With CHF 134.8 million, net income (excluding changes in fair value) is in line with expectations of the Company. For FY 2018, the ebitda guidance (excluding changes in fair value) of CHF 240 million is confirmed. Due to successful letting activities, PSP Swiss Property expects a lower vacancy rate of 5% at year-end 2018.
Press release
13 November 2018
Quarterly results as per 30 September 2018
PSP Swiss Property with successful letting activities. The vacancy guidance as per year-end 2018 has been improved to 5%. The ebitda guidance for FY 2018 is confirmed.
With CHF 134.8 million, net income (excluding changes in fair value) is in line with expectations of the Company. For FY 2018, the ebitda guidance (excluding changes in fair value) of CHF 240 million is confirmed. Due to successful letting activities, PSP Swiss Property expects a lower vacancy rate of 5% at year-end 2018.
Real estate portfolio and letting activities
At the end of September 2018, the carrying value of the total portfolio was CHF 7.384 billion (end of 2017: CHF 7.046 billion). The property portfolio purchased from Edmond de Rothschild (Suisse) S.A. is included since Q1 2018. All properties are centrally located and perfectly maintained. Strategically, this acquisition perfectly fits the existing portfolio of PSP Swiss Property and strengthens its position in particular in the French-speaking part of Switzerland. Furthermore, the land related to a building in Bern was acquired. In spring 2018,the “Grosspeter Tower” in Basel was completed and reclassified as investment property. It has become one of the city’s most distinctive buildings with a hotel and offices. Streamlining the portfolio, a property in Petit-Lancy (Geneva) and a development project in Rheinfelden were sold. The properties located at Bernerstrasse Süd 167/169 in Zurich and at Route des Arsenaux 41 in Fribourg might also be sold shortly.
Since mid-2018, the letting activities continued to be successful. The vacancy rate of 6.8% as per mid-2018 was further reduced to 6.1% as per the end of September 2018. Major leases worth mentioning were related to the following properties: Peter-Merian-Strasse 88/90 and “Grosspeter Tower” (both in Basel), Wasserwerkstrasse 10, 12 / Stampfenbachstrasse 109 (Zurich) as well as Bahnhofplatz 2 (Biel). 1.2 percentage points of all vacancies are due to ongoing renovations. Of all the lease contracts maturing in 2018 (CHF 29.1 million), 97% were renewed, respectively extended at the end of September 2018.
Development projects
Further milestones were achieved at the ongoing development projects. The renovation work at the property Hardturmstrasse 161, Förrlibuckstrasse 150 in Zurich will be completed by early 2019. Due to its new exterior and top-notch interior with flexible office layouts, this property has become much more attractive.
The new construction “ATMOS” (the former “Orion”) in Zurich West is also on track. In the meantime, the two old buildings located at Förrlibuckstrasse 178/180 and Hardturmstrasse 181/183/185 have been demolished completely. Early October 2018, the foundation for the new building was laid. PSP Swiss Property will invest approximately CHF 130 million into this project, which should be completed by early 2021. The new commercial property (23’600 m2 letting space) will significantly strengthen the positioning in Zurich West. With the recent lease agreement signed with On, Zurich, an innovative Swiss running shoe brand, 45% of the space is already pre-let.
Since March 2017, the “Residenza Parco Lago” in Paradiso (Lugano) is under construction. The investment total for this new building complex, consisting predominantly of condominiums, amounts to approximately CHF 80 million. Completion is expected early 2020. All units will be sold; marketing started this year.
There was one setback at the large-scale renovation project “Bahnhofquai/-platz” opposite Zurich’s main train station. The two properties at Bahnhofplatz 1 and Bahnhofquai 9/11/15 suffered serious damage due to a major fire at the end of August 2018 (construction stage 1 of the whole project). On 15 October 2018, the clean-up and support work started. The still existing façade, which is protected as a historic monument, will be retained, while the buildings will be restored based on their previous appearance. Currently, it is assumed that stage 1 will be delayed by around 1.5 years and re-construction will take until mid-2021. The cause of the fire is still under investigation by the police authorities. Fortunately, stage 2 (under construction) and stage 3 (under review) were not affected by the blaze.
In the context of the portfolio optimisation, the building located at Rue de Berne 6 in Geneva was reclassified as a development property during Q3 2018. Currently, various options are being evaluated which all include a comprehensive renovation.
