Peach Property Group closes first half of 2011 in line with expectations

• Market value of portfolio managed by the Group increased by 3% to CHF 272.2 million
• No bargain purchases or project closeouts in first half of the year, as expected: commensurate decrease in operating income
• Result is a loss of CHF 6.3 million, including net foreign exchange losses of CHF 1.9 million
• Development projects progressing as planned
• Strategy extended to ensure operating income continuity
• Purchase of Munster portfolio marks first step in strategy execution
• Euro bond issue to finance further expansion

Zurich, 26 August 2011 – The market value of the property portfolio managed by Peach Property Group Ltd, a leading developer of high-quality residential property in German-speaking Europe, has increased in the first half of 2011. A 3% rise since 31 December 2010 takes the portfolio’s total market value to CHF 272.2 million. The strong rise in the Swiss franc acted as a constraint on value growth. Had exchange rates remained steady, a 5% increase would have resulted, taking the total to CHF 278.5 million.

As expected, there were no major project closeouts or bargain purchases in the first half of 2011. The company’s operating income of CHF 6.2 million is therefore below the one for the comparable prior-year period (first half of 2010: CHF 34.5 million). Deriving from the lower level of operating income, a loss of CHF 5.3 million (2010: CHF 24.6 million) was recorded under the heading of operating profit (EBIT). The result for the period, affected by net foreign exchange losses of CHF –1.9 million, amounts to CHF –6.3 million (2010: CHF 16.6 million). This corresponds to diluted earnings of CHF –1.30 per share (2010: CHF 6.18).

As of 30 June 2011, consolidated shareholders’ equity stands at CHF 99.4 million. This equates to a sound equity ratio of 51% (31 December 2010: 53%).

Important project milestones passed

In the first half of 2011, Peach Property Group forged ahead with its development projects in Switzerland, Germany and Austria according to schedule. Works preparatory to construction began on the “Peninsula” site in Wädenswil, near Zurich. In an exclusive cooperation agreement, the well-known landscape designer, Enzo Enea, was commissioned to design the park and gardens. Peach Property Group has also held talks with all appellants against its “Aquatica” project. The appeal process is not yet concluded. On time at the end of June, an application was finally filed for building permission for the “Mews & Gardens” project. Peach Property Group brought “Living 106”, its first project in Berlin, to a successful conclusion. Civil engineering works for “yoo berlin” were completed in July. 1 August 2011 then marked the start of the building construction. A 20-year lease with Fattal Group, which operates 24 hotels in Germany, has been concluded for the hotel which will be built in the adjacent wing of “yoo berlin” as part of the “Am Zirkus 1” project. In Hamburg, the foundation stone was laid in May for the first of the two stages of the “Harvestehuder Weg 36” building project. Finally, building construction work on the “Schooren des Alpes” project in Kappl, near Ischgl, Austria, progressed according to schedule.

Strategy extension

Peach Property Group developed its strategy further in the first half of the year. Maintaining its existing focus on project developments in the luxury and top-quality residential property segment, the Group will also invest in future in portfolio properties yielding good returns, using ongoing rental income to even out the income peaks from the project business.

The first step in the implementation of the strategy was already taken in mid-July, with the acquisition of a first set of portfolio properties in Germany. The portfolio comprises 376 residential units, with total floor space of 26,000 square metres. The properties are located in Munster, within commuting distance from the two major cities of Hamburg and Hanover. The purchase price of EUR 9 million, including purchase-related costs, will lead to annual rental income of around EUR 1.2 million. This represents a gross return in excess of 13%. After deduction of maintenance costs, the result is a net return of 9.75%.

Euro bond issue

In line with its long-term goals and adjusted strategy, the German subsidiary Peach Property Group (Deutschland) GmbH is issuing a euro bond. Proceeds from this will be used primarily to finance existing and new projects and add to its portfolio properties in Germany. Publicly offered for up to EUR 50 million, the bond has a coupon of 6.6% and a term of five years. It is listed on the Open Market of the German Stock Exchange (ISIN code: DE000A1KQ8K4, WKN: A1KQ8K). The bond is placed largely with institutional investors in Germany and Switzerland. The issue opened on 4 July 2011 and continues until the end of the year.

Prospects

Peach Property Group will continue to examine the acquisition of suitable, high-return portfolio properties in the second half of 2011. At project level, its sights are again set on a number of milestones. On the “Peninsula” site in Wädenswil, building permission should be received this winter for the “Mews & Gardens” project, while the “Peninsula Beach House” project continues parallel to this. During the second half of the year, the Building Appeal Tribunal should rule on the “Aquatica” appeal. If no agreement is reached, the Administrative Court, as the court of next instance, would have to make a judgement – probably by the end of 2012.

The topping-out ceremony at “Harvestehuder Weg 36” should take place at the end of September, celebrating completion of the first stage of construction. The second stage is set to commence before the end of this year. In Berlin, building construction continues on the twin projects “yoo berlin” and “Am Zirkus 1”. Another topping-out is due this autumn: on the “Schooren des Alpes” project.

Dr. Thomas Wolfensberger, CEO of Peach Property Group Ltd, comments: “Peach Property Group Ltd has made good progress in the first half of 2011. Our development projects have reached the planned milestones and thereby increased the market value of our property portfolio. Parallel to this, we have developed our strategy further and acquired an initial portfolio of properties leased for income. This lays the foundation for regular income flows in future.”

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