PSP Swiss Property AG

Ladies and gentlemen, welcome to the PSPC's property Q1 2025 results conference call. I am Moira, the call 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 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 Giacomo Barzarini, CEO of PSPC's property. Please go ahead, sir.

Good morning, everybody, and welcome to our Q1 results release. As always, I will give a quick headline rundown on the major items we saw. As you know, Q1 follows pretty quickly the full year release, so there's by habit not much news. But if you start on the left-wing market, we continue to see a very positive sentiment on the prime locations, especially in Buick Engineering, but that's a continuum. Meanwhile, we saw that also on the left-wing side, and we continue to see a bifurcation between prime and non-prime, being on the left-wing side, being on the range side. If you look at the left-wing success, it's just a few highlights. which are probably not material with regard to the rental income, but are quite important with regard to leasing levels or vacancy rates. The one is on the redevelopment of the boulders in Bern, where we have a leasing success at rents at slightly above 400, which are pretty strong rents for Bern. Clearly, it's a very centrally located building. It's a rather small space. But I think we are positive on that side. Secondly, we fully let now Limmatke. If you recall, we had offered to let the spaces slightly below 800. We tried to stick to our target and we now have fully let the building and re-let the last two floors at rent above 800. And finally, non-prime, but working on since about 15 years. We have almost fully left Reinfelden. With the remaining office space, we have just a little bit of retail vacant. I think these are quite nice successes also. As I said, not really material with regard to lower rental income. With that, we are confirming and reiterating our vacancy rate guidance. If you go to the transaction side, the market is intact, although we see limited transaction on the prime side. This is not due to the fact that there are not potential buyers, but there are still very few potential sellers. There has been a transaction on the Covaxie in Geneva, which has been traded. There is an asset, and I will mark the slide one on the video. but there is still only few transactions in that market, predominantly due to the fact that we don't see really sellers on that end. If we go quickly to the results, on the one hand, although we are a bit below the market consensus, we are fully in line with our projections. We have a slight positive impact on the cost side. This is due to an effect on the building at the Rue du Marché, where we got the Ashgier sustainability label. Through that, we don't need to pay the property taxes on that building for the next 20 years. We had a yearly amount on this tax amount, and we were able to release it now in two months for the last five years. This is a one-off effect for the quarter. But the HDR label, which is a sustainability label in Geneva, had a positive impact on that building. The second element is on the valuations. As you know, we have typically no valuation changes in Q1 and Q3, but also this year we had a positive incidence on a building on Barmoss Plots, Risenhouse Plots, where you had to ask the value due to a leasing contract to review the valuation, which triggered an uplift of roughly 13 million on that building, and you saw that on the income line. With that, if you look forward on the valuations, and I anticipate a potential question, if you look at the current transactional market, If we look at the structural vacancies and the market rents, I would expect that there is a slight uplift on the values towards mid-year if there's nothing material which is changing, predominantly due to the fact to market rent levels and structural vacancy rate adjustments. If we go quickly on the major highlights on the projects, the one to highlight is is the project in Wallisveldum, the Rixie Park, we got the official rezoning, although there is still an appeal period going through, so legally it will go through by mid-year, but the local community and the population has a positive vote on the rezoning on all the projects which were planned, of which also ours was part, and secondly, on the Löwenbräu side, we are progressing with building permission and potential operators on the repositioning of the Löwenbräu-Reth building. Here we will disclose more towards mid-year, but we are also pretty positive on that side. If you look a bit on the condenser systems, on the income, this is really what we delivered. you might interpret that the taxes were higher, and in fact, we had to adjust the rate tax for the Geneva properties. The rate tax going forward, the tax rate has changed 14 to 14.7%, and this has an impact on the taxes we had to pay in Geneva, and this probably explains a bit the differences between our net income result and the conventus. With that, I'd like to go straight to the Q&A and open the mic.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You will hear a call to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Anyone who has a question may press star and 1 at this time. The first question comes from Steven Bowman from ABN AMBRO. Please go ahead.

Hi, good morning. Thank you for taking my questions. Quick one. Life-to-life growth in Zurich is slightly negative. Could you please comment on that one?

Can you repeat that? I didn't understand it.

Yeah, sure. So if I look at life-to-life growth in Zurich, it is slightly negative, minus 40 bits. Could you please comment on that?

Yes, if you recall, last year we had a strong contribution on the turnover rent in one building, which is on a repeat. And this is the fact why it went through Zurich.

Okay, yeah. And the second one, since you are adding the engineers had a redevelopment, Could you please comment if there are any other developments also in that area? And what I mean is that the municipality in the past mentioned that they want to revitalize the cartier de banques a bit. So maybe if there's some updates on that.

