PSP Swiss Property AG

Ladies and gentlemen, welcome to the PSP Swiss Property Q1 Results 2021 conference call. I'm Moira, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Giacomo Balzarini, CEO of PSP Swiss Property. Please go ahead, sir.

Good morning, everybody, and welcome to this conference call. As always, I will not go through the presentation. I will make a one, two-minute introductory remark and then really leave up the floor for questions. I think, as seen in the past, that's the best use of time of everybody. Just to start off, we reported, I think for us, a very solid Q1 result. Reiterating our guidance is also for 2021. The market has not really materially changed since we last talked about two months ago. What we see is in CBD locations, a healthy letting market. In the outskirts, obviously, a more difficult letting market. but in the majority of our locations we see quite a healthy and good demand. We see a continuously strong transactional market with transaction evidence for equal, if not even lowering, yields on the prime assets with visible cash flows. Headline results is the things to be mentioned, at least from our side, top-line growth, an increase of the rental income of 4.6%, deriving predominantly from new projects which came into the portfolio in Geneva and Zurich and the acquisition. We have a moderate COVID impact in Q1, clearly compared to no impact in Q1 2020. So here from the comparison, the top line growth would have been even higher with a Flat-ish like-for-like development of plus 0.2%. If we include, obviously, the COVID implication, we are at minus 2.1%. We report in Q1 also valuation gains. As you know, typically we value the portfolio twice a year fully. If we have in Q1 or Q3 material evidence based on rental contracts or of completion of projects, We are obliged to ask the value for an extra valuation. We did that in two instances. One on the completion of a project in Zürich West Atmos, which triggered a valuation gain of roughly 20 million. And we have renewed a lease agreement on Bahnhofstraße, the highest retail at higher rents, which triggered a valuation gain of a bit more than 10 million. But these were the two incidences where we had the valuation gains. And also to be evident is the condominium sales gains. On the one hand, the development in Lugano with Parco Lago, where we have transferred ownership of all the reserve departments from year end. And so I've now sold effectively 62% and contributed 5.5 million to the income gap. And we have sold a project in Zurich, Kielberg. As you know, a few years ago, we have earmarked assets with a higher beta usage conversion from office into resi. We have developed a project on Kielberg, various scenarios, thought about developing it ourselves and selling the apartments in view of the strong residential market, we came to a conclusion that we sell it as a project and so realized a gain of 7.7 million or a plus of more than 50% of the book value. On the cost side, fairly stable picture leading clearly to an EBIT margin of above 82, 83%. I think on the cost side to be evidenced is the continuous reduction of the financial expenses We are now on a passing cost of debt of 38 basis points, clearly contributing a substantial part to the bottom line. Here the strategy is when we have larger maturities, try to lock in rather low rates on the longer term, but on the short term we try to, through private placements, try to fund us currently negatively and we fund us negatively at roughly 40-45 basis points in a magnitude of 150 million. So this is quite a strong contributor also to the earnings and here also we try to optimize the whole P&L impact. I think with that, that's a bit the headline numbers. I would really like to hand over to questions and I'm happy to enter into all the material details you would like to go through.

We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and 1 on their touch-tone telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Anyone who has a question or a comment may press star and 1 at this time. The first question is from Pascal Furger from Fontobel. Please go ahead.