Ladies and gentlemen, welcome to the I am Sandra, the Chorus 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 to everybody, thanks for attending this conference call of the annual results of PSP for 2022. We're happy to report, I would say, outstanding results. Before starting the presentation, please allow me to thank all the PSP employees for this outstanding job over the last couple of years. As you know, these were very special times, and to be able to report year-on-year those results is really the merit of all the employees. I will go quickly through all the slides, giving the highlights first slide, and then allow really a bit of more time for the questions. As we start with Slide 3 , an overview of the portfolio. I think here to remind, we will continue to focus and concentrate on commercial properties in the primary cities of Switzerland, especially in Zurich and Geneva.
Also, through the transactions we did last year, notably the asset swap or the disposal, we will try to concentrate even more the portfolio on the place to be and on the prime locations. Slide 4, two remarks. The letting market in these locations, especially Zurich and Geneva, for prime office are intact. We're letting well, rents are solid. Secondly, the transaction market on this prime segment clearly slowed down a bit, but also here is intact and the yields were stable in 2022. Slide 5: the main developments. We tried to be active. We did an asset swap with an insurance company. We did an acquisition and a disposal. We continue to dispose the condominium in Parco Lago, and progressive. Vacancy rate came in at 3% for the year end, and is expected to stay bel ow the 4% for 2023, and we have already renewed more than 60% of the in 2023 . On the financing side, partments . I more, but we did a lot of progress on our sustainability approach underlying our efforts, which are engaged in many years the Green Bond Framework and also now today later on the valuation gains. The property sales, as mentioned, the CHF 25.2 million, predominantly disposing the Préverenges.
It's a development project we have sold in the first half of last year. The Parco Lago condominium disposals. Here we are left with a few apartments which we will most probably sell in 2023. On the cost side, Slide 9, you see basically an unchanged cost development. We put a lot of focus on operational excellence. We aim to have an EBITDA margin of above 80%, which we achieved also this year. You see also the operating expense, maintenance expense is a very stable line. We are not so much affected by the energy price increases. Also inflation is not hitting us so much on the cost side.
Just to be aware, the cost side for us is a very important matter to have this discipline and to have this operational excellence in order to have this EBITDA margin of over 80%. Slide 10, the financial expenses, only moderate change. Here clearly this is a number of CHF 11.6 million, which will change in 2023. The interest environment has changed also in Switzerland, also for PSP. We don't see dramatic moves, but clearly also our refinancing has changed. This, I think, will be after 2021, a record low financial expense number we probably will not see in the near-term future. Tax side, pretty stable average tax rate of between 17% and 18%. Slide 11. As mentioned, we're proposing a dividend increase of CHF 0.05 to CHF 3.80.
I said often, in the meetings, we have a good visibility that we can continue on this CHF 0.05 path over the next couple of years. I think we have a payout ratio of below 80% at the moment. If you look at our EPRA EPS projections, we can continue that path despite an increased interest rate environment and financial expense in hitting EPRA EPS. We have a top-line growth due to development projects, and we have inflation adjustments which allow us to continue that CHF 0.05 growth path despite any major positive or negative events which are, I would say, out of control, of our control. If you go into the page 14, portfolio vacancy rate, as mentioned, you see a stable portfolio development size-wise.
As we always said, we are not too much focused on portfolio size, although the portfolio grew in the last three years by CHF 1.5 billion. We are focused on earnings quality. Therefore, we are clearly looking at transaction where we can buy or sell at equal or improving yields and improving earnings. We have now a vacancy rate of 3%, which is for us basically a record low level. On the largest vacancies, slide 15, yearly we have to keep in mind, we talk about low numbers. The Boschstrasse, the biggest one, has also been let. The Richtistrasse, the later four ones in Swiss North, we're working on a rezoning project, we're working on alternative usages.
I think we are aware of the issues, but with regard to valuations, a lot has already been taken into account into the valuation. I think here we are in a level where we can start talking about upside. Slide 16, expiry profile, you see a moderate development. If you take into account that we have five-year lease contracts with options, this is a natural path. Our more than half has already been renewed in 2023, and we are working on 2024, and are not so worried about 2025, 2026, if you look the absolute size. Slide 17, 18, valuation changes. Second half of 2022 was basically unchanged on the valuation, slightly negative with CHF 7 million, but this is honestly on a CHF 10 billion portfolio rounding error.
The CHF 124 million, predominantly CHF 90 million, investment portfolio, CHF 32 million development portfolio, comes out of the half- year revaluation with overall a slight discount rate, a change of + 3 basis points. I think here, as I mentioned beforehand, the valuer looks at transactional evidence. I think the transactional evidence still holds for the valuations we have in the portfolio. We will see over the next couple of months, quarters, what will happen on the transaction market and what then the implications are from the valuer. Clearly positive are the indexation possibility. We are able to index more than 90% of our rental income, so that's a positive on that, clearly the valuation. Also fact that, we have development projects which we are leasing up is a positive.