Some of the developments – to be reclassified to the investment portfolio after their completion – will generate rental income starting in FY 2020. Only the residential project „Residenza Parco Lago“ in Paradiso – all units to be sold – will have an earlier P/L impact. With the adoption of IFRS 15 (Revenue from Contracts with Customers), income from condominium sales are recorded during the current business year.
Quarterly results January to September 2018 (9 months)
With the adoption of IFRS 15, Revenue from Contracts with Customers, the previous year’s period Q1-Q3 2017 and FY 2017 had to be restated. Revenues relating to condominium sales are now recorded using the so-called percentage-of-completion-method. The application of IFRS 15 did not have any material impact on Q1-Q3 2017 resp. FY 2017.
During the reporting period, net income (excluding changes in fair value) reached CHF 134.8 million (Q1-Q3 2017: CHF 137.8 million). While this is a decrease of CHF 3.0 million or 2.2% compared to the previous year’s period, the results are in line with the expectations of the Company. Then during the previous year’s period, income from apartment sales exceeded this year’s figures by CHF 9.4 million. Rental income increased by CHF 4.7 million or 2.3% to CHF 208.9 million during the reporting period, which is particularly positive. The increase was mainly due to the portfolio purchase (Edmond de Rothschild), and capitalised own services related to rose by CHF 2.0 million to CHF 3.9 million (Q1-Q3 2017: CHF 1.9 million).
Operating expenses increased by CHF 1.6 million to CHF 43.4 million (Q1-Q3 2017: CHF 41.8 million). Financial expenses declined by CHF 2.1 million to CHF 16.9 million (Q1-Q3 2017: CHF 19.0 million).
Net income (including changes in fair value) reached CHF 220.3 million (Q1-Q3 2017: CHF 164.8 million). The increase of CHF 55.6 million compared to the previous year’s period resulted mainly from the appreciation of CHF 107.6 million (Q1-Q3 2017: appreciation of CHF 17.7 million). Thereof, CHF 91.5 million resulted from the portfolio revaluation at mid-2018 and CHF 16.0 million from the revaluation of the investment property “Grosspeter Tower” in Basel and the development project “ATMOS” in Zurich West at the end of September 2018. The project “Bahnhofquai/-platz” in Zurich damaged by a major fire was also assessed, which, however, did not lead to a change in fair value.
Due to the portfolio appreciation, tax expenses increased by CHF 35.2 million to CHF 55.7 million (Q1-Q3 2017: CHF 20.5 million). It should also be taken into account that the new lower corporate tax rate in the Canton of Vaud was applied for the first time in Q3 2017. This resulted in a positive effect (release of deferred taxes) in the amount of CHF 17.0 million in the previous year’s period (Q1-Q3 2017).
EPS (including changes in fair value) amounted to CHF 4.80 (Q1-Q3 2017: CHF 3.59). EPS (excluding changes in fair value), which is the basis for the dividend distribution, amounted to CHF 2.94 (Q1-Q3 2017: CHF 3.00).
At the end of September 2018, NAV per share was CHF 88.61 (end of 2017: CHF 86.96). The dividend payment of CHF 3.40 per share made on 11 April 2018 must be taken into consideration in this regard. NAV before deducting deferred taxes amounted to CHF 106.71 (end of 2017: CHF 104.22).
Strong capital structure
With total equity of CHF 4.065 billion (end of 2017: CHF 3.989 billion) – corresponding to an equity ratio of 53.7% (end of 2017: 54.0%) – the capital base remains strong. Interest-bearing debt amounted to CHF 2.571 billion, corresponding to 34.0% of total assets (end of 2017: CHF 2.491 billion respectively 33.7%). Excluding debt capital invested as fixed-term deposit totalling CHF 125 million, the debt ratio was 32.9%. At the end of September 2018, the passing average interest rate was at very low 0.89% (end of 2017: 0.99%). The average fixed-interest period was 3.2 years (end of 2017: 3.6 years). Currently, unused committed credit lines amount to CHF 910 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.
Market environment and outlook 2018
PSP Swiss Property expects that the predicted economic expansion will have a positive impact on the demand for office space. The outlook for retail space in central locations is also significantly better than for assets in the periphery. The investment market for commercial properties is expected to remain challenging. The focus of PSP Swiss Property remains on the modernisation of selected properties, the further development of the sites and projects as well as ongoing letting activities. Acquisitions are considered primarily in the strategic investment areas and must be justified by potential added value in the long-term.
