (in CHF 1 000) H H Note Purchases of own shares Sales of own shares Increase in financial debt Repayment of financial debt Issue of bonds Issue expenses of bonds Repayment of bond Distribution to shareholders Cash flow from financing activities Changes in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period The notes are part of these condensed consolidated financial information.

25 Consolidated financial statements 25 Consolidated statement of shareholders equity (in CHF 1 000) Share capital Capital reserves Own shares Retained earnings Revaluation reserves Total shareholdersʼ equity 31 December Net income attributable to shareholders of PSP Swiss Property Ltd Changes in interest rate hedging Changes in pension schemes Income taxes Other comprehensive income Comprehensive income attributable to shareholders of PSP Swiss Property Ltd Distribution to shareholders Purchase of own shares Compensation in own shares Elimination tax effect on profits on own shares in statutory accounts June Net income attributable to shareholders of PSP Swiss Property Ltd Changes in interest rate hedging Changes in pension schemes Income taxes Other comprehensive income Comprehensive income attributable to shareholders of PSP Swiss Property Ltd Purchase of own shares Compensation in own shares Elimination tax effect on profits on own shares in statutory accounts December Financial statements Net income attributable to shareholders of PSP Swiss Property Ltd Changes in interest rate hedging Changes in pension schemes Income taxes Other comprehensive income Comprehensive income attributable to shareholders of PSP Swiss Property Ltd Distribution to shareholders Purchase of own shares Compensation in own shares June The notes are part of these condensed consolidated financial information.

26 26 Consolidated financial statements Notes to the consolidated interim financial statements as of 30 June General information PSP Swiss Property Ltd is a public company whose shares are traded on the Swiss Exchange (SIX Swiss Exchange). The registered office is located at Kolinplatz 2, 6300 Zug. PSP Swiss Property Group owns 160 office and commercial properties as well as four development sites and six individual projects throughout Switzerland. The properties are mainly in prime locations in Zurich, Geneva, Basel, Bern and Lausanne. As of 30 June 2017, PSP Swiss Property had 89 employees, corresponding to 84 full-time equivalents (end of 2016: 90 respectively 84). The condensed consolidated interim financial statements as of 30 June 2017 are based on the interim accounts of the controlled individual subsidiaries, which have been prepared in accordance with uniform accounting policies and valuation principles. They were authorised for issue by the Board of Directors on 17 August Summary of significant accounting policies The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), published by the International Accounting Standards Board (IASB), and comply with Swiss law and the Directive on Financial Reporting (DFR) of the SIX Swiss Exchange. The condensed consolidated interim financial statements as of 30 June 2017 have been prepared in accordance with IAS 34 (Interim Financial Reporting). They do not include all the information and disclosure, which is required for the annual report and should therefore be read together with the financial reports for the 2016 business year. The properties are valued semi-annually (at the end of June and at the end of December) by an external, independent real estate valuation company. A systematic value analysis is made by PSP Swiss Property internally at the end of the first and third quarter in order to identify any substantial changes in value. If this analysis results in property-specific changes in value (more than 2 % compared to the total value of the property portfolio per quarter respectively more than CHF 5 million for individual properties), the properties involved are also valued by the external, independent valuation company at the end of the respective quarter. Thereby the change in fair value is recognised in the income statement. Properties newly acquired during the reporting period are valued externally at the end of the quarter. Thereby the change in fair value is recognised in the income statement. Investment properties respectively investment properties earmarked for sale, which are sold by the time the financial statements are drawn up, but for which the transfer of benefits and risks takes place only in a later reporting period, are basically valued at the contractually agreed sales price deducting sales costs. A corresponding change in fair value is recognised in the income statement.

27 Consolidated financial statements 27 Furthermore, the same consolidation, accounting and valuation principles have been applied for the interim financial statements as of 30 June 2017, as those which are described on pages 50 to 61 of the 2016 annual report of PSP Swiss Property. There were no changes in the consolidated companies compared to the annual report as of 31 December Apart from the holding company PSP Swiss Property Ltd, none of the Group companies is listed on a stock exchange. Since 1 January 2017, the following amended IFRS accounting standard has been used in the consolidated financial statements for the first time: Amendments to IAS 7 Statement of Cash Flows (Disclosure Initiative): The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). On initial application of the amendment, entities are not required to provide comparative information for preceding periods. PSP Swiss Property is not required to provide additional disclosures in its condensed interim consolidated financial statements, but will disclose additional information in its annual consolidated financial statements for the year ended 31 December Financial statements 3 Segment reporting Revenue includes operationally billed products and services. The following positions in the income statement are not included in revenue: net changes in fair value of the properties, expenses from sold properties (inventories), income from other property sales and income from participations in associated companies.

