Real estate portfolio
At the end of June 2019, the carrying value of the total portfolio was CHF 7.820 billion (end of 2018: CHF 7.442 billion). Early in 2019, a number of properties in Bern’s city centre and in Bern-Liebefeld were acquired. As part of the portfolio streamlining process, two properties were sold, one in Zurich-Altstetten and one in Fribourg. Two development projects were successfully completed in the second quarter of 2019. The properties located at Rue Saint-Martin 7 in Lausanne and at Hardturmstrasse 161/Förrlibuckstrasse 150 in Zurich West were reclassified to the investment portfolio.
The valuation in the reporting period resulted in a portfolio appreciation of CHF 124.7 million. CHF 102.5 million thereof are related to the investment portfolio and CHF 22.2 million to the project developments. Of the CHF 102.5 million, CHF 7.5 million are related to the first-time valuation of the properties acquired in Bern. And of the CHF 22.2 million, CHF 18.5 million are related to the development project “Rue du Marché” in Geneva. At the end of June 2019, the portfolio’s weighted average nominal discount rate stood at 3.41% (year-end 2018: 3.50%). Along with a lower discount rate, various lettings, improved earnings expectations from planned investments and the vacancy development had a positive impact on valuations.
At the end of June 2019, the vacancy rate stood at 4.0% (end of 2018: 5.0 %). The improvement was the result of several new lettings and the saleof the two properties located in Zurich-Altstetten and Fribourg. One percentage point of all vacancies is due to ongoing renovations. Of the lease contracts maturing in 2019 (CHF 31.0 million), 87% were renewed at the end of June 2019. The Wault (weighted average unexpired lease term) of the total portfolio was 4.5 years. The Wault of the ten largest tenants contributing around 30% of the rental income was 6.2 years.
Sites and development properties
At the beginning of the year, the last condominium on the Löwenbräu site in Zurich was sold. Furthermore, seven units of the “Residenza Parco Lago” project in Paradiso, which is still under construction, were sold in the reporting period. The new "ATMOS" building in Zurich West is proceeding according to plan. Various negotiations are underway for larger rental spaces.
Half-year results H1 2019
Net income excluding gains/losses on real estate investments amounted to CHF 115.3 million (H1 2018: CHF 85.6 million). This corresponds to an increase of CHF 29.7 million or 34.7% compared to the previous year’s period. Operationally, higher rental income (+ CHF 6.3 million), increased profit from condominium sales (+ CHF 1.1 million), lower operating expenses (- CHF 1.4 million) as well as lower financial expenses (- CHF 1.5 million) contributed to the improved overall result. Furthermore, deferred taxes in the amount of CHF 58.0 million were released; CHF 21.6 million thereof had a positive effect on net income excluding gains/losses on real estate investments. The release of deferred taxes was related to the reduction in total profit tax rates in the cantons of Geneva and Basel-Stadt. Earnings per share excluding gains/losses on real estate investments, which is the basis for the dividend distribution, amounted to CHF 2.51 (H1 2018: CHF 1.87).
Net income reached CHF 258.8 million (H1 2018: CHF 158.3 million). The increase of CHF 100.5 million compared to the previous year’s period resulted mainly from the portfolio appreciation of CHF 124.7 million (H1 2018: CHF 91.5 million). In addition, there was a profit of CHF 15.0 million from the sale of two investment properties (H1 2018: CHF 2.3 million). At the same time, the aforementioned release of deferred taxes in the amount of CHF 58.0 million led to in a tax income of CHF 5.1 million (H1 2018: tax expenses of CHF 40.5 million). Earnings per share amounted to CHF 5.64 (H1 2018: CHF 3.45).
At the end of June 2019, net asset value (NAV) per share was CHF 92.68 (end of 2018: CHF 90.63); the dividend payment of CHF 3.50 per share made on 10 April 2019 must be taken into consideration in this regard. NAV before deducting deferred taxes amounted to CHF 110.77 (end of 2018: CHF 109.20).
Strong capital structure
With total equity of CHF 4.251 billion (end of 2018: CHF 4.157 billion) – corresponding to an equity ratio of 52.8% (end of 2018: 54.6%) – the equity base remains strong. Interest-bearing debt amounted to CHF 2.870 billion, corresponding to 35.6% of total assets (end of 2018: CHF 2.511 billion respectively 33.0%). Excluding financial debt invested as fixed-term deposit totalling CHF 125 million, the debt ratio was 34.6%. At the end of June 2019, the passing average cost of debt was 0.73% (end of 2018: 0.87 %). The average fixed-interest period was 4.0 years (end of 2018: 3.0 years). Currently, unused committed credit lines amount to CHF 890 million.