I would say nothing really material. There was a larger transaction of the BNPT in that area, but that's a few years back, the repositioning. I think the overall revitalization of that area is ongoing. There are also the buildings which were at the time sold by Lombard Odier, which will be reconverted, but I think that adds all to the quality of the Quartier des Vents. So nothing we would be worried about, but rather positive for the overall area and our project. And we have seen that, by the way, also by selecting success to a bank already, on the on the on the river and and also on the lasting success of the review as we have seen so we are rather positive on this side very clear thank you so much the next question is from ken kager from the kb please go ahead good morning everyone i have

Two questions. The first one is regarding the expiries in 2017 and 18. We see there are 16%, which is a rather high number. Could you give us a bit of a color on the potential effects on the vacancy rate there or where you see those renewals? And the second question is on Valley 7. Last time you said once you have the permission, you will give us a bit of a on where this journey is going, which is if you would fail the whole project, what the potential associated profit with such a fail would be, how far you would go in development by yourself, if you would take an asset swap with, for example, Swisslax as an option. That's basically it. Thank you very much.

I think for the second one, you're absolutely right that we don't have the permission yet. I think we have to wait for the previous year. Oh, I think it is here. We will disclose more details in the half year or in Q3. I think it is quite a rather complex project with many involved parties. and one has to really think through before making public statements that what we can reiterate is the overall communality, the mayor, the whole city are in favor of this overall rezoning, which will bring more residential areas to the communality. We are positively impacted, but we are working together with the local authorities to develop an interesting project And how it will then look once we are through, we will obviously, in our responsibility, disclose it. But whatever we say, talk now is premature. So I hope you understand. No, no, but I think this is more than fair. With regard to 26, as you remember, we had an expiry on Rudolf Kasselhoff with the tenants of Big Day. We are working there on the one hand on the relating of the full big deal. We are in discussion with the tenants. Secondly, we are also thinking about the potential reconversion. So I think this is the largest in the next year. And then we have in 27, we have some retail expiries but we are very positive based on the demand we see that we can really relapse or prolong those contracts and there is one or two office tenants which we know that this will come to maturity but I think this 16% is an ordinary process and then we will provide the vacancy rate guide as we get closer to it.

Thank you very much.

Thank you, Ben.

The next question comes from Eleanor Few from Barclays. Please go ahead.

Just one question from me. So your cost of debt has been quite flat for the last three quarters. Maybe just how do you see it developing over the year to come?

Well, we are currently also looking at the market. We could refund at those rates. We could issue a bond today at those rates. So I think I don't see at the moment major increases. If we work on the credit side, we are rather decreasing it even. So I think we would be rather around the 1% plus minus. I don't see at the moment, also based on the refinancing needs, substantial impact to it.

Thanks very much. Thank you.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. The next question comes from Holger Frisch from Zürcher Kanzlerbank. Please go ahead.

Yes, good morning. Two questions from my side. The first one would be on the income taxes. Could you just remind us of the background for the unusually high income taxes being in this period?

Yes, I mentioned at the beginning, but perhaps it was not so clear, we had to adjust the the local tax rate in Geneva from 14 to 14.7% as they're moving up towards targeting the 15% tax rate and this explains the tax adjustment you want.

Okay, thank you. And then on the conversion of the Lovens by REG to a service department, you also have some service departments in Basel and if I'm not wrong, you are not operating them on your own, right?

Absolutely.

And could you remind us of how many of those apartments you have in your portfolio currently?

The only one we have is sizable is really the Hochstraße. That's the only one we have. We had one in Zurich which we swapped in the transaction with Fish Life.

Okay, thank you.

But just to add, I think in general we are not operating any of those activities. We are always looking what is the best user of the building, which medium-long term can provide us with the high rental income and add value to the overall area and to the overall building. And then we go through normal bidding processes once we have identified it.

Once again, to ask a question, please press star and 1 on your telephone. Ladies and gentlemen, that was the last question.

I would now like to turn the conference back over to Dr. Mabazzarini for any closing remarks.

Yes, thank you very much. Before wishing you all a happy week, We have, as most of you know, planned for a property tour Thursday night and Friday morning in Geneva. Thank you for all those attending. If there's anybody who would like to attend, we'll host a dinner in the Quartier du Banque on Thursday night, where we have also guest speakers on the local market, and we will do a property tour visiting all the projects and assets in Geneva Friday morning. So everybody who is not perhaps now already signed up, have been invited. You can do that online or you can write to Vasco or myself.

Thank you very much. Have a good week. Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Colorschool and thank you for participating in the conference.

You may now disconnect your lines. Goodbye.