Aug. 27 (Bloomberg) -- Swiss Prime Site AG, Switzerland’s largest listed real estate manager, said first-half profit slid 38 percent because an accounting gain wasn’t repeated.
Net income dropped to 137.2 million francs ($149.5 million) from 222.3 million francs a year earlier, the Olten, Switzerland-based company said in a statement today. The previous figure was boosted by a 22.5 million-franc gain stemming from the application of new accounting standards for valuing property portfolios.
Swiss property prices are at a two-decade high and the country’s national bank has repeatedly warned of a build-up of mortgage imbalances. Meanwhile Swiss Prime Site, which owns the 126-meter-high (413.4 foot) Swiss Prime Tower -- Zurich’s tallest building -- and rents out office and retail space to companies including Inditex SA, sees economic uncertainty in Europe boosting vacancy rates in commercial real estate. The vacancy rate at the end of June rose to 6.8 percent.
“Substantially lower property revaluations and rising vacancy rates mirror for us the cooling off of the Swiss real estate market without a bubble to burst,” Rainer Skierka, a Zurich-based analyst with J. Safra Sarasin wrote in a note to investors. “The commercial real estate segment remains characterized by oversupply with rising vacancy rates and rents under pressure depending on location.”
Property revaluations affecting net income dropped 68 percent to 53.6 million francs amid low discount rates because of the low interest rate environment, Chief Executive Officer Markus Graf said at a press briefing in Zurich today.
The shares dropped as much as 0.5 percent to 73.05 francs and were trading at 73.45 at 10:42 a.m. in Zurich, valuing the company at 4.4 billion francs.
“The demand for rental properties that promise a higher equivalent value due to the quality of their location, accessibility, flexibility of use and architecture should accentuate further,” the company said in the statement. “Hence, Swiss Prime Site can reap the rewards from this trend with its portfolio of prime properties.”
Rental income rose 8.9 percent to 217.3 million francs after acquiring retirement housing group Tertianum for 435 million francs in July last year. The company has said it may consider listing Tertianum.
Even so, Swiss Prime Site repeated today that it expects to increase net rental income in 2014 compared to the financial year 2013 by about 15 million francs to roughly 435 million francs and sees a vacancy rate of 6 percent to 7 percent.
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