PSP Swiss Property AG

Ladies and gentlemen, welcome to the PSP Swift Property half-year 2025 results conference call. I am Mathilde, the call-call operator. I would like to remind you that all participants will be in lesson-only mode and the conference is being recorded. The presentation will be followed by 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 Balzarini, CEO of CSP Swiss Properties. Please go ahead, sir.

Thank you, Mathilde. Good morning, everybody, and thanks for dialing in. As usual, with the half-year results and the quarter results, I will do a rather quick introduction, then go directly into the Q&A. As we reported this morning, we are satisfied with the very solid operating results. We have seen it's a bit lower in the previous year's comparison, but as mentioned, this is due to a specific one of the effects we had in the first half of 2024. We have seen a valuation gain of about 100 million, which is predominantly driven by the Zurich CBD portfolio, and thanks to the continuous cost discipline, we operate at an EBITDA margin of above 85%. We are on track with the various development sites, also here and there might take a bit longer, but we can go through that in the Q&A, but generally we are pretty satisfied with the development and the demand. And on the prediction side, we have nothing we acquired or disposed, but clearly we are looking at the transactions in the market, but as for now, we have not seen anything which would suit our portfolio. The successful news came out from Valizelen, that we got the permission and the new rezoning code, so we are working there on the next strategic steps, and we have the reclassification of the full site. And on the funding side, we were able to launch the first three-strand floating rate note, a couple of weeks back, which we reported as a subsequent event, and we were able to secure extremely interesting margin conditions, clearly on a rather shorter issue, but which allows us to keep the average cost of debt around the 1%. With that, we can confirm our guidances for the year-end. as we did in the press release this morning. And as I mentioned, I prefer rather going directly into the Q&A and go to your questions. Thank you.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have answered the queue. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star L1 at this time. The first question comes from the line of Matthias Lindauer from Fontode. Please go ahead.

Yes, good morning, everyone. Thank you for taking my questions. I have two questions. First, how is the progress on renewing rental agreements which are starting in 2026? And the second one is from Löwenbräu. Are you already in advanced talks with an operator for the service department? Thank you.

Thank you, Matteo. On the 2026 renewals, clearly we are working on those. Also, typically, with the majority of those, you start six to nine months before. We have one larger maturity, which comes up in Geneva. So it is at Casillas, at the end of the Q1, where we have the tenant moving out. We were very close in signing the lease agreement, which didn't mature then or materialize a few days back. So here this is the biggest one which will mature, which makes approximately 1% of the rent roll. But we are very positive that we can tackle it. And the others, I think that's the usual ongoing business we have. With regard to the Löwenbräu, I think there are two paths. We are on the provision models and clearly we talk with construction operators. I think that's on the way as well.

Thank you very much.

The next question comes from the line of Mark Forster from Finans und Wirtschaft. Please go ahead.

Hello, good morning.

Can you hear me?

Absolutely.

Oh, good. Thank you very much for answering questions. You said that demand was selective and increasingly tri-sensitive, even in essential locations. So what does this imply for PSB? Because your portfolio profited from substantial re-evaluation gains coming from very central locations. So is the price sensitive behavior of talent more an issue for the market in general or does the PSP feel some implications too?

I think generally, if you look at the market you mentioned, we are lacking well and we are especially in the office reaching our rental expectations and selectively also exceeding. Also, the highest retail, we are reaching our rental expectation and we see a solid demand. It's clearly, you see a bifurcation between CBD and non-CBDs, and then as you get closer, if you take specifically future classes, perhaps there we have to adjust a bit our rental expectation because it's not super, super prime. But generally... we see that we can translate our rent expectations. That materialized also in the valuation updates of the first half of the year.

Thank you very much.

We now have a question from the line of Stephen Boomer from Otto GHS. Please go ahead.

Hi, good morning. Thanks for taking my questions. I have two sets of questions. The first one relating to the pre-levelings in Geneva's Quartier de Banc. What is your opinion on the strength of the Geneva leasing market compared to one year ago? And second, maybe provide some comment on the discussions that you have today, including on where rental levels are likely to fall and expected occupancy for the moment of delivery. That's the first one.

I would say on the Geneva CBD, the fact that we were able to buy the headquarter last year and have a hospitality concept is very positive. We have also had an immediate relating of a full building. We are going into a multi-tenant strategy and we are in negotiation and we have rental contracts out there. I think the positive, we will deliver a complete new product to the fact what we have beforehand. And we see a solid demand on all those. On one of the 32 buildings, we have to go first to the building permission. Sometimes those take a bit longer and then also the letting starts obviously a bit later. But compared to one year ago, I would say we didn't have this product. So I would say the demand is stronger and we are talking to tenants we wouldn't have talked a year ago because there was a completely different product. So we are positive on the quartier de banque, but never mind, you have to first develop those products, you have to go to the building permit, you have to build them, but you will deliver very nice offices, and also reasonable sizes, which are not really super large floor plates. So I think we will absorb, or the market will absorb these products.