For FY 2018, an ebitda (excluding changes in fair value) of CHF 240 million is still expected (2017: CHF 242.2 million). With regard to the vacancies, a lowered rate of 5% is expected at year-end 2018 (previous guidance: below 6%; end of September 2018: 6.1%).
Key figures Q1-Q3 2018
Key financial figures | Unit | 20171 | 9M 20171 | 9M 2018 | +/-2 |
Rental income | CHF 1 000 | 272 454 | 204 272 | 208 929 | 2.3% |
EPRA like-for-like change | % | -1.1 | -1.3 | 0.5 | |
Net changes fair value real estate investments | CHF 1 000 | 83 253 | 17 739 | 107 559 | |
Income property sales (condominiums) | CHF 1 000 | 19 614 | 19 420 | 9 982 | |
Income property sales (investment properties) | CHF 1 000 | 627 | 308 | 2 346 | |
Total other income | CHF 1 000 | 5 043 | 4 341 | 7 502 | |
Net income | CHF 1 000 | 256 890 | 164 751 | 220 317 | 33.7% |
Net income excl. real estate gains3 | CHF 1 000 | 177 738 | 137 765 | 134 797 | -2.2% |
Ebitda excl. real estate gains | CHF 1 000 | 242 187 | 186 929 | 184 550 | -1.3% |
Ebitda margin | % | 81.5 | 81.9 | 81.2 | |
Total assets | CHF 1 000 | 7 384 243 | 7 570 275 | 2.5% | |
Shareholders’ equity | CHF 1 000 | 3 988 560 | 4 064 572 | 1.9% | |
Equity ratio | % | 54.0 | 53.7 | ||
Return on equity | % | 6.6 | 7.3 | ||
Interest-bearing debt | CHF 1 000 | 2 491 087 | 2 570 976 | 3.2% | |
Interest-bearing debt in % of total assets | % | 33.7 | 34.04 | ||
Portfolio key figures | |||||
Number of investment properties | Number | 157 | 165 | ||
Carrying value investment properties | CHF 1 000 | 6 383 901 | 6 742 834 | 5.6% | |
Implied yield, gross | % | 4.2 | 4.2 | 4.1 | |
Implied yield, net | % | 3.5 | 3.6 | 3.5 | |
Vacancy rate end of period (CHF) | % | 8.2 | 6.1 | ||
Number of sites/development properties | Number | 12 | 11 | ||
Carrying value sites/development properties | CHF 1 000 | 661 892 | 640 828 | -3.2% | |
Employees | |||||
End of period/FTE | People | 86/81 | 92/88 | ||
Per share figures | |||||
Earnings per share (EPS)5 | CHF | 5.60 | 3.59 | 4.80 | 33.7% |
EPS excl. real estate gains5 | CHF | 3.87 | 3.00 | 2.94 | -2.2% |
Distribution per share | CHF | 3.406 | n.a. | n.a. | |
Net asset value per share (NAV)7 | CHF | 86.96 | 88.61 | 1.9% | |
NAV per share before deferred taxes7 | CHF | 104.22 | 106.71 | 2.4% | |
Share price end of period | CHF | 92.35 | 95.05 | 2.9% |
1 | Restated due to first-time adoption of IFRS 15, Revenue from Contracts with Customers. |
2 | Change to Q1-Q3 2017 or carrying value as of 31 December 2017 as applicable. |
3 | “Net income excluding gains/losses on real estate investments” corresponds to the consolidated net income excluding net changes in fair value of the real estate investments, realised 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 | Excluding debt capital invested as fixed-term deposit totalling CHF 125 million: 32.9%. |
5 | Based on average number of outstanding shares. |
6 | For the business year 2017. Cash payment was done on 11 April 2018. |
7 | 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 hrs (CET): conference call (Q&A only) held in English
Switzerland / Europe · +41 (0)58 310 50 00
Great Britain · +44 (0)207 107 06 13
USA · +1 (1)631 570 56 13
Other numbers · https://media.choruscall.ch/documents/Attended_DI_numbers.pdf
Agenda
Publication FY 2018 · 26 February 2019
Annual General Meeting 2019 · 4 April 2019
Publication Q1 2019 · 7 May 2019
Publication H1 2019 · 15 August 2019
Publication Q1-Q3 2019 · 12 November 2019
PSP Swiss Property – leading Swiss real estate company
PSP Swiss Property owns a real estate portfolio of CHF 7.4 billion in Switzerland’s main economic areas; its market capitalisation amounts to CHF 4.5 billion. The 92 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.
