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During 2006, PSP Swiss Property’s net income rose, due to increased rental income and a portfolio revaluation, by 57.2% to CHF 225.3 million (2005: CHF 143.3 million).
Net income excluding real estate revaluation rose by 5.4% to CHF 128.3 million (2005: CHF 121.7 million). The Board of Directors proposes a cash payment of CHF 2.20 per share, up 4.8% from CHF 2.10 in 2006. As in the previous year, this payment will be in the form of a nominal value reduction.

Remarkable increase of rental income and EBITDA
During the reporting year, rental income rose by 5.7% to CHF 239.5 million. (2005: CHF 226.6 million). EBITDA excluding real estate revaluation effects rose even by 8.5% to CHF 205.5 million (2005: CHF 189.3 million). The EBITDA margin improved to 74.1% (2005: 73.9%).

Real estate portfolio and revaluation
At the beginning of August 2006, a property (office and retail areas) in the centre of Biel was purchased for approximately CHF 26 million. There were a number of further interesting properties and portfolios on the market but none was purchased, because all of PSP’s offers were outbid, sometimes by far. On the other hand, 10 non-strategic properties were sold for CHF 60.8 million, 13.2% higher than the last valuation by Wüest & Partner. Currently, properties with a total value of CHF 117 million are earmarked for sale. Taking the real estate transactions as well as the revaluation at year-end 2006 into account, the value of the real estate portfolio increased by 3.4% to CHF 4.757 billion (end of 2005: CHF 4.602 billion). Thereof, the carrying value of the sites and development properties stood at CHF 0.243 billion at year-end 2006 (end of 2005: CHF 0.223 billion). The valuation of the investment properties led to a gain of CHF 126.1 million. The appreciation resulted mainly from the improved market environment for commercial properties and changes in the discount rates. At the end of 2006, the portfolio’s overall average weighted discount rate was 5.66% (end of 2005 5.86%). The lower discount rate reflects the yield compression on Switzerland’s real estate market.

Vacancy and rental situation
During the reporting period, the overall vacancy rate rose from 12.4% (end of 2005) to 13.9% (end of 2006). At mid-year 2006 it had reached 15.5%. The increase in the first half of the year was the result of several terminations as well as additional vacancies due to renovations. During the second half of 2006, the vacancy rate could be reduced, despite the fact that lease contracts ran out for a number of large areas. The highest vacancy rates are still in the Zurich area; out of the total vacancies (CHF 38.7 million), 65.5% are in this region. In addition to intensifying rental activities, the company invests in the attractiveness respectively the furnishings of a number of properties to lower the vacancy rate.

Solid financial structure
At year-end 2006, equity stood at CHF 2.5 billion (end of 2005: CHF 2.4 billion) corresponding to 52.1% of total assets. This strong equity base provides substantial financial flexibility for future growth.


Board of Directors and Executive Board
The Board of Directors will propose to the Annual General Meeting on 4 April 2007 the election of Messrs. Luciano Gabriel, Nathan Hetz and Max Zollinger as additional members of the Board of Directors. Both, Nathan Hetz (Director and CEO of Alony Hetz, Properties & Investment Ltd) and Max Zollinger have many years experience in the financial and real estate sector; they shall support PSP’s Board of Directors mainly in real estate specific topics. Luciano Gabriel will succeed Fritz Jörg as CEO on 1 April 2007. Giacomo Balzarini, who has been with PSP Swiss Property since 1 December 2006, will then take over the CFO position as a member of the Executive Board.

Outlook 2007
Due to its strong market position and its real estate portfolio with potential, PSP Swiss Property is confident about its medium- and long-term prospects. From 2007, income from the joint venture with Lehman Brothers (WTF) will cease, because virtually all WTF properties could be sold in 2006. Furthermore, several investments are planned in 2007 to improve the attractiveness of the portfolio. Due to these factors and based on unchanged property holdings, EBITDA excluding gains/losses on real estate investments is likely to be lower next year. Consolidated EBITDA excluding gains/losses on real estate investments is expected to reach CHF 190 million in 2007 (2006: CHF 205.5 million). From today’s perspective, the risk of negative valuation adjustments from the revaluation of the properties at the end of 2007 is regarded as low. Overall, the average vacancy rate for the investment portfolio as a whole is expected to be around 13% in the current year. As at year-end, the vacancy rate is expected to be between 10 and 12%.

source : PSP Swiss Property