28 28 Consolidated financial statements Segment information H (in CHF 1 000) Real Estate Investments Property Management Holding Subtotal Eliminations Total Group Rental income Net changes in fair value of real estate investments Income from property sales (inventories) Expenses from sold properties (inventories) Income from other property sales Income from investments in associated companies Property management services Capitalised own services Other income Total operating income Real estate operating expenses Real estate maintenance and renovation expenses Personnel expenses Fees to subcontractors General and administrative expenses Impairment charge properties Depreciation Total operating expenses Operating profit (ebit) Financial income 71 Financial expenses Profit before income taxes Income taxes Net income attributable to shareholders of PSP Swiss Property Ltd Revenue with third parties Revenue with other segments Total revenue The Real Estate Investments Segment exclusively invests in commercial properties. As PSP Swiss Property is exclusively active in Switzerland, no geographical segment information is disclosed.

29 Consolidated financial statements 29 Segment information H (in CHF 1 000) Real Estate Investments Property Management Holding Subtotal Eliminations Total Group Rental income Net changes in fair value of real estate investments Income from property sales (inventories) Expenses from sold properties (inventories) Income from other property sales Income from investments in associated companies Property management services Capitalised own services Other income Total operating income Real estate operating expenses Real estate maintenance and renovation expenses Personnel expenses Fees to subcontractors General and administrative expenses Depreciation Total operating expenses Financial statements Operating profit (ebit) Financial income 149 Financial expenses Profit before income taxes Income taxes Net income attributable to shareholders of PSP Swiss Property Ltd Revenue with third parties Revenue with other segments Total revenue The Real Estate Investments Segment exclusively invests in commercial properties. As PSP Swiss Property is exclusively active in Switzerland, no geographical segment information is disclosed.

30 30 Consolidated financial statements 4 Real estate investments (in CHF 1 000) Investment properties Investment properties for sale Ownused properties Sites and development properties at market value at historical value Development properties for sale IAS 40 IFRS 5 IAS 16 IAS 40 IAS 40 IAS 2 Total real estate investment Carrying value at 31 December Purchases Capitalised/released rent-free periods Transfers Capital expenditures Capitalised own services Capitalised interest expenses Sales Net changes in fair value of real estate investments n.a n.a. n.a Net changes in fair value of properties held at 1 January n.a n.a. n.a Net changes in fair value of properties acquired, completed, transferred and sold n.a n.a. n.a Impairment charge n.a. n.a. 0 n.a Depreciation n.a. n.a. 665 n.a. n.a. n.a. 665 Carrying value at 31 December Historical cost Accumulated depreciation Carrying value, net Capitalised/released rent-free periods Capital expenditures Capitalised own services Capitalised interest expenses Sales Net changes in fair value of real estate investments n.a n.a. n.a Depreciation n.a. n.a. 336 n.a. n.a. n.a. 336 Carrying value at 30 June Historical cost Accumulated depreciation Carrying value, net Straightlining of incentives given to tenants.

31 Consolidated financial statements 31 On 3 April 2017, the property located at Eisenbahnstrasse 95 in Gwatt (Thun) was sold for CHF 7.0 million. The revaluation of the properties resulted in an overall appreciation of CHF 17.7 million (thereof CHF 14.5 million were related to the investment portfolio and CHF 3.2 million to the project developments). Mid-2017, the portfolio s weighted average nominal discount rate stood at 3.73% (year-end 2016: 3.82%). The discount rate reduction by 9 basis points and successful new lettings had a positive effect on valuations, compensating the depreciations due to selective lower market rents and higher renovation expenses at various properties. As at the end of June 2017, payment obligations for current development and renovation work totalled CHF 53.5 million (end of 2016: CHF 49.9 million). 5 Financial result (in CHF 1 000) H H Financial income Total financial income Financial expenses Capitalised interest expenses Amortisation of issue expenses of bonds Total financial expenses Total financial result Overall financial expenses for financial instruments at amortised cost Financial statements Interest-bearing debt amounted to CHF billion at the end of June 2017 (end of 2016: CHF billion). Over the past four quarters the average interest rate was 1.32 % (previous year s period: 1.55 % respectively 1.42 % for the financial year 2016). At the end of June 2017, the average interest rate stood at 1.23 % (end of 2016: 1.28 %).

32 32 Consolidated financial statements 6 Fair value hierarchy Financial instruments, investment properties and other properties held at fair value are valued according to a three-level fair value hierarchy. The fair value definition is classified into three categories: level 1 regards instruments with price quotations in a liquid market. If there is no liquid market for a position and there are no official price quotations, the fair value is determined according to a recognised valuation method: at level 2, the valuation method is mainly based on input parameters with observable market data; at level 3, the valuation method is based on one or several input parameters without observable market data. The following table shows the market value (fair value) of these positions recognised in the balance sheet. Assets (in CHF 1 000) Level 1 Level 2 Level 3 Market value 31 December 2016 Properties (IAS 40 & IFRS 5) Financial investments Derivative financial instruments (hedging) Total financial assets Liabilities (in CHF 1 000) Derivative financial instruments (hedging) Total financial liabilities Assets (in CHF 1 000) Level 1 Level 2 Level 3 Market value 30 June 2017 Properties (IAS 40 & IFRS 5) Financial investments Derivative financial instruments (hedging) Total financial assets Liabilities (in CHF 1 000) Derivative financial instruments (hedging) Total financial liabilities During the reporting period, no positions were transferred in between the fair value levels (previous year: none).