I would say the main driver is the discount rates, and this is in the hand of the market, and we will have to observe the market and the valuer on what is coming from that side. Allow me a few comments on slide 20 on our Green Finance Policy. Here, just to start off, PSP's approach to sustainability is a key element since inception of the company. Whenever we touch a building, renovated a building, we always look to do it at the most sustainable way possible. Also, due to the local jurisdiction, the local requirements, I think in Switzerland the standards are very high. Also, we realize that the market expects from a publicly listed company that you have a certain framework, that you have a certain commitment.
We decided last year that we launch our Green Bonds Framework for the bond side. We successfully reclassified all existing bonds in the third quarter to green bonds, basing with the basis of the CO2 emissions and the ESG rating, having two external parties from ISS and Moody's. What we did in the fourth quarter, and we completed it now, we implemented Sustainability-Linked Loans for all drawn credit lines in more than CHF 600 million of committed lines. Here we have based our concept also on the green bonds framework. We have implemented the pay- away solution. Also here we have an external review report from ISS. And an internal opinion from one of the Big Four companies. With that, we have the full debt, which is green.
We publish a Green Bond Report on the first Q results 2023. From then onwards, we report publicly on our sustainability efforts and on the funding policy. On the debt side, if you look on slide 22, you see that we have a Loan-to-Value of 32.6%, basically unchanged compared to 2021. We have a solid mix between loans and bonds. Duration came a bit down, but that's something we have anticipated, and we are running at a passing cost of debt of 47 basis points which, however, will clearly increase over the next quarters. A quick glance on some major projects we're working on, Slide 24. Project Clime in Basel is a full wooden building. We have finished. We have still only 50% pre-let to telecom company and the restaurant.
We have quite an interesting line of potential tenants. Due to the centrality and the quality of the building, we are not very worried to be able to let the remaining surface. Clearly, the pickup is a bit slower than expected, also due to the market conditions in Basel. If you look at the quality of the product, it's a question of time, but it's not a question of if, in our view. Hôtel des Banques in Geneva, slide 25, we have completed the refurbs of the acquisition. It's basically fully let. We have two LOIs outstanding. We are left with 1 floor. Here, we have a very positive re-letting situation. Clearly, these activities contributed to the positive valuation gains of 2022. Slide 26, Project B2 Binz. It's still not let.
Here, we are in discussion with a light industrial company for two floors. We are in talks with a variety of office tenants for the remaining floors. Here, we're also positive to soon be able to announce letting success. However, also here it takes a little bit more time on the letting as perhaps we have expected, but the product is, in our view, very positive. We see a good line-up, here we will soon be able to announce some results. Slide 27, Bahnhofplatz, Zurich is the last piece of the whole development sites on the Bahnhofplatz/ Waisenhausplatz. I think with that, we are completing the whole refurb at the Main Station. Slide 28, just as an example, a refurb close to the lake on the Bellevue. We had outgoing rents before refurb, around CHF 400.
We are letting now office here at CHF 850. Majority is pre-let. We are in final negotiation for the remaining office space. Last but not least, a last start in Pelikanstrasse. That's next to the Bahnhofstrasse. A refurbishment of an existing building, which we just started. Also here we have a very good line-up, also from retailer. Here with that, I would end my comment on this project. We still see a solid demand for prime retail in Zurich and in Geneva. Clearly, as soon as you move out of the city centers, it becomes also here a bit more difficult. Slide 30, you see the sum up of these existing projects. This will add an additional CHF 15 million to the top line in the next two years.
If you go on slide 33 and 34, these are the two projects which we are currently working on. One is on the Bellevue, and one is in Basel. These two projects will add up another CHF 11.5 million within 2025. We have top line growth coming from the development projects, although the overall project pipeline is moderate. As you know, we are working always on the investment portfolio to reconvert assets, improve assets, and we have some good visibility also going forward. With that, I would go to slide 38. On our projections and outlook, we guide for an EBITDA in 2023 of CHF 285 million.
The underlying is that we see top line growth that have a bit less convenience sales. We guide for a vacancy rate of below 4%, which is not far off from the 3% we have reported in 2022. I think that would end my initial remarks. I would like to open for questions.
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 touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to unmute only answer till asking a question. Anyone with a question may press star and one at this time. The first question comes from Ken Kagerer from ZKB. Please go ahead.
Yes, good morning, everyone. I have three questions, and I would take one after the other. The first one is with regards to the re-letting success for the 2023 expiries. What was the average increase of rents, and could you pass on all the inflation-related increases without any concessions? An add-on to that one would be: what is now the rent-free period for a typical five-year contract? If you manage to get 10-year contracts, what will be the rent-free period there?
