PSP Swiss Property : Quarterly report Q1–Q3 2023

Real estate portfolio

Portfolio value in CHF billion

Vacancy rate in %

Ebitda excl. gains/losses on

real estate investments in CHF million Ebitda margin in %

Shareholders' equity

Shareholders' equity in CHF billion Return on equity in %

Composition of net income

373.9

Net income excl. gains/losses on real estate investments in CHF million

Contribution gains/losses on

real estate investments in CHF million

Dear Readers

Swiss market environment

Letting market, office and retail

Our portfolio only reflects a special subsegment of Switzerland's commercial real estate market: high-quality properties in central locations in the most important business centres. In this segment, the letting market remained satisfactory in the reporting period. For older office properties in B and C locations as well as non-food retail space, however, letting remained a challenge.

The market was dynamic in the centres of Geneva and Zurich with continuously good demand for attractive letting space. The environment was more difficult in Basel with its oversupply of office space.

Home office and hybrid work have established themselves. However, we are convinced that the company office and the exchange among employees at the workplace are crucial for a company's long- term success. Therefore, we expect that the overall demand for office space - at least in central locations - will not necessarily decline.

Investment market

The transaction market for properties in good inner- city locations has hardly changed in the reporting period in terms of prices and initial yields. Despite higher interest rates, required yields remain very low for attractive investment opportunities in prime locations. The number of closed transac- tions, however, has decreased significantly in the reporting period. Investors continue to prefer assets with high cash flow visibility. Due to the uncertain economic development and higher interest rates, yield needed by investors have risen in peripheral locations and for qualitatively outdated properties.

Business development and results

Rental income developed positively.

In the reporting period, the letting of commercial space developed positively. Rental income increased from CHF 236.8 million by CHF 10.7 million or 4.5 % to CHF 247.6 million compared to the previous year's period. The operational result, i.e., net income excluding gains/losses on real estate investments1, increased by CHF 29.5 million or 16.3 % to CHF 210.8 million (Q1-Q3 2022: CHF

181.3 million). The release of deferred taxes in the amount of CHF 30.6 million had a positive effect on the overall result (this release was recorded in the half-year results 2023 as of the end of June 2023). On the other hand, lower profit from the sale of development projects and condominiums had a negative impact (CHF - 9.8 million compared to Q1-Q3 2022). Operating expenses decreased by CHF 1.3 million or 3.1 % to CHF 41.7 million (Q1-Q3 2022: CHF 43.0 million). Financial ex- penses were up by CHF 6.9 million or 79.8 % to CHF 15.5 million (Q1-Q3 2022: CHF 8.6 million).

Earnings per share excluding gains/losses on real estate investments, which is the basis for the divi­ dend distribution, amounted to CHF 4.59 (Q1-Q3 2022: CHF 3.95).

Net income reached CHF 155.3 million (Q1-Q3 2022: CHF 284.0 million). The decrease in net income by CHF 128.6 million or 45.3 % was mainly due to the portfolio devaluation by CHF 67.2 million (Q1-Q3 2022: appreciation of CHF 131.9 million). As per 30 June 2023, the regular semi-annual portfolio valuation by our external real estate valuation company Wüest Partner resulted in a depreciation of CHF 90.7 million. Due to property- specific changes in value, we had two properties valued by Wüest Partner as of the end of Septem- ber 2023, in accordance with our accounting principles (Bahnhofplatz 1, 2 / Bahnhofquai 9, 11, 15, Zurich: completion of project development; Binz- ring 15/17, Zurich: extension of lease contract). This resulted in a total appreciation of CHF 23.5 million (further information on the portfolio valuation can be found in note 4 on page 30).

On the other hand, the above-mentioned release of deferred taxes in the amount of CHF 30.6 million had a positive effect on net income (further information on the treatment of deferred taxes can be found in note 6 on page 32).

Earnings per share amounted to CHF 3.39 (Q1-Q3 2022: CHF 6.19).

At the end of September 2023, net asset value (NAV) per share was CHF 112.85 (end of 2022: CHF 113.33). NAV before deducting deferred taxes amounted to CHF 135.45 (end of 2022: CHF 136.62).

EPRA key figures are shown on pages 38 to 49.

Portfolio

At the end of September 2023, our real estate portfolio included 162 investment properties. In addition, there were 11 sites and development properties. The carrying value of the total portfolio was CHF 9.7 billion.

Investment properties

In the reporting period, we purchased the office building at Pfingstweidstrasse 60/60b in Zurich for CHF 216.5 million. During the same period, we sold the property at Bahnhofstrasse 23 in Inter- laken for CHF 3.0 million.

Sites and development projects

During the reporting period, we successfully completed four projects and reclassified the properties back into the investment portfolio:

In Q1 2023, the car park "P-West" in Zurich West was completely renovated. We have also planted greenery on the façades and taken measures to promote biodiversity in the surrounding area.

In Q2 2023, we completed the project "Clime" in Basel and handed the premises over to the ten- ants. "Clime" is a sustainable wooden building with around 6 100 m2 of usable space.