Okay, and you expect them to be almost fully free now?

I would say that we have a very high latency to this.

Okay, yeah. Second question. What is the expected timing of the RISTI Park residential disposals? And secondly, do you see more residential redevelopment potential in your portfolio?

Yes, thank you. Well, on the RISTI Park, we just came out of the rezoning. So I think now that our priorities on the one hand really work on the project of having and being able to deliver a project which includes all the requirements. On parallel, we have been approached on potential asset swaps which we are going through. I think that's a parallel move we have, and that was also the reason why we had to reclassify it for sales. I would say here it's a bit premature to talk about timing. because you can imagine it's a large project which involves also various tenants, but clearly it's on the highest priority of us. And clearly we are very positive to be able now to deliver a nice product for the region, if at the end it's we that deliver it to somebody else, I think that's something we will have to, we will go through in the next couple of quarters.

Okay, clear. And the second one, do you expect some other residential redevelopment potential in Portfolio?

Well, if you look historically, we have always the approach of the highest and best use. So we have two assets which we are working on, which is the Seelamstraße and the Führerstraße. We appear to glance into the Portfolio also when we see that perhaps an office building is rather up for a residency. But this will not be the substantial driver of our strategy. It is a continuous asset management approach throughout the organization. And for sure, there will be some redevelopment in the RSI. But as I said, it will not be the dominant part.

So we're clear. Thank you so much. Thank you.

The next question comes from the line of Ken Kegerea from Züricher Kantonalbank. Please go ahead.

Yes, good morning, everyone. Thank you for taking my question. The first one is on the vacancy rate. Could you just give us some granularity, how you want to get that down from the current 4% to the intended 3.5% by year-end?

This will go through a letting of the retail surfaces on the Führungsstrasse by year-end through a temporary letting of that phase and the parallel letting activity for the long term. This will be the main driver of the reduction.

What is the average rent percentage for temporary letting, please?

This is, I would say, it's not a substantial driver. The important is that we want to show cases. Clearly, we are working on a fixed rent for a first part of the surface, but we are foreseeing to have a full leasing of the overall surface if you are not able to have a leasing agreement by the year end.

Thank you, then. I've seen that the average duration of your debt has come down over time. What is your strategic plan for the average duration? Currently it's 3.6 years, if I see that correctly. Where would you want to see that in the mid-term?

Yes, that's correct. If you look, very historically, we were even shorter. We were even at three or below. Then with the negative rates, we tried to go as long as possible. I think the way we see it, first of all, we have basically full inflation hedge on the top line. So we have the ability to go a bit shorter. Plus, we have a relatively low loan-to-value ratio. So I would say whatever is around three and a half, four and a half is an area where we feel comfortable and within that area we try to act opportunistically on diversification of funding sources and to having attractive spreads.

Excellent. Zurich, as I understand it, you have had very significant uplifting variations there. What do you expect in terms of the UBS properties coming to the market in the prime office space and in terms of the impact on the market in terms of ranks and absorption of vacant buildings?

Do you talk about disposals or about lettings?

No lettings.

I think that the thing we see is that perhaps in 26, 27, there will be some office space coming to the market, but the way we see it and the strength of the market, this will be absorbed. It could lead to temporary vacancies in buildings. But I think it's not a huge amount of surveys which comes. The demand in the CBD for modern offices is solid. That's what we observe in our buildings. So I think that's not in our really substantial influence.

And retail on the Paradeplatz? What's your view on that?

I had to give an interview yesterday. The different buildings, you're close to a dead zone. If you want to get there by foot, So I think it's very difficult to see what concept comes. We heard that there's retail coming, but we have also heard that it's not so clear what kind of retail. I think the demand for retail generally on Bahnhofstraße is very high. But I think also that the further away corner of the Bahnhof, of the Paradeplatz, is not so attractive. like just from the pure accessibility. But the underlying demand what we see from tenants is quite strong.

Maybe last one from my side. We have seen that Mobimo has done an M&A deal and obviously we always ask you what are you seeing in the market? Do you see some consolidation activity where you could take part of and if so, how would you finance that?

With all respect, I think it was a small M&A deal. can call it M&A deal we look at the market we look at transactions but we are as always we are very sensitive to try to do aggressive transactions in the long term we are very diligent on capital allocation and we don't see really a lot of assets which would view as our portfolio so the funding then if we find something really of interest I think the funding is least of the issues.