To your inflation question, we have a full adjustment of the inflation. We had no discussion or, yeah, discussion on that. We could pass on the full adjustment. On the reletting.
Sorry, the question was solely related to the relettings. If you basically say you relet the contract in 2023 and the run rate is 100, could you pass on the inflation without any problems in a reletting situation?
Yes.
Okay, thank you.
For the full set of the portfolio. On your second question, on the first one, on the reletting, on the ones with identical, the identical tenants, we are slightly 2.5% above. That's exactly the indexation. I think here it's difficult to increase the rents selectively. Whenever we do something with the asset, as mentioned beforehand, we have significant upside potential. This is clearly then not representative for the full portfolio. On the rent-free, it depends really on the location. We would say if you are in the super prime location, you talk about two to three months of rent-free. I think here the incentives, you know, are stable.
Thank you. The second question is with regards to financial structure. The question is, where will you go over the next two years with your fixed interest period in years?
I think that's something we will decide, you know, along the lines of interest rate development and the expiries. As I mentioned last time, due to the strength of the balance sheet, due to of the quality of our earnings, we are not worried if the duration comes a bit down. If you know, historically, we had a duration which was much lower. We will see how the curves look. but it could be that we are above four years, it could be below four years. It depends really on how long we would do a bond if we do a bond. but as I mentioned last time, we are not so worried about affordability for PSP. Having said that, also with the dividend capability which comes out of it.
Okay, thank you. The final and last question. Could you give us more granularity on your vacancy guidance, please?
I think it's difficult to give more granularity. We say below 4% for the full year. I think that's a solid number. Honestly, we are working on those expiries. We have the Project Clime, which comes into the portfolio. B2 Binz, which will be completed. We have to see if this comes into the portfolio. These are the drivers of the vacancy rate. I think what I can say, it has basically no impact on our EBITDA guidance, so I'm not worried on it.
Okay.
If it's 10.7%, 8%, 9% or 6%, I think this is. We don't know. We are convinced that we can be below 4%.
Thank you very much.
Thank you.
The next question comes from Holger Frisch from Zürcher Kantonalbank. Please go ahead.
Yes, good morning. I have only one additional question on the renewal and expiration profile. Currently there are 55% of the leases that are due this year already renewed. Compared with previous years, this seems rather low number. Could you elaborate a bit on the reasons? Do you sense a reluctance from existing tenants to renew at this point of time?
No, I don't sense a reluctance. You have to see that there are many contracts which come to an expiry. We have already agreements with some, but the lease has not been signed. I think here we have a visibility of basically another 30% to be signed, which will come in then in June, in one Q2. I think this depends a lot, you know, on the size of the expiries, but we don't sense any reluctance of tenants.
Okay, great. Thank you.
The next question comes from Markus Kulessa from Bank of America. Please go ahead.
Hey, good morning. My first question would be on the guidance on EBITDA. Just to understand, my understanding there will be almost no income anymore from property sales. Is this right? Is this the only reason why the EBITDA is down year-on-year? Do you see also, it's also due to the vacancy increase due to new projects?
We are typically not giving a guidance on the sales of the inventories. As I mentioned, you know, we had with 2022 roughly CHF 25 million of disposal gains. In our projections, we are roughly half of it for 2023. As I mentioned also, we despite the fact that we are vacating Hochstrasse, Globus in Bellevue, and Limmatquai, which costs us roughly CHF 10 million of rental income. Despite that, we see a top- line growth which comes from inflation adjustment and re-lettings of last year. The vacancy rate increase comes more towards Q3, Q4, and has less of an impact on the overall EBITDA guidance.
Okay. The two buildings sorry, which are gonna be vacated are CHF 10 million each or CHF 10 million total?
Well, al together the three are CHF 8 to CHF 10 million. Hochstrasse and Globus on Bellevue are roughly CHF 8 million.
Okay, thank you. My next question is on the indexation for 2023 or 2022 also what the inflation indexation part was in your like-for-like goals, because the 0.8 like-for-like rent goal seems more at the low end of your historic average. To see if there is an acceleration with the indexation or if you don't see it at all in the rent goal.
Yes. Let me step back quickly. When we do inflation adjustment, we take the November CPI. October to October, then the public November CPI. For 2022, we took the November CPI of 2021, which was roughly 0.4%-0.5%. In 2022 you see little inflation adjustment. For the 2023 numbers, we took the November 2022 numbers, which was an inflation of 2.9%, and we were able to transfer roughly 2.7% to the tenants. You see the first indexation effects really in 2023 and not in 2022.
Okay, thank you. Can you give us a guess of the reversion, rent reversion for the whole of your portfolio?
I would say if you-.
Yeah.
