To date, PSP Swiss Property has managed the challenges due to the corona crisis well. The lockdown had only a minor impact on the half-year results. PSP Swiss Property considers itself well positioned for the current year due to its high-quality portfolio and its solid capital structure.
Press release
18 August 2020
Half-year results as per 30 June 2020
PSP Swiss Property with solid interim results. Ebitda forecast is confirmed. Improved vacancy rate guidance for year-end 2020.
To date, PSP Swiss Property has managed the challenges due to the corona crisis well. The lockdown had only a minor impact on the half-year results. 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 June 2020, the carrying value of the total portfolio was CHF 8.127 billion (end of 2019: CHF 7.982 billion).
At the end of March 2020, a plot with a commercial building (built in 1975/1991) at Grubenstrasse 6 in Zurich (district 2) was acquired for CHF 33.5 million. The structure will be replaced with a modern new building offering a mixed use (around 5 600 m2 of office and 5 900 m2 of commercial space). The investment sum amounts to approximately CHF 35 million. The new property will benefit from its good location: the bus and suburban railway stations Zurich Binz are located right next to the building. Demolition work on the existing building have begun. The new building should be constructed between 2021 and 2023.
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. The remaining areas are being negotiated.
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. The construction approval is still pending; however, the construction start is expected for autumn 2020. The construction period will take about two and a half years.
The valuation of the properties resulted in an appreciation of CHF 31.1 million. Thereof, CHF 26.4 million were related to the investment portfolio and CHF 4.7 million to the sites and developments projects. The portfolio’s weighted average nominal discount rate stood at 3.29% (year-end 2019: 3.32%). The appreciation resulted mainly from the lower discount rate as well as from various lettings and the reduction in vacancies. In contrast, more cautious income forecasts in connection with COVID-19 had the effect of reducing the value in individual cases.
At the end of June 2020, the vacancy rate stood at 3.4% (end of 2019: 3.5%). 0.6 percentage points of all vacancies is due to ongoing renovations. Of the lease contracts maturing in 2020 (CHF 31.7 million), 92% were already renewed. The wault (weighted average unexpired lease term) of the total portfolio was 4.1 years. The wault of the ten largest tenants, contributing around 30% of the rental income, was 5.8 years.
Consolidated half-year results (January to June 2020)
Net income excluding gains/losses on real estate investments amounted to CHF 98.3 million, this corresponds to a decrease of CHF 17.1 million or 14.8% compared to the previous year’s period (H1 2019: CHF 115.3 million). The decrease is due to positive one-off effects in H1 2019 – the reduction of income tax rates in the cantons of Basel-Stadt and Geneva resulted in a release of deferred taxes totalling CHF 58.0 million, of which CHF 21.6 million had a positive impact on net income excluding gains/losses on real estate investments.
Rental income increased by CHF 1.7 million to CHF 146.7 million (H1 2019: CHF 145.0 million). This is despite the fact that in Q2 2020, rent reliefs of CHF 2.3 million were recorded in connection with the lockdown. Operating expenses decreased by CHF 1.7 million to CHF 25.9 million (H1 2019: CHF 27.6 million). Financial expenses declined by further CHF 3.0 million to CHF 7.1 million (H1 2019: CHF 10.0 million).
Earnings per share excluding gains/losses on real estate investments, which is the basis for the dividend distribution, amounted to CHF 2.14 (H1 2019: CHF 2.51).
Net income reached CHF 121.8 million (H1 2019: CHF 258.8 million). Positive one-off effects in H1 2019 also explain the decline in net income by CHF 137.0 million or 52.9%. In addition to the effects already mentioned, the portfolio appreciation in the reporting period was lower at CHF 31.1 million compared to H1 2019 (CHF 124.7 million). Furthermore, in the previous year's period, income of CHF 15.0 million had resulted from the sale of two investment properties. Earnings per share amounted to CHF 2.66 (H1 2019: CHF 5.64).
