PSP Swiss Property AG

Ladies and gentlemen, welcome to the PSP Swiss Property Q1 2024 results conference call. I am Maria, the cross-call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. 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.

Thank you, Maria, and good morning to everybody to our first quarter results report of 2024. As always, I will do a quick rundown on the major highlights in order to have plenty of time for the questions. As you have seen, in our view, we have achieved very solid operating results. in the first quarter. I will not enter into the market discussion as we have talked about it almost end of February and since then the market really didn't change so much. We are confronted with a very solid CBD market and clearly observe the bifurcation between CBD and non-prime. If we go directly into the key slides, I would ask to go to slide 9. I think one of the highlights is the rental income growth of almost 10%, driven on the one hand by the acquisition West Park to West we undertook last year. Secondly, we have recognized the full indexation of the first quarter of roughly 1.1 percentage points. Thirdly, we had to recognize turnover rent for the full 23 in Q1. And plus, we had a payout of a fit-out of a tenant, which is considered kind of a one-off for the Q1. This amounted of this increase of roughly 8 million for the first quarter. On the valuation gains, which are unusual for Q1 and Q3, you know our matrix that we have a full valuation of the portfolio in the half year and the full year. And if we have material evidence that based on rental contract changes, there's a plus minus change of 5 million per asset, we are obliged to ask the valuer to review the valuation of this asset. This had a materialization of four assets. I will go into the details on a later slide. And thirdly, you have seen a property sales gain on the condominiums. of roughly 550,000. This is basically the last gain and the closing of the project Parco Lago in the southern part of Switzerland after almost 20 years of construction. So this project now has finally come to an end. It was a very successful project. On the cost side, although we see a plus 5%, I think, on Swiss franc amount, it's almost neglectable and compared to the last year those with regard to projections we are pretty in line with our cost view we had a bit higher letting costs we had on the gna we had a bit higher rating costs with regard to our sustainability efforts and some it projects but overall it was a pretty normal quarter with regard to the cost. So here I wouldn't have anything major to highlight, although some percentage points are a bit higher, but this is also seasonality driven. On the next slide, 11, you see on the one hand the increase clearly of the financial expenses. We are still able to fund at very attractive terms. We showed the bonds in the first quarter at very attractive spreads. Nevertheless, clearly financial expenses grew and will continue to grow, perhaps a bit less strongly than we had expected also due to the interest rate cut by the Swiss National Bank. But I think this is something which is inevitable and also in one or the other case also a bit healthy that we have a re-correlation of a sound market. On the tax side, The higher tax impact here is driven by the valuation gains. Nothing else. It was a pretty ordinary quarter with regard to the taxes. If you look on the vacancy rate, which came in at 4.1%, here we confirm our guidance for the year-end to be below 4%. If you look, the biggest vacancy contribution comes from the B2Bs. Here we have signed the lease agreement with the light industrial area, and we are in final steps of signing a larger commercial lease. We're hopeful to come to an end by the next couple of weeks, and we'll then do a respective announcement. Here we're clearly working full speed on this letting, and we see that the product is quite attractive in the market, so we are pretty positive on it. On the remaining part, no major changes to what we have reported in the Q1. As I mentioned, an unchanged guidance. On the expiry profile, the majority has been already released. We are left with 14% to be released. And this leads me to the slide 18 with the changes in fair value. Here we disclose the four assets with regard to the Bahnhofstrasse and Waagkasse. This is an option which has been exercised by a tenant in advance at higher rents, and this triggered clearly a valuation gain on the Bahnhofstrasse 66. This was a break option which was not exercised, therefore also here an adjustment on the DCF model by the valuer. The Weissenhausstrasse Bahnhof G is driven by the strong performance of the tenant and by a partial recognition of the turnover rent which was so far not recognized and triggered evaluation gain and the hochstraße in basel was driven by the letting success on the leasing side and having now a fully led building since q1 and this triggered the fourth evaluation gain so i think this are really asset-specific contributions. I would be careful in applying a read across the whole portfolio. I think we are confronted, as I mentioned at the beginning, with a healthy letting market. Nevertheless, we still would expect a flattish development over the full year. I think in the Q&A we might also talk about the transaction market But the evidence we have today is that on the valuation side, we should see overall a flattish development for the year. And therefore, you see also slide 19, those valuations had no impact on the yields. It's a pure DCF rental income, cash flow driven perspective applied then by the value. On slide 21 and 22, the financing situation, I would say unchanged. We are confronted with a solid funding market being on the credit side, being on the bond side. And I think also with regard to the maturities, we have a very good visibility. We have plenty of committed credit lines and also the credit matrix. with the equity ratio, with the loan-to-value, is basically unchanged towards the full year results, and they wouldn't expect also major changes towards the year end. What is not recognized here is obviously the dividend, which was paid then shortly after the Q1, and clearly this would change a little bit the matrix, but not substantially. On the development projects, We are all working, I would say, full speed on the ones we have listed. On a summary, on slide 30, you see that Fusli Strasse, we have had this letting success on the office side. We have already talked. We are working on the retail side with a couple of tenants. On the tech on Basel, as mentioned a bit, also in the full year results, so far unchanged. This will take a bit longer to be leased up. On the Globus on Bellevue, all signs on green. Tenants are starting with the fit-out, and it's planned to be opened for Christmas. Hochstrasse, it's fully let. And Hotel du Post in Lausanne, we have started on the marketing side. We have a partial letting, and here we are working now really on the construction side and started up the letting. From this 23 roughly million of potential rental income, which will come in until the end, 25, 26 annualized, 1.2 million have already been recognized. So to answer the presentation before going into the Q&A on slide 34, you see in a nutshell, slightly updated EBITDA guidance of 300 million compared to 295 million. and a confirmed vacancy rate guidance of below 4%. With that, I would end my short presentation and leave the floor for the Q&A.

We will now begin the Q&A session. Anyone who wishes to ask a question or make a comment may press star and 1 on the touch-tone telephone. You will hear a tone to confirm that you have 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 one at this time. The first question comes from John Wong, Financial Campaign. Please go ahead.