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PSP Swiss Property AG / Key word(s): Quarter Results
Quarterly results as per 31 March 2022 (3 months)
PSP Swiss Property has achieved a very good operational result. With its high-quality portfolio and its strong capital structure, PSP Swiss Property considers itself well positioned.
Real estate portfolio
At the end of March 2022, the value of the portfolio was CHF 9.193 billion (end of 2021: CHF 9.127 billion), the vacancy rate was 3.5% (end of 2021: 3.8%).
Through selective transactions, we have further optimised our Zurich and Geneva portfolios in particular and thus improved the quality of earnings.
With effect from 17 February 2022, we entered an asset swap with Swiss Life AG and the Anlagestiftung Swiss Life. We acquired two commercial properties in Zurich, at Lintheschergasse 10 and Mühlebachstrasse 2 / Falkenstrasse 30, for a total of CHF 67.6 million. In return, we sold three properties (Rue du Pont 22 in Lausanne, Lintheschergasse 23 and Löwenstrasse 16 in Zurich) for a total of CHF 59.4 million.
Furthermore, at the end of February 2022, with retroactive effect from 1 January 2022, we acquired the prime commercial property located at Place de la Synagogue 3-5 / Rue Jean-Petitot 4-6 in Geneva for CHF 64.0 million. This prestigious property has around 2 700 m2 of usable space, which is mainly used for offices. The property is fully let in the medium to long term, with the main tenant being the IWG-brand 'Signature', a coworking operator.
As of 30 March 2022, we sold the peripherally located development project 'Grand-Pré' in Geneva for CHF 60.5 million. In addition, we sold further condominium units of the residential development 'Residenza Parco Lago' in Paradiso (Lugano).
At the end of March 2022, the vacancy rate stood at 3.5% (end of 2021: 3.8%). 0.6 percentage points of the vacancy is due to ongoing renovations. Of the lease contracts maturing in 2022 (CHF 54.8 million), 80% had been renewed by the end of March 2022. The wault (weighted average unexpired lease term) of the total portfolio was 3.9 years. The wault of the ten largest tenants, contributing around 30% of the rental income, was 4.6 years.
Real estate market
Overall, the office letting market has improved in recent months. Demand for attractive office space is good in central locations in our main markets of Zurich and Geneva. The Basel letting market also eased respectively improved in the reporting period. The letting market for older office properties in B and C locations as well as non-food retail space, which was already difficult before the outbreak of the corona crisis, remained challenging.
The transaction market for properties in good inner-city locations has returned to pre-corona levels for some time now. Investment demand for such properties with high cash flow visibility remains high. As a result, yields are low. A slowdown of the market is not evident at the moment.
Quarterly results Q1 2022 (3 months)
In the reporting period, we achieved a net income excluding gains/losses on real estate investments of CHF 69.7 million. This represents an increase of CHF 7.8 million or 12.7% compared to Q1 2021 (CHF 61.8 million). The increase was mainly due to higher rental income (+ CHF 1.7 million), higher income from the sale of project developments and condominiums (+ CHF 5.2 million), and more capitalised own services (+ CHF 1.3 million). With regard to rental income, it must be taken into account that in Q1 2022 practically no more corona-related rent reliefs have accrued (Q1 2021: CHF 1.6 million). On the cost side, operating expenses increased slightly by 0.9 million and financing expenses remained relatively stable at CHF 3.0 million (Q1 2021: CHF 2.9 million). Earnings per share excluding gains/losses on real estate investments, which is the basis for the dividend distribution, amounted to CHF 1.52 (Q1 2021: CHF 1.35).
Net income reached CHF 78.0 million (Q1 2021: CHF 88.8 million). The decrease in net income by CHF 10.8 million or 12.2% compared to the previous year's figure is explained by the portfolio appreciation of CHF 11.9 million, which was lower compared to the previous year's period (Q1 2021: CHF 33.2 million). Earnings per share amounted to CHF 1.70 (Q1 2021: CHF 1.94).
At the end of March 2022, net asset value (NAV) per share was CHF 107.62 (end of 2021: CHF 109.42). NAV before deducting deferred taxes amounted to CHF 129.98 (end of 2021: CHF 131.84). It should be noted that the shareholders' dividend entitlement for the 2021 business year takes place on the date of the Annual General Meeting (a dividend distribution of CHF 3.75 per share was resolved on 31 March 2022). Consequently, CHF 3.75 per share were already deducted in equity respectively in equity per share and NAV before deducting deferred taxes as at 31 March 2022 and recognised as a liability. The dividend payment was made on 6 April 2022.
Strong capital structure
With total equity of CHF 4.936 billion at the end of March 2022 - corresponding to an equity ratio of 53.4% (end of 2021: CHF 5.019 billion or 54.7%) - the equity base remains strong. Interest-bearing debt amounted to CHF 3.003 billion or 32.5% of total assets (end of 2021: CHF 3.013 billion or 32.8%). The average cost of debt was low at 0.38% (end of 2021: 0.40 %). The average fixed-interest period was 4.9 years (end of 2021: 5.1 years). Currently, unused credit lines amount to CHF 780 million (thereof CHF 580 million committed).
PSP Swiss Property has an Issuer Rating A3 and a Senior Unsecured Rating A3 (outlook stable) from Moody's.
The Board of Directors as of its meeting of 2 May 2022 is constituted as follows: The Compensation Committee was completed with the Board members Henrik Saxborn and Corinne Denzler. It now consists - like new the Nomination Committee - of Henrik Saxborn (Chair), Corinne Denzler and Adrian Dudle. The Audit Committee consists new of Adrian Dudle (Chair), Mark Abramson and Aviram Wertheim. Henrik Saxborn was elected Vice Chairman of the Board of Directors.
GDP growth of around 2% is forecasted for the Swiss economy in 2022. Ultimately, the real estate sector should also benefit from this. Nevertheless, a precise outlook for the commercial real estate market is difficult. We expect demand for modern office space in A-locations to hold up in the coming months. The letting market for older office properties in B- and C-locations as well as for non-food retail space is expected to remain difficult.
Our focus remains unchanged: we modernise selected properties, work on our development projects and concentrate on our letting activities. We will only consider acquisitions if they allow for added value in the long term and continue to selectively dispose non-strategic assets. In financing, we will continue to pursue our proven conservative approach.
For the 2022 business year, we now expect an ebitda excluding gains/losses on real estate investments of above CHF 285 million (previously: CHF 285 million; 2021: CHF 278.8 million). With regard to the vacancies, we continue to expect a rate of below 4% at year-end 2022 (end of 2021: 3.8%).
1 Change to Q1 2021 or carrying value as of 31 December 2021 as applicable.
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PSP Swiss Property - leading Swiss real estate company
PSP Swiss Property has been listed on the SIX Swiss Exchange since March 2020 (symbol: PSPN, security number: 1829415, ISIN CH0018294154).
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PSP Swiss Property AG
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