At the end of June 2020, net asset value (NAV) per share was CHF 96.07; the dividend of CHF 3.60 per share paid on 17 April 2020 must be considered in this regard (end of 2019: CHF 97.02). NAV before deducting deferred taxes amounted to CHF 115.23 (end of 2019: CHF 115.82).
Strong capital structure
With total equity of CHF 4.406 billion at the end of June 2020 (end of 2019: CHF 4.450 billion) – corresponding to an equity ratio of 53.8% (end of 2019: 55.4%) – the equity base remains strong. Interest-bearing debt amounted to CHF 2.808 billion, corresponding to 34.3% of total assets (end of 2019: CHF 2.596 billion or 32.3%).The passing average cost of debt was low at 0.52% (end of 2019: 0.73%). The average fixed-interest period was 5.5 years (end of 2019: 4.4 years). Currently, unused credit lines amount to CHF 900 million (thereof CHF 730 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.
Remarks with regard to the corona crisis
The measures taken by the Federal Council in mid-March 2020 to combat the coronavirus, most of which have since been repealed, had a severe impact on the population and the economy. How long it will take to return to normality is impossible to predict from today’s perspective. This depends on how a future spread of the coronavirus can be contained and how badly the lockdown has damaged the economy.
Thanks to its broad portfolio diversification and its focus on office use, the exposure of PSP Swiss Property in the sectors affected by ordered business closures is manageable (21% of total rental income). Moreover, the impact on these tenants varies widely. PSP Swiss Property has approximately 2 300 tenants; thereof, around 220 were directly affected by the ordered closure of their businesses. Until the end of June 2020, about 350 tenants had applied for a deferral of payment or a rent adjustment. As an emergency measure, payment extensions were granted, if this was appropriate. Overall, rent reliefs in the amount of CHF 2.3 million were recognised in the Q2 2020 income statement. As at 30 June 2020, outstanding lockdown-related rent receivables amounted to CHF 5.2 million.
In June 2020, the Federal Council was mandated by a motion to draft a law requiring a subsequent rent reduction of 60% in favour of tenants affected by the authorities' closure of their businesses. The planned regulation is intended to ensure that agreements made between tenants prior to the adoption of the law remain valid; and will apply only to monthly rents of up to CHF 20 000, with the possibility for both, the landlord and the tenants, to refuse the regulation if the monthly rent exceeds CHF 15 000. This means that further consensual agreements will not be blocked but more difficult to achieve. The introduction of a corresponding regulation (for monthly rents up to CHF 15 000) would result in total estimated rent reliefs of additional approximately CHF 0.7 million for PSP Swiss Property.
Subsequent events
With effect from 1 August 2020, an asset swap with Zurich Insurance Group was carried out. The commercial building at Seilerstrasse 8 in Bern was acquired for CHF 23.7 million from Zurich Insurance Group (we already own the immediately adjacent property at Seilerstrasse 8a). As a counter transaction, the development property at Zurlindenstrasse 134 in Zurich was sold for CHF 15.0 million; resulting in a gain of CHF 7.6 million.
Market environment and outlook 2020
An outlook of the Swiss economy is more difficult than ever. Most forecasts predict a decline in GDP by around 6% for 2020. A return to growth rates is expected in Q3 or Q4 2020. However, GDP is unlikely to reach pre-corona levels before 2022. It is just as difficult to anticipate the impact of the corona crisis on the real estate sector. More than ever, it must be differentiated between the various sub-segments. The situation is different for office space and other commercial properties and it varies significantly depending on the quality of their location. PSP Swiss Property expects demand for modern office space in A-locations to remain stable in the coming months. On the other hand, the market for older office buildings in B- and C-locations as well as non-food retail space, which had been challenging even before the crisis, will remain difficult for the time being.
It is yet too early for a final assessment of the impact the corona 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 is office space and the tenant base is broadly diversified. The development projects, most of which are already well let, will generate further growth. We also have a solid equity base and sufficient financing sources.
