Public Service Properties Investments, the European real estate investment and financing company, saw its cash rental income increase by 2.1 per cent in the first half of 2010, driven by rent increases in the UK portfolio but partially offset by adverse foreign exchange movements. 

Between 31 December 2009 and 30 June 2010, the value of the company’s investment properties decreased by 2.1 per cent or approximately GBP4.8m as a result of increased capitalisation rates.

The company completed an open offer on 14 April 2010 raising net proceeds of GBP24.0m from the issue of 35,631,326 new shares at 70p per share. The majority of the capital will be used to add bed capacity through expansion, re-configuration and refurbishment of a number of properties in the UK investment portfolio. 

The first four projects have been commissioned with aggregate expenditure of GBP6.7m and an expected final completion date in the second quarter of 2011. The company is also reviewing several other projects and expects to start work on these later this year. 

The independent valuation of the UK portfolio, which represented 70 per cent of the company’s portfolio at 30 June 2010, decreased by 2.6 per cent during the first half of 2010 with the average capitalisation rate for the UK investment properties assessed at 6.6 per cent at 30 June 2010 compared to 6.3 per cent at 31 December 2009. 

Of the company’s 39 properties in the UK, the individual capitalisation rate was increased for 25 properties, including seven which are subject to extension or re-configuration projects and a further eight in the Wellcare portfolio which is the focus of the current capital expenditure programme. 

Subject to market conditions, it is expected that those properties in the capital expenditure programme will benefit from fair value gains following completion of the developments, in addition to increased annual revenue. This will also improve the loan to value cover of the company’s debt facilities, as anticipated at the time of the open offer.

The independent valuation of the German portfolio, which represented 18 per cent of the company’s portfolio value at 30 June 2010, declined by 1.3 per cent in constant currency during the first half of 2010. The average capitalisation rate for the German portfolio was 6.9 per cent compared to 6.7 per cent at 31 December 2009.

The independent valuation of the US and Swiss portfolios, representing 12 per cent of the company’s portfolio at 30 June 2010, declined in value by 0.8 per cent in constant currency during the first half of 2010.

The company paid a second interim dividend to shareholders in May of 4.5p per share, making a total dividend for 2009 of 6.5p per share, compared to 6.0p per share for 2008.