Okay, thank you very much.

Thank you, Ken.

We now have a question from the line of Silas Venci from Kempen. Please go ahead.

Good morning, Giacomo. Thank you for taking my questions. First one, coming back to your comments on demand being more selective and price sensitive. I understand that there is bifurcation and you own more prime properties, but does this make you more cautious on future lettings? Or are you going to continue to chase higher rents?

I think this is a very general question. I think it's asked by us specifically. I think we have buildings where we know that we can increase the rents. Generally, we have seen and said in the past that you can increase rents in line with the quality of the product you're delivering. So clearly the ambition is to increase the rental income and to increase the life for life. Also, you know, if you have 150, 160 assets, there's always one asset which expires and you need to do some work and then you have a longer absorption time. But what I say and see with our position of the assets we have alternative tenants, And you can report that it's an increased rate, yes. But it's very, very active as a species.

Okay, clear. And then on guidance, I would say you typically have the tendency of upgrading guidance in H1. Historically, you've been a bit more conservative at the start of the year. This time, you've only confirmed guidance. So how should I read this?

I would read it the way we communicate it. We never issue the guidance in the beginning of the year with the aim to upgrade the meetings. We issue the guidance we think we can get by the year end. If we issue guidance with a fixed number, it's because we have a conviction that we get to those fixed numbers. If you guys that we can get a higher, we issue higher. Here we said clearly around 300, not with an ambition to be stuck. So clearly we try to beat it, but it's not something we hold on the back end. So I would read it that this is the guidance we give for the full year.

Okay, thanks. So maybe just one last one. Of course, looking at valuations, it does screen that valuations have clearly bottomed out. If we look beyond the very prime segment, there seem to be interesting deals at very attractive yields. Wouldn't it be a perfect moment to be more on the acquisition side?

We look at the variety of the acquisitions, and if we think that something is for us long-term, at least this. not only from an ETF point of view, but also from an NID point of view, we clearly look at it and we try to buy it. Just the fact that a yield is higher in a less prime location doesn't intrigue us to say now we have to go and buy it. Also here we look at all the transactions and we take the decisions asset by asset. And we don't feel under pressure that we need to buy. If you look historically, we grew top line by almost 70 million in the last six years. So we find opportunities.

We don't cherish opportunities.

Okay. Thank you very much. That's all for my time. Thank you.

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

Thanks very much for Q&A.

Just one, so not especially for the acquisitions, but maybe thinking about disposals, do you think you could be moving towards a seller at the second half of the year, given the transaction market moving in the right direction?

I wouldn't say on the large scale. We have something minor, which we are working on a disposal, but this is more of a cleanup We are pretty happy with the portfolio we have. We did, I wouldn't say a larger, but we did some disposals last year in the portfolio which were part, so I wouldn't expect now large disposals the second half.

Thank you.

Thank you.

We now have a question from the line of Andreas from Bader Hellyer. Please go ahead.

Yeah, good morning. My first question is on taxes, more specifically deferred taxes. Could you elaborate a bit on the moving parts here? Because I think that's probably the key reason why you have missed the expectations on the adjusted net profit. I'm specifically thinking about the minus 6.3 million impact from, say, changes in tax rates. And maybe you could also elaborate on the effects, you know, that long term revaluation effects had that you had in previous periods, what the effect here was in the first half, just to better understand what the goal normality felt like. And then I have the second question. Basically, same questions we already heard two times, but I'm going to ask it a bit different. I mean, your competitors all seem to fully use their balance sheets and put it at work. We're also increasing LGVs. with acquisitions and projects and you stick to your conservative approach of low LTV and not humping for acquisitions. Why do you think investors are better off with your conservative strategy in the current low rate interest environment? Thank you very much.

