Ladies and gentlemen, welcome to the PSP Swiss Property Q1, Q3 results conference call. I am Sandra, the conference 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 one on your telephone. For operator assistance, please press star and zero. 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.
Good morning, everybody, welcome to this conference call. As always, I will make a very quick introduction and comment on the Q3 results, then followed by Q&A. As a reminder for those which have not yet registered, at around 10:00, 10 to 10:00, we will have our first Sustainability Capital Markets Day, also displayed through a webcast. With regard to the results, we are pleased to report, I would say, very solid operating results for the first 9 months of 2022. On the back of a healthy underlying operating market, predominantly in Zurich and Geneva, also quite solid what we currently see in Basel. We report a vacancy rate of 3.1% and have a very good visibility that we will be below 3.5% by the year-end, and therefore upgrade our expected vacancy rate guidance for the year-end.
We report a very solid balance sheet of an LTV of 33%, and clearly, we still very low passing average cost of debt, which obviously, and we will come into that clearly during the Q&A, will increase over the next couple of years if interest rates stay at the levels they are. We also report today the launch of a new green bond framework, which allows us to reclassify all of our outstanding bonds of the amount of CHF 1.8 billion into green bonds. With that, we expect that any future bond we will issue will most likely be a green bond. The underlying market, as I said, is in the markets we are present, in the CBDs of Zurich and Geneva, very healthy.
That allows us to provide a rental growth of 2.3%, clearly also benefiting from backlogs of the COVID factors of last year and from results of development pipeline. We have a very high-cost discipline translating in an EBIT margin of above 80%, which is our target. With that, basically, we have already earned our full-year dividends in the first 9 months. We continue to focus on our development projects, are preparing also for the next phase for the next 2, 3 years with a high visibility on the lettings. We go very positive into the year-end of 2022 and very positive into 2023. This is really in a nutshell the highlights, I would like to hand over to you for the Q&A.
We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on the touchtone 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 two. Participants are requested to use only handsets while asking a question. Anyone with a question may press star and one at this time. The first question comes from Ken Kagerer from KBW. Please go ahead.
Yes, good morning, everyone. I have a question with regards to the expiry profile of leases on slide 16. In 2023, you have 14%, in 2024, you have 12%. Could you highlight a bit where that journey on vacancies might be going there? I'm sure you had various discussions already. The second question is with regards to the green bond framework. We were a bit surprised that it is, I don't want to say so easy, but it is possible to generate green bonds retrospectively because that's something relatively new. Could you just highlight a bit how you were doing that and how the credibility of that would be? Thank you very much.
Thank you, Ken. With regard to the expiry profile of 2023 and 2024, as highlighted by you in the respective slide, I think it's worth keeping in mind that the expiries are a bit lower than in the past, and typically we are confronted with expiries of 17%, 18%. If we look into the next year, we have three largest expiries, which we already know that we will not renew them. It's a Globus on Bellevue, it's Hochstrasse, it's Saint-François, where we are vacating the buildings, reposition them, but with a very high, if not fully let status. The remaining expiries for next year are in a magnitude of two, three, CHF 400,000 per year as on a let base. I would say quite diversified, no big peaks. If we go into 2024, also there, the visibility we have from the larger ones is quite positive.
We have no big peaks where you say, "Okay, this is a major event which worries us." I think overall, with regard to rental income development, we are positive. How this translates then in our vacancy rate guidance, I think here we need another few months, and we will report back then with the full year results. For a rental income perspective and development, we are positive that we can continue to deliver growth on this side. With regard to the green bond framework, I wouldn't call this easy. It was, I would say, a very complex and cumbersome process. The first one, obviously, in Switzerland, but we were aligning our views on the green bond framework of Gecina, one of the largest European office REITs listed in Paris, which did the same a bit more than a year ago.
I think maybe it comes as a surprise for the market. For us, it's just a translation of what we are doing since inception of the company. We do green investments. We defined the green bond framework with a reference portfolio, which reflects solid, ambitious emission targets, but which is backed with good and solid emission numbers. We have linked it with certificates in the form of ratings, on quality ratings of the single buildings. With that, we got not only one second party opinion, but also two. I think this is a very solid set of framework, which reflects our attitude to be as green as possible as a company. Underlying and undermining the various investments we did over the last 15 years. I think this is clear.
It's a bit a surprise for the Swiss market, but as I said, from a structural point of view, this was already once put in place in Europe. We are very positive on these achievements, but it was, I would say, a very detailed and complex process.
Excellent. If I may, I would like to add one more. Could you just give us a quick update on where you stand in Wallisellen? What your plans are? I think there could be some residential tower, or a big potential tenant might be there. Could you just say where you're standing there? Thank you.