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
On 24 July 2019, the existing bond maturing in 2024 was increased by a nominal amount of CHF 75 million to CHF 300 million. All-in, the cost of this bond increase amounts to -0.0322% p.a.
Market environment and outlook 2019
PSP Swiss Property expects good demand for office space. However, the demand will focus primarily on central and easily accessible locations. The retail space market at good locations is stable.
The focus of PSP Swiss Property remains on the modernisation of selected properties, the further development of sites and projects as well as ongoing letting activities. Acquisitions are considered primarily in the strategic investment areas.
For the business year 2019, an ebitda excluding gains/losses on real estate investments of above CHF 250 million is now expected (previous guidance: CHF 250 million; 2018: CHF 241.7 million). With regard to the vacancies, a rate of around 4% is now expected at year-end 2019 (previous guidance: 4.5%; end of June 2019: 4.0%).
Key figures
Key financial figures | Unit | 2018 | H1 2018 | H1 2019 | +/-1 |
Rental income | CHF 1 000 | 279 373 | 138 688 | 144 985 | 4.5% |
EPRA like-for-like change | % | 0.9 | 0.2 | 1.9 | |
Net changes fair value real estate investments | CHF 1 000 | 166 692 | 91 524 | 124 688 | |
Income property sales (condominiums) | CHF 1 000 | 10 484 | 1 683 | 2 806 | |
Income property sales (investment properties) | CHF 1 000 | 2 472 | 2 346 | 14 961 | |
Total other income | CHF 1 000 | 8 172 | 5 031 | 3 846 | |
Net income | CHF 1 000 | 308 152 | 158 274 | 258 762 | 63.5% |
Net income excl. real estate gains2 | CHF 1 000 | 176 250 | 85 601 | 115 305 | 34.7% |
Ebitda excl. real estate gains | CHF 1 000 | 241 743 | 117 675 | 125 718 | 6.8% |
Ebitda margin | % | 80.8 | 80.5 | 82.3 | |
Total assets | CHF 1 000 | 7 619 283 | 7 515 079 | 8 056 962 | 5.7% |
Shareholders’ equity | CHF 1 000 | 4 156 908 | 3 998 519 | 4 251 153 | 2.3% |
Equity ratio | % | 54.6 | 53.2 | 52.8 | |
Return on equity | % | 7.6 | 7.9 | 12.3 | |
Interest-bearing debt | CHF 1 000 | 2 511 212 | 2 590 740 | 2 869 522 | 14.3% |
Interest-bearing debt in % of total assets | % | 33.0 | 34.5 | 35.63 | |
Portfolio key figures | | | | | |
Number of investment properties | Number | 163 | 166 | 165 | |
Carrying value investment properties | CHF 1 000 | 6 778 932 | 6 729 952 | 7 151 574 | 5.5% |
Implied yield, gross | % | 4.1 | 4.1 | 4.0 | |
Implied yield, net | % | 3.5 | 3.5 | 3.5 | |
Vacancy rate end of period (CHF) | % | 5.0 | 6.8 | 4.0 | |
Number of sites/development properties | Number | 11 | 11 | 11 | |
Carrying value sites/development properties | CHF 1 000 | 663 174 | 612 535 | 668 235 | 0.8% |
Headcount | | | | | |
Employees/FTE | People | 91/86 | | 90/85 | |
Per share figures | | | | | |
Earnings per share (EPS)4 | CHF | 6.72 | 3.45 | 5.64 | 63.5% |
EPS excl. real estate gains4 | CHF | 3.84 | 1.87 | 2.51 | 34.7% |
Distribution per share | CHF | 3.505 | n.a. | n.a. | |
Net asset value per share (NAV)6 | CHF | 90.63 | 87.17 | 92.68 | 2.3% |
NAV per share before deferred taxes6 | CHF | 109.20 | 105.14 | 110.77 | 1.4% |
Share price end of period | CHF | 96.85 | 92.00 | 114.10 | 17.8% |
1 | Change to H1 2018 or carrying value as of 31 December 2018 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 | Excluding debt capital invested as fixed-term deposit totalling CHF 125 million: 34.6%. |
4 | Based on average number of outstanding shares. |
5 | For the business year 2018. Payment was made on 10 April 2019. |
6 | 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
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Agenda
Publication Q1-Q3 2019 · 12 November 2019
Publication FY 2019 · 25 February 2020
Annual General Meeting 2020 · 9 April 2020
Publication Q1 2020 · 5 May 2020