In Q3 2023, the two projects (both comprehensive renovations and modernisations) "Hotel de Banque" in Geneva and "Bahnhofplatz 2" in Zurich were completed.

During the reporting period, we sold part of the Wädenswil site (Reithalle, Mühlequartier and Felsenkeller) for CHF 13.0 million as well as the project "Spiegel" in Köniz near Bern for CHF 2.7 million. There were partial sales at the project "Residenza Parco Lago" in Paradiso and at the "Salmenpark" site in Rheinfelden totalling CHF 17.2 million.

Major projects in execution

Projects with an investment sum of CHF 10 million or more that are currently being realised are described below. More information on all projects can be found on pages 66 to 67.

Project "B2Binz", Zurich: The commercial building (built in 1975/1991) at Grubenstrasse 6/8 in Zurich, which we purchased at the end of March 2020, will be replaced by a new mixed-usebuilding (approxi- mately 5 200 m2 of office and 6 100 m2 of commercial space). The investment sum amounts to around CHF 35 million. The new building will be completed by the end of 2023.

Project "Zürcherhof", Zurich: By the end of 2023, the property at Limmatquai 4 will be completely renovated, including the façade and technical in- stallations. The investment sum amounts to around CHF 25 million.

Project "Füsslistrasse", Zurich: The property at Füsslistrasse 6 is a building with an Art Deco façade. The total renovation will be completed by mid-2024.The investment sum amounts to around CHF 20 million. The former telephone exchange is considered a valuable witness to the history of technology and is a listed building. In addition to the modernisation of this building, energy aspects are also part of the total renovation.

Project "Hochstrasse", Basel (reclassified in Q1 2023): The commercial building at Hochstrasse 16 / Pfeffingerstrasse 5 in Basel is being modernised. About half of the rental space (around 15 500 m2) will be converted to an alternative use with 187 serviced apartments being planned. The renovation will be completed by the end of 2024. The total investment amounts to around CHF 28 million.

Project "The12", Zurich (reclassified in Q1 2023): The property at Theaterstrasse 12 in Zurich was built in 1973 and originally designed as a department store. Since its construction, the building has never been completely renovated and is now facing a high need for refurbishment. "The12" will be a contemporary and flexibly usable commercial building with a total of around 5 000 m² of representative retail, gastronomy and office space. Usable outdoor spaces serve as attractive recreational areas. The investment amounts to around CHF 35 million. The property will be ready for move-inat the end of 2024.

Vacancy

At the end of September 2023, the vacancy rate stood at 3.2 % (end of 2022: 3.0 %). Of the lease contracts maturing in 2023 (CHF 43.0 million), only 3 % were open at the end of September 2023. As per year-end 2023, we expect a vacancy rate of below 4 %. The slight increase is due to the reclassification of "B2Binz" (project completion in Q4 2023).

The wault (weighted average unexpired lease term) of the total portfolio was 4.7 years at the end of September 2023. The wault of the ten largest tenants, contributing around 25 % of the rental income, was 5.2 years.

Green Assets

In November 2022, we presented our Green Bond Framework. Detailed information on the implementation of the Green Bond Framework can be found in our Green Bond Report, which was published on 5 May 2023; it is available at www.psp.info. We will report annually on our activities and progress in the field of sustainability on an asset and portfolio level.

Capital structure

We have a solid equity base.

With total equity of CHF 5.176 billion at the end of September 2023 - corresponding to an equity ratio of 53.2 % (end of 2022: CHF 5.198 billion respectively 54.8 %) - the equity base remains strong. Interest-bearing debt amounted to CHF 3.386 billion, corresponding to 34.8 % of total assets (end of 2022: CHF 3.092 billion respectively 32.6 %). At the end of September 2023, the average passing cost of debt was 0.88 % (end of 2022: 0.47 %). The average fixed-interest period was 4.1 years (end of 2022: 4.1 years).

As of the date of publication of this interim report, we had unused credit facilities totalling CHF 1.035 billion; thereof, CHF 0.735 billion were committed credit lines. These financing sources are sufficient for our ongoing business activities, upcoming refinancing of financial facilities maturing in the short term as well as the planned capital expenditures for our development projects and investment properties.

Outlook

For 2023, we expect higher rental income than in 2022.

In today's rental market, it is still crucial to differentiate between prime locations in the economic centres and peripheral locations. In the market segment relevant to us - high-quality properties in central locations, especially in the economic centres of Zurich and Geneva - we expect demand for office space to remain sound.

In general, due to the changing interest-rate envi- ronment, market participants are today confronted with challenges unlike anything we have seen in the last ten years. The valuation of properties must deal with these market uncertainties. Thanks to our low debt ratio of 34.8 %, we are well positioned to cope with these challenges.

Major renovation projects will lead to manageable temporary rent losses in the current year. Never- theless, we expect higher rental income overall in 2023 than in 2022 due to the indexation (inflation adjustment) of rental contracts as per the beginning of 2023, the completion of several projects as well as the acquisition in Zurich West.