Yes. Thank you. Okay. I think Wallisellen has a variety of option of development. We are on the letting process. Although one has to say here, it's a quite demanding environment, so it's not easy to let large surfaces. The competition is quite high with availability. Secondly, we are working together with the local authorities on potential rezonings. As I said last time, there are no quick wins. It's quite a lengthy process. We are working together with architects on potential renderings. I would say, as I mentioned already mid-year, this is something we hopefully can provide an update towards the third and fourth quarter of next year. Clearly, we're working on all fronts. I think materially, I see more upside than downside in Wallisellen, how we are positioned. Clearly, it's a sub-portfolio of 5 assets.
Whenever you have expiries, tenants are more confronted with some flex-based consideration, with a demand consideration. Overall, I see almost negligible impact on our bottom line, and midterm, rather a positive potential impact than a negative one. Is that okay, Ken?
As a reminder, if you wish to register for a question, please press star and one. Star followed by one. The next question comes from Pascal Furger, from Vontobel. Please go ahead.
Good morning. My question is regarding your rental income. We observe here a slowdown in the third quarter, despite actually the fact that new projects such as Gartenstrasse flat s in Zurich came into the portfolio. Can you just explain a bit about this and what you expect for the fourth quarter? Related to this is the like-for-like growth, which was quite strong with 0.9%. Does it already include some of the indexed contracts, which are linked to inflation? These are my two questions. Thank you.
Pascal, unfortunately, I had very hard time to hear you. I think the first question was linked towards a slight decrease on the rental income on Q3. I think here, keep in mind that this year we sold more rental income that we bought. At the edge, this might have had a contribution on the Q3. On the like-for-like rental growth, as we disclosed, one part is driven by the COVID impact. There is a marginal contribution from indexation of last year. It was about 0.25 percentage points. The larger indexation contribution will come in 2023. Our estimates currently are around 2.5%, but we have to wait for the November CPI and then take this into account. As disclosed, we have the like-for-like contribution ex-COVID, which was 0.5 thereof, roughly the half is indexation from last year.
The next question comes from Holger Frisch from Zürcher Kantonalbank. Please go ahead.
Yes. Good morning. Thank you for taking my questions. I have a couple of questions regarding your financing structure. Your average fixed interest period went down to 4.3 years now, which is the lowest number in roughly four years. Could you maybe elaborate on the positive impact of the cost of capital that you expect from the switch to the green bond financing structure compared to the current approach? Third one would be on the financial liabilities with a maturity of less than 12 months increased to roughly CHF 540 million now. What is your preferred refinancing option for the maturing debt? Will it be private placements, green bonds, or would you even consider mortgages at this point of time? Thank you.
Thank you. On the first one, as a reminder, if you go a bit back in history, and I'm not saying that we go down that route, but historically, we tended to have a duration of more two and a half to three years. We increased our duration over the last years, as much as we could, considering also the availability on the bond market. I would say, depending on our view on interest rates, on the lengths, we see they could stay at a certain level. We might also go a bit shorter on the duration. I wouldn't say not too much, but I think overall, with our loan to value, with our quality portfolio and respective quality of earnings, it's all about affordability. I think here I'm comfortable with 4.3, but we might also be comfortable with a lower number.
Here, I think we are very closely monitoring the market. Our next really refinancing need is September next year, which clearly, obviously, as you mentioned, sums up to this CHF 500 million in one year. We will see how the market looks. We have available credit lines. With the green bonds framework, we obviously enlarged our funding capabilities in the capital market, I think with a very solid green bond framework. The private placements, I wouldn't expect that this makes up the large part of it. I think this is for us always an add-on. There's a diversifier, but I wouldn't say that's a large part. Besides that, I think we will not use, most likely, different instruments. We are pretty solid on our bond market, on our credit market, and selectively, as I said, on the private placement.
With regard to the cost of capital, on the same question a few years back, in a more normalized negative interest rate environment, we have observed limited pricing power due to green bonds, perhaps because we were already very tight in pricing. I think with this new framework, there will be, I would say, pricing consideration. How much this is, we will see. I think this is something we didn't do it for the pricing; we didn't do it exclusively for the funding. I think it was a natural development of the companies go through that route as we were able now to demonstrate that we achieved certain results on the emission side per building.
Clearly, we will take the benefits of the cost of capital, we'll take the benefits of the funding resources, but this is something which is a bit more speculative now, and I think it wouldn't be serious to give up a number now.
Once again, to ask a question, please press star and one. Mr. Balzarini, so far there are no more questions.
I would like to thank everybody. I look forward to hear and see the one or the other in roughly an hour and a half. If you have any follow-up question, please do not hesitate to contact us. I wish you a great day. Thank you. Bye-bye.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.