33 Consolidated financial statements 33 7 Derivative financial instruments The fair value of derivative financial instruments (interest rate swaps) is calculated as the present value of future cash flows. The fair value is based on counterparties valuations. These valuations are checked by PSP Swiss Property with regard to their plausibility by means of Bloomberg valuations. The fair value of derivative financial instruments corresponds to their carrying value. During the reporting period one new forward starting interest rate payer swap for CHF 50 million was newly signed (beginning in the year 2019 and maturing in 2027). All interest rate swaps (pay fix/receive floating) fulfil the requirements for applying hedge accounting. The fixed interest rate basis for the interest rate swaps existing at the end of June 2017 was % to %; the variable interest rates are based on the CHF Libor. As in the previous year, the cash flow hedges were effective in the reporting period. 8 Debt (in CHF 1 000) 31 December June 2017 Long-term debt Long-term bonds Total interest-bearing debt In the reporting period, fixed-term loans totalling CHF 130 million were drawn using existing credit lines and CHF 40 million were repaid. During the same period, an already existing bond with maturity in 2023 was increased by nominal CHF 50 million. Financial statements As in the previous year, no debt was outstanding at the end of June 2017, which was secured by mortgages on properties, and no debt was outstanding with an amortisation obligation. All financial key figures (financial covenants) set out in the existing credit agreements were adhered to in the reporting period. The most important financial covenants concern the consolidated equity ratio, the interest coverage and the debt ratio. At the respective balance sheet dates, the exposure of all debt with regard to changes in interest rates was as follows: (in CHF 1 000) 31 December June 2017 < 6 months to 12 months to 5 years > 5 years Total interest-bearing debt At the end of June 2017, the average fixed-interest period was 3.8 years (end of 2016: 4.3 years).

34 34 Consolidated financial statements 9 Share capital During the reporting period, a total of own shares were purchased at an average price of CHF per share totalling CHF 0.2 million and own shares were sold at an average price of CHF per share totalling CHF 0.2 million (previous year s period: own shares purchased at an average price of CHF and own shares sold at an average price of CHF 84.25). Further information on changes in equity is shown on page Per share figures Earnings per share is calculated by dividing the reported net income by the average weighted number of shares, excluding own shares. Earnings per share excluding gains/losses on real estate investments is based on Net income excluding gains/losses on real estate investments 2. Q Q H H Net income in CHF Net changes in fair value of real estate investments in CHF Impairment charge properties in CHF Income from property sales in CHF Attributable taxes in CHF Net income excl. gains/losses on real estate investments in CHF Number of average outstanding shares Earnings per share in CHF (basic and diluted) Earnings per share excl. gains/losses on real estate investments in CHF (basic and diluted) Equity per share changed as follows: 31 December June 2017 Shareholdersʼ equity in CHF Deferred taxes in CHF Number of outstanding shares Net asset value per share in CHF Net asset value per share before deduction of deferred taxes in CHF Based on number of outstanding shares. 2 Net income excluding gains/losses on real estate investments corresponds to the consolidated annual net income excluding net changes in fair value of the real estate investments, realised income on sales of investment properties and all of the related taxes. Income from the sale of properties which were developed by the Company itself is, however, included in the Net income excluding gains/losses on real estate investments.

35 Consolidated financial statements Dividend payment Based on a resolution of the Annual General Meeting on 5 April 2017, a payment of an ordinary dividend of CHF 3.35 per share (totalling CHF million) was made on 11 April 2017 (previous year: CHF 3.30 per share, thereof CHF 1.80 out of the capital contribution reserves and CHF 1.50 as ordinary dividend). 12 Subsequent events On 24 July 2017, the CHF 100 million 0.045% private placement (maturing 2021) issued in December 2016 was increased by CHF 50 million to CHF 150 million. On 17 August 2017, the Salmenpark II residential project in Rheinfelden was sold for CHF 27.6 million. There were no further material subsequent events. Financial statements

36 36 Consolidated financial statements Ernst & Young Ltd Maagplatz 1 P.O. Box CH-8010 Zurich Phone Fax To the Board of Directors of PSP Swiss Property Ltd, Zug Zurich, 17 August 2017 Report on the review of interim condensed consolidated financial statements Introduction We have reviewed the interim condensed consolidated financial statements (income statement, statement of comprehensive income, balance sheet, cash flow statement, statement of changes in equity and notes, pages 18 to 35 and 52 to 67) of PSP Swiss Property Ltd for the period from 1 January to 30 June The review of comparable figures was performed by another auditor. The Board of Directors is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting and article 17 of the Directive on Financial Reporting (DFR) of the SIX Swiss Exchange. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review. Scope of Review We conducted our review in accordance with Swiss Auditing Standard 910 and with International Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting and article 17 of the Directive on Financial Reporting (DFR) of the SIX Swiss Exchange. Ernst & Young Ltd Daniel Zaugg Licensed audit expert (Auditor in charge) Tobias Meyer Licensed audit expert