I think we have positive rent reversion. I think on the size of the portfolio, whenever this materializes, I wouldn't say it's neglectable year on year. It's sizable per asset, but overall it takes years to materialize. As I mentioned beforehand in Wollishofen, I think we are low with the market rent, but you know, it takes time to materialize. Overall, if you look at the values report, I think we are at market or slightly even below market. I would say what you see like-for-like is coming predominantly out of indexation, and then the top-l ine growth on top of it comes due to refurbishment and the increase in rent out of refurbishment, like the Globus on Bellevue, where we increased the rent from a bit more than CHF 4 million to roughly CHF 7 million. That's where the top line growth additionally comes from these refurbs.
Okay, thank you. On your portfolio valuation outlook for this year, do you have an idea on what kind of cap rate extension we could expect, or if we should continue at the same pace as H2, given the transactions you're seeing and the market conditions?
I think without offense, this is not in our view up to the management to say. The valuer is responsible for the valuations in our case. We have a view that we are letting well, the underlying market is solid. We can pass through the indexation, that's a positive contribution. What then happens on the transactional market and how the valuer applies those transaction yields to our portfolio, I think is a bit outside of our control. In our view, it's also the main driver of the overall valuation. I think what we can say is that we have positioned PSP, that we can go through the cycles, whatever happens on the valuations, without expecting now any shocks. That our dividend capability and dividend path is independent of the valuations.
From that end, you know, I have to pass on these questions. We'll see what the market does, and there are various public statements from the various valuers on this subject. We are working on our operating activities. We are working on our disposals. We are looking at acquisitions. I think I will not make statements on valuation expectations.
Yeah. Thank you. Makes sense. Last question, the more personal one. I saw you reported the EPRA L TV metric, which is very appreciated. I just wanted to know because some of your peers are giving a lot of pushback, saying it's complicated, it takes time. Just to know how time-consuming or difficult it was really actually to implement a few metrics.
For us, it was absolutely not critical. I think also here we have to say we have a simple business model. From that end, it was absolutely easy. I think in the majority of the cases it shouldn't be a problem.
Okay.
We have plenty of time. There's plenty of guidance from the EPRA. I think here, it shouldn't be a big issue, but there might be circumstances, JV structures where it is perhaps a bit more difficult, but for us it was easy.
Thank you.
Thank you.
The next question comes from Andreas von Arx from Baader Helvea. Please go ahead.
Good morning. I'll start with two questions on your outlook statement in the press release. You say that the demand for office space is likely to remain high in the economic centers of Zurich and Geneva. Could you please make a statement with regards to Basel, Bern, and Lausanne, especially the demand to a change of usage in Basel? I mean, that's a city that was still seen quite positively, I think just a month, a few months ago. The other question on the outlook just is that you also with some restrictions, you see no impact on the transaction market. Could you maybe add some color on what you mean with some restrictions? Thank you.
On the first question, I think if you take Basel, Bern, and Lausanne, I think they are a bit smaller markets, it's really also sometimes, you know, one or two lease agreements can change a bit the sentiment. We were critical last year till the publication. All of a sudden, we were able to fill up the Grosspeter Tower. We had some letting success in the city center, this turned us a bit more positive. I think what turns us positive is that we have a good product. However, we see that the overall market is not so solid as a Zurich CBD or a Geneva CBD. Bern, we are letting well. I think we also are now in Hardturm, which is not the prime spot. We have some letting successes.
I think we are a bit, but this is also, you know, from, I would say, almost a bit from the hips or from the stomach at the moment, a little bit less positive on Lausanne. Also this is sentiment-driven based on, you know, demand, based on responses, but as you know, it's a, it's a minor part of our portfolio. I think here this is often that you have one region or one area which is a bit more positive than the other, a bit less. I would say at the moment, Bern is solid in our portfolio. We are moderately positive on Basel, perhaps a little bit more concerned on Lausanne, but this is really a bit at the edge. The second comment on the transaction market, what we observed, and we observed some transaction that prime yields hold up.
We see some yield widening on selective transactions. It's still a little bit of an illiquid market to have here full evidence is difficult. If you're saying with some restriction, we see what interest rates did, and we don't see it in the transaction market. We are here a bit observing and looking on what really goes on on the transaction market.
Okay. I have two questions with regards to specific properties. I'm sorry if I missed your comments on the new development in Basel. The 50% pre-let that is for the service department, is that correct? The other 50%, is that the ground floors where you would need an office tenant? Or is that the way to think about that one?
Yes. We start the project with the service department concept. Then we will, you know, provide, I would say, Grade A office space. We start with that. We are having there clearly a bit of a parking space and a bit of storage, but it's predominantly 5,000 sq m office, which comes in our view, modern office space in a good location. The start is with the service department concept.
I wanted to ask on Wollishofen. I'll give you a pass given the comments you made. Maybe this time can I ask about Moosstrasse in Rüschlikon? I also checked it on Google Maps and looked at