PSP Swiss Property AG

Ladies and gentlemen, welcome to the PSP Swiss Property Financial Year 2025 results conference call. I am Moira, the course 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 Balzarini, CEO of PSP Swiss Property. Please go ahead, sir.

Thank you, Maria, and good morning to everybody, to our release of the annual results of 2025. As every year, I will have a quick rundown through the major highlights of the year, and then I will open for the Q&A in order to have enough time to address the questions. As stated already at the press release, clearly we are happy and pleased to report an excellent year-end result for 2025, which is predominantly backed by very good business sentiments in our major markets of Zurich and Geneva, which reflects roughly 80% of our portfolio. We have seen major re-lettings within our portfolio, and we are very positive on the letting market in general in those areas, specifically in the city areas. There's a clear bifurcation between city center and surrounding and secondary locations. That's a trend we have seen now since a couple of years. Second point, we are confronted with a huge amount of liquidity which needs to be invested in the real estate, first and foremost residential, but then also prime office, and that has also driven the valuations last year backed by the letting successes. If we go into the headline results, and we start with slide 9, We see that the operating income went up by 9.4%, clearly driven by the new changes in fair value, which you will address separately. The rental income was flat, also driven by the fact that we had disposals last year, which has reduced the top line. On the other hand, we had positive contributions by the finish of the projects in Basel, in Zurich, and acquisition in Geneva. We had one slight gain from a disposal of an investment property in Bern, Gurten, which ends basically the development site we owned in Bern and contributed 7.7 million gain. We have no gains out of disposal from inventories, and we have seen no acquisitions during the year. I will come later to that point. On the expense side, you see an overall reduction of the operating expenses by further 1.2%. The biggest contributor was the property tax refund we had in Geneva last year, which reduced the operating expenses by 12.8%. For the ongoing year, you will see a bit of a rebalancing of that line and back to the roughly 11 million. Beside that, we have and demonstrate continuously high-cost discipline, and we turned in this year with an EBITDA margin slightly above 85%. Financial expenses on slide 11 have leveled out roughly at 35 million. This is the run rate we should see also. on 26, considering today's interest rate environment, and the taxes of 95.5 million were separated, 31 million in current taxes, and 65 million deferred taxes, where of 50 were linked to the valuation gains. With that, the board proposes, again, an increase in the dividend of 5 cents, 395, you see that on slide 12. which results in a payout ratio of 80%. If you go into the portfolio on slides 15 and 16, you see that the vacancy rate came in as expected to 3.5%. We had a higher vacancy report in Q3. If you remember that, I think this can always happen depending on the expiry profile, but we were pretty convinced that we get to this 3.5%. If you look on the details, slide 16, we see letting successes in beans, the Grubenstrasse, which with the current lettings, is led by almost 80 percent, and we are confident that we will leave out the remaining spaces over the next couple of months. And the second big letting success is where we are today at the letting of almost 85 percent that have advanced negotiations of the remaining small retail space and one office floor. On the lease expiries on slide 17, the major highlight is that for this year, we are almost done. We are left with 16% of lease expiries. That helped us to give also guidance of 3.5% vacancy rate for 26, and the major highlight for 27, Always the big question on the release renewal on Google. Google made a public statement beginning of the year that they will concentrate on two sites in Zurich. One is the Europale, and secondly is the Hügelmann site. And in this end, we are now in the paperwork. And finally, the lease expiry is still within the numbers of 2017. If you go to the valuation gains and overall portfolio appreciation, 425 was roughly 2.9% if we include investments. The valuation gains per se was 231 million. The one part, 13.7, was in Q1. We added the value of another 97 in the half year. And for the fourth quarter, another $118.5 million. Besides the compression overall of two basis points, one of the key drivers on the Q4 valuation gain was the letting of two high street retail contracts at the rent of above 25% plus to the in-place rent. and this triggered a revelation gain in Q4. It didn't make up the full amount, but clearly it was a significant contributor, and that is observed over the last two, three years. The high-speed retail, especially in Zurich, at the right location, is sought after, and there is quite a lineup of tenants looking for those spaces. If you go into the capital structure, I will not go into the detail of the green finance policy authorities at our hearts. All the funds coming from the bonds, coming from the credits, and coming from the private placement are linked to our ambition to reduce emissions. Overall, on the debt, we have still roughly one billion of committed unused credit lines. But this is on slide 23. For us, the highlight is really that the loan-to-value came further down to 33.1% today, clearly backed by, on the one hand, the valuation gains into portfolio predominantly. Today, we fund at roughly 80, 90 basis points. We're on a four, five year, so I think the funding environment for us continues to be very interesting. Some highlights on the development. If you look on 25, we are finishing . We are there with a level of 50%. We have leased out the retail space. Roughly six of these leases all at rent between 450 and 490 Swiss francs. And we have a reasonable good leasing level that we expect that we could lease off the whole building within the next six to 12 months. The overall carte de banque develops very well. If you look at the detail, for instance, on the number five, the carte de bise, is almost fully let. We are left with one floor. As you know, we have let also the private bank on slide 27, the full building of Banque Henriette. And on slide 28, we have received the building permission for Jean Petito 15, and they are in negotiation with the bank. On 12, we are still waiting the building permissions. I will address the at the end. On slide 29, I would like to first highlight the progress of . Slide 30, we got the building permission. We have identified an operator. We are signing contracts with that operator, and we are positive that we will soon be able to open a hotel in by end 28. To further project in Bern, Eigerstrasse slide 31. Here we are planning service departments. We are in the phase of submitting the building permissions. in Geneva, we will start this year in summer the reconversion in the hotel where we have fully signed lease agreement. And on slide 33 and 34, we are starting the works in Marktplatz in Baden, a very central building location. The rendering is not really providing the full beauty of that building, but it's on the central marketplace of Baden. And Lillebachstraße is a very small project, but it's on the Stadthofen, where you will hear more over the next couple of years on what we plan to do on that site. A quick update and I think this will be then also part of the Q&A. We are in final negotiations on two transactions which would include the disposal of the RISD part and the acquisition of a very central located asset. We have signed head and terms and are in a final due diligence with the two parties So this is something, if everything goes well, should be expected within the next six months. However, this is quite a complex transaction, so we will have to continue to work on it. This leads me to the end and to the guidance for 26. We guide for an increased EBITDA of $310 million for 2026. and a guidance on the vacancy rate of roughly 3.5%. That would end my outlines, and I would like to hand over for the questions.

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 tone to confirm that you have entered a 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 one at this time. The first question comes from the line of Stephen Boumans from ABN AMBRO of the OBHS. Please go ahead.