For the business year 2020, an ebitda excluding gains/losses on real estate investments of around CHF 260 million is confirmed (2019: CHF 256.1 million).
With regard to the vacancies, a lower rate of around 3% at year-end 2020 is now expected (previously: around 3.5%; end of June 2020: 3.4%).
Key figures
Key financial figures | Unit | 2019 | H1 2019 | H1 2020 | +/-1 |
Rental income | CHF 1 000 | 290 460 | 144 985 | 146 689 | 1.2% |
EPRA like-for-like change | % | 1.2 | 1.9 | -0.92 | |
Net changes fair value real estate investments | CHF 1 000 | 244 176 | 124 688 | 31 131 | |
Income property sales (inventories) | CHF 1 000 | 12 835 | 2 806 | 1 335 | |
Income property sales (investment properties) | CHF 1 000 | 14 961 | 14 961 | 0 | |
Total other income | CHF 1 000 | 7 957 | 3 846 | 4 872 | |
Net income | CHF 1 000 | 453 425 | 258 762 | 121 780 | -52.9% |
Net income excl. real estate gains3 | CHF 1 000 | 215 214 | 115 305 | 98 251 | -14.8% |
Ebitda excl. real estate gains | CHF 1 000 | 256 145 | 125 718 | 127 691 | 1.6% |
Ebitda margin | % | 82.0 | 82.3 | 83.5 | |
Total assets | CHF 1 000 | 8 036 244 | 8 196 117 | 2.0% | |
Shareholders’ equity | CHF 1 000 | 4 450 220 | 4 406 424 | -1.0% | |
Equity ratio | % | 55.4 | 53.8 | ||
Return on equity | % | 10.5 | 5.5 | ||
Interest-bearing debt | CHF 1 000 | 2 596 136 | 2 807 772 | 8.2% | |
Interest-bearing debt in % of total assets | % | 32.3 | 34.3 | ||
Portfolio key figures | |||||
Number of investment properties | Number | 162 | 161 | ||
Carrying value investment properties | CHF 1 000 | 7 259 441 | 7 279 741 | 0.3% | |
Implied yield, gross | % | 4.0 | 4.0 | 3.9 | |
Implied yield, net | % | 3.4 | 3.5 | 3.4 | |
Vacancy rate end of period (CHF) | % | 3.5 | 3.4 | ||
Number of sites/development properties | Number | 12 | 15 | ||
Carrying value sites/development properties | CHF 1 000 | 722 223 | 847 706 | 17.4% | |
Headcount | |||||
Employees/FTE | People | 94/89 | 95/88 | ||
Per share figures | |||||
Earnings per share (EPS)4 | CHF | 9.89 | 5.64 | 2.66 | -52.9% |
EPS excl. real estate gains4 | CHF | 4.69 | 2.51 | 2.14 | -14.8% |
Distribution per share | CHF | 3.605 | n.a. | n.a. | |
Net asset value per share (NAV)6 | CHF | 97.02 | 96.07 | -1.0% | |
NAV per share before deferred taxes6 | CHF | 115.82 | 115.23 | -0.5% | |
Share price end of period | CHF | 133.60 | 106.70 | -20.1% |
1 | Change to H1 2019 or carrying value as of 31 December 2019 as applicable. |
2 | EPRA like-for-like change excluding COVID-19 impact is +0.7%. |
3 | “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”. |
4 | Based on average number of outstanding shares. |
5 | For the business year 2019. Cash payment was made on 17 April 2020. |
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
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:
Switzerland/Europe/etc. +41 (0) 58 310 50 00; UK +44 (0) 207 107 0613; US +1 (1) 631 570 56 13
Agenda
Publication Q1-Q3 2020 · 10 November 2020
Publication FY 2020 · 23 February 2021
Annual General Meeting 2021 · 31 March 2021
Publication Q1 2021 · 30 April 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 4.7 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).
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.