Thank you, Andreas. I think on the deferred tax rate, I thought we have disclosed it, but we had a tax rate increase in the Canton of Geneva which have an impact on preferred taxes. So this is an alignment of the local taxes which goes on on the on the acquisition front. I think here, and we try to evidence that over the last year, it's clearly that the acquisitions with those funding levels are accretive. And We are generally positive on Switzerland and we are generally positive on the office market and we are generally positive on our locations. However, we come out of a super cycle and rates are low. So the sensitivities are very high and I think therefore we are a bit more selective with our in-place portfolio and with development pipeline. Although it doesn't seem large, but we have other developments in the portfolio which will come through the next 12-18 months, we feel that it's more opportune to wait for the opportunities when they strike. Like we bought the Hotel de Banque during COVID. We bought the West Heights when not many were able to buy it. We try to buy something a bit off the mark and then come in with a new concept. So, we will see and get opportunities, but we need to get the additional extra in our area. And therefore, we feel also pretty comfortable with a reasonable low loan-to-value. I think this is, for us, the cradle. And that was also, by the way, the message into the organization today. We need to be able to work through cycles. We are not aware if they come and when they come. And if we do an acquisition, we need to be convinced that this creates additional value, maybe long-term. And this is in our locations. And so we don't want to dilute those locations by buying something which is a bit east or west. And I think that's a bit our philosophy, but that's also the way we are incentivized. We are incentivized for the long-term development. And I think every shareholder and investor has to figure out which case he wants to play. But we shouldn't forget it's still a secretive business. And sensitivities are high. But that's not a message of cautious. I think it's a message we give things decades and we grew. And I think we were the ones which grew most over the last year with single acquisitions. But we are not promising it.

Thank you. Thank you.

The next question comes from the line of Shital Jalmalani from Deutsche Bank. Please go ahead.

Hi, I just have a quick one on rental growth. Where do you see the like for like rental growth at the year end of 2025 and where do you stand in terms of ERV and how do you see it across your recent markets?

Yes, if I understood your question on the like for like, You see that the like-for-like clearly came down compared to the last year, but last year we had a much higher indexation, plus we had a substantial turnover component which didn't materialize in this amount in 25, so from the 1.2 percentage points. Roughly 1% was like-for-like flows through the indexation. Through the different markets, we will be able now to continue to go at a larger range on super prime retail, but those occur when we have maturities. We can increase the range in prime office when we renovate the buildings and bring up new products, and I think for the majority of the others, it's clearly a stable development within the stations. I think that should be the message across the markets.

Okay, got it.

We have a follow-up question from the line of Matteo Lindauer from Funtube. Please go ahead.

Yes, I have one more question regarding all the operating income. For example, in 2024, we have seen it at 11.6 million. In 2023, 7 million. Now we're standing after the whole year at around 1 million. What can we expect going forward from auto operating income or what's your expectation?

If you take in the capitalized loan services and the auto income with regard to the VAT refunding, I think you could figure out another 2 million by the year end.

Okay, and going forward in 2026, 2027?

I think on the overall operating income of 300 million for the half year, betting a 1 percentage point in 2037. No, I think it will be this 9 million.

Okay, perfect. Thank you.

Thank you. Thank you.

The next question comes from the line of Alexander Tomanos from Green Street. Please go ahead.

Good morning, I take my questions, two questions for me. How are the discussions going on Delta Post in Iran, given the project was reached in less than six months?

The discussions on Delta Post are going, I have to admit, positive. We have an advanced discussion on the retail part. We have an increased interest on the retail part, and I hope that we can soon report a success on that. Also, there are alternatives. And we have basically on every floor ongoing discussions and negotiations. It's clear that I think that the building is a superb building when it finishes delivered. It's for the sub-market large surfaces. It's a large product. And it will take a bit of time to be absorbed. And it's a bit, I would say, on the price range. It respects the quality of the product. But we have signed leases. We are in discussions. I think the sentiment and the responses are picking up. But it's at the end, you know, you have the delivery. Then you have to negotiate. And it takes time, really. a thousand percent, but we are positive on San François. It's a very nice product at the end.

Thank you. And second question, and I think that's something that's hard to do as well. Swiss Fineside announced the purchase of a new build-up in the West last week. You mentioned you have a conservative long-term view in terms of acquisitions. Were you in the bidding tent for the West?

It's a General assets we were aware of at the very beginning and we didn't follow up.

Thank you very much.

Thank you.

As a reminder, if you wish to register for questions, please press star N1 on your telephone. We now have a question from the line of Kai Klose from Berenberg. Please go ahead.

Yes, good morning. Just one question regarding the general and external expenses. There was a bit of a stronger rise in the first half of the year by 6%. Was there anything specific in the first half, kind of a one-off, and such a given indication for the year?

Well, the general lightning cost, yes, they increased by 6%, but we are talking about 200,000. So we had a bit more IT costs and project costs, I would say for the overall of the year, I think this is in line with the last years. As I said, the overall operating expenses are very stable. They might vary depending on delivery of certain projects here and there, but this is all very, very much under control.

Got it.

Many thanks.

Thank you. Once again, to ask a question, please press star N1 on your telephone. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Giacomo Balzarini for any closing remarks.

Yes, thank you from our side for your interest, for the questions. I'm sure we will keep in touch and I wish you all a successful day. Thank you. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coral School and thank you for participating in the conference. You may now disconnect your lines. Good-bye.