2020

05.05.2020 – PSP Swiss Property AG

Quarterly results as per 31 March 2020

Press release

5 May 2020

Quarterly results as per 31 March 2020

PSP Swiss Property with solid quarterly results.

The further course of the financial year is likely to be affected by the measures to combat the coronavirus pandemic and its as yet unclear market impact. However, PSP Swiss Property considers itself well positioned for the current year due to its high-quality portfolio and its solid capital structure.

Real estate portfolio

At the end of March 2020, the carrying value of the total portfolio was CHF 8.055 billion (end of 2019: CHF 7.982 billion).

At the end of March 2020, a plot with a commercial building at Grubenstrasse 6 in Zurich (district 2) was acquired for CHF 33.5 million. The property built in 1975/1991 will be torn down and replaced by a modern building. A mixed use is foreseen with around 5’600 m2 of office and around 5’900 m2 of commercial space. The investment sum amounts to approximately CHF 35 million. Construction work is expected to start at the beginning of 2021 and will take around two years.

The properties acquired at Bärenplatz in Bern in January 2019 will be extensively renovated and modernised by the end of 2021. The investment sum amounts to around CHF 14 million. The ground floor and the first basement floor are intended to be used for gastronomy (around 1’100 m2), with office space above (around 1’300 m2) and some small apartments (around 900 m2) in the uppermost parts of the building. 30% of the space (gastronomy area) has already been pre-let. There is also interest for the remaining areas.

The office building at Grosspeterstrasse 18 in Basel no longer meets today's requirements. Planned is a new construction with around 5’600 m2 of office space; 50% has already been pre-let to Swisscom. The investment sum amounts to around CHF 34 million. Not yet determined is the construction start. The construction period will take about two and a half years.

After the lawsuit filed by Steiner AG in February 2016 against PSP Swiss Property and Löwenbräu Kunst AG in connection with the Löwenbräu site construction project for damages of approximately CHF 58.5 million was completely dismissed by the Commercial Court of Zurich in March 2020, Steiner AG refrained from appealing to the Swiss Federal Supreme Court. The legal dispute is thus concluded.

At the end of March 2020, the vacancy rate stood at 3.2% (end of 2019: 3.5%). The reduction was the result of several new lettings. 0.6 percentage points of all vacancies is due to ongoing renovations. Of the lease contracts maturing in 2020 (CHF 31.7 million), 85% were renewed at the end of March 2020. The wault (weighted average unexpired lease term) of the total portfolio was 4.2 years. The wault of the ten largest tenants, contributing around 30% of the rental income, was 6.0 years.

Consolidated quarterly results (January to March 2020)

Net income excluding gains/losses on real estate investments amounted to CHF 48.1 million, underbidding the previous year’s period by CHF 2.4 million or 4.8% (Q1 2019: CHF 50.5 million). The decrease is due to one-off effects in the previous year’s period: The release of deferred taxes in the amount of CHF 5.0 million in connection with the reduction of income tax rate in the canton of Basel-Stadt; thereof, CHF 1.6 million had a positive effect on net income excluding gains/losses on real estate investments; and higher profit from the sale of condominiums or projects (CHF 1.6 million). Income from capitalised own services also declined (- CHF 1.9 million). Rental income (+ CHF 1.6 million), operating expenses (- CHF 0.9 million) and financial expenses (- CHF 1.2 million) developed positively in the reporting period. Earnings per share excluding gains/losses on real estate investments, which is the basis for the dividend distribution, amounted to CHF 1.05 (Q1 2019: CHF 1.10).

Net income reached CHF 47.9 million (Q1 2019: CHF 79.7 million). The decline in net income by CHF 31.8 million or 39.9% is also explained by one-off effects in Q1 2019. In addition to the aforementioned effects from the release of deferred taxes and sales, in Q1 2019 – in contrast to Q1 2020 –resulted a portfolio appreciation of CHF 19.7 million. Furthermore, in the previous year's period, income of CHF 15.0 million resulted from the sale of two investment properties. Earnings per share amounted to CHF 1.04 (Q1 2019: CHF 1.74).

At the end of March 2020, net asset value (NAV) per share was CHF 98.05 (end of 2019: CHF 97.02). NAV before deducting deferred taxes amounted to CHF 116.94 (end of 2019: CHF 115.82).

Strong capital structure

With total equity of CHF 4.497 billion at the end of March 2020 (end of 2019: CHF 4.450 billion) – corresponding to an equity ratio of 55.3% (end of 2019: 55.4%) – the equity base remains strong. Interest-bearing debt amounted to CHF 2.666 billion, corresponding to 32.8% of total assets (end of 2019: CHF 2.596 billion or 32.3%).The passing average cost of debt was 0.58% (end of 2019: 0.73%). The average fixed-interest period was 5.9 years (end of 2019: 4.4 years). Currently, unused credit lines amount to CHF 770 million (thereof CHF 620 million committed).

PSP Swiss Property has ratings from two international rating agencies: Senior Unsecured Rating A- (outlook stable) from Fitch and A3 Issuer Rating (outlook stable) from Moody’s.

Subsequent events

The ordinary Annual General Meeting on 9 April 2020 approved all proposals of the Board of Directors. Among other resolutions, the payment of an ordinary dividend of CHF 3.60 per share for the business year 2019 was approved (previous year: CHF 3.50 per share). The payment totalling CHF 165.1 million was made on 17 April 2020.

Luciano Gabriel was re-elected as Chairman of the Board of Directors, as were all six other current members of the Board of Directors, each for a one-year term of office. In addition, Henrik Saxborn was elected as a new member of the Board of Directors, also for a one-year term of office. Ernst & Young AG, Zurich, was re-elected as Statutory Auditors for the business year 2020. Proxy Voting Services GmbH, Zurich, was re-elected as independent shareholder representative (one-year term of office). The Compensation Committee and the Audit Committee consist of Peter Forstmoser (Chairman), Adrian Dudle, Nathan Hetz and Josef Stadler. The Nomination Committee consists of Josef Stadler (Chairman), Corinne Denzler and Adrian Dudle.

Letting market and outlook 2020

Today, economic forecasts are more difficult than ever. It is just as difficult to anticipate the impact of the coronavirus crisis on the real estate sector. PSP Swiss Property expects the demand for office space to stagnate temporarily. The market for retail space, which had been challenging even before the outbreak of the coronavirus crisis, will remain difficult for the time being.

It is too early for a final assessment of the impact the coronavirus crisis will have on our business activities. However, PSP Swiss Property is well prepared for the times ahead for a number of reasons: we have a high-quality portfolio with a low vacancy rate. The main use comprises office space and the tenant base is well diversified. Furthermore, the equity base is solid and the financing sources sufficient. The further course of the financial year will probably be affected by the measures to combat the pandemic and its as yet unclear effects. However, our exposure in the sectors most affected by the coronavirus crisis (such as non-food retail, gastronomy, leisure, etc.) is limited to 21% of rental income.

For the business year 2020, an ebitda excluding gains/losses on real estate investments of around CHF 260 million is now expected (previously: over CHF 260 million; 2019: CHF 256.1 million). Compared to the previous guidance, rental income is expected to be slightly lower at the previous year's level. In addition, there is a minor delay in the development project "Residenza Parco Lago" in Paradiso/Lugano and the sale of the apartments. The loss of income should be largely compensated by lower operating expenses and income from the early sale of other development projects.

With regard to the vacancies, a rate of around 3.5% at year-end 2020 is now expected (previously: below 3.5%; end of March 2020: 3.2%).

Key figures

Key financial figures

Unit

2019

Q1 2019

Q1 2020

+/-1

Rental income

CHF 1 000

290 460

72 440

74 042

2.2%

EPRA like-for-like change

%

1.2

1.9

0.5

Net changes fair value real estate investments

CHF 1 000

244 176

19 735

-235

Income property sales (inventories)

CHF 1 000

12 835

2 458

851

Income property sales (investment properties)

CHF 1 000

14 961

14 961

0

Total other income

CHF 1 000

7 957

2 989

1 024

Net income

CHF 1 000

453 425

79 747

47 928

-39.9%

Net income excl. real estate gains2

CHF 1 000

215 214

50 519

48 117

-4.8%

Ebitda excl. real estate gains

CHF 1 000

256 145

65 358

63 301

-3.1%

Ebitda margin

%

82.0

82.8

83.4

Total assets

CHF 1 000

8 036 244

8 126 531

1.1%

Shareholders’ equity

CHF 1 000

4 450 220

4 497 332

1.1%

Equity ratio

%

55.4

55.3

Return on equity

%

10.5

4.3

Interest-bearing debt

CHF 1 000

2 596 136

2 666 115

2.7%

Interest-bearing debt in % of total assets

%

32.3

32.8

Portfolio key figures

Number of investment properties

Number

162

161

Carrying value investment properties

CHF 1 000

7 259 441

7 206 807

-0.7%

Implied yield, gross

%

4.0

4.1

4.0

Implied yield, net

%

3.4

3.5

3.5

Vacancy rate end of period (CHF)

%

3.5

3.2

Number of sites/development properties

Number

12

15

Carrying value sites/development properties

CHF 1 000

722 223

847 864

17.4%

Headcount

Employees/FTE

People

94/89

95/88

Per share figures

Earnings per share (EPS)3

CHF

9.89

1.74

1.04

-39.9%

EPS excl. real estate gains3

CHF

4.69

1.10

1.05

-4.8%

Distribution per share

CHF

3.604

n.a.

n.a.

Net asset value per share (NAV)5

CHF

97.02

98.05

1.1%

NAV per share before deferred taxes5

CHF

115.82

116.94

1.0%

Share price end of period

CHF

133.60

120.70

-9.7%

1

Change to Q1 2019 or carrying value as of 31 December 2019 as applicable.

2

“Net income excluding gains/losses on real estate investments” corresponds to the net income excluding net changes in fair value of the real estate investments, net income on sales of investment properties and all of the related taxes. Income from the sale of properties which were developed by the Company itself is, however, included in the “net income excluding gains/losses on real estate investments”.

3

Based on average number of outstanding shares.

4

For the business year 2019. Cash payment was made on 17 April 2020.

5

Based on number of outstanding shares.

Further information

Giacomo Balzarini, CEO · Phone +41 (0)44 625 59 59 · Mobile +41 (0)79 207 32 40

Vasco Cecchini, CCO · Phone +41 (0)44 625 57 23 · Mobile +41 (0)79 650 84 32

Report and presentation are available on www.psp.info

www.psp.info/reports

www.psp.info/presentations

Today, 10:30 Uhr (CET): conference call

Access to the call: you will receive phone number, passcode and your personal PIN to directly access the call by pre-registering (required) here.

Should you have any issues with the registration, please dial the following number 10-15 minutes prior to conference start:

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Agenda

Publication H1 2020 · 18 August 2020

Publication Q1-Q3 2020 · 10 November 2020

Publication FY 2020 · 23 February 2021

Annual General Meeting 2021 · 31 March 2021

PSP Swiss Property – leading Swiss real estate company

PSP Swiss Property owns a real estate portfolio of CHF 8.1 billion in Switzerland’s main economic areas; its market capitalisation amounts to CHF 5.0 billion. The 95 employees are based in Geneva, Olten, Zug and Zurich.

Since March 2000, PSP Swiss Property is listed on the SIX Swiss Exchange (symbol: PSPN, security number: 1829415, ISIN CH0018294154).

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None of the information in this press release constitutes an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. None of the securities of the Company referred to in this press release have been or will be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or under the applicable securities laws of any state or other jurisdiction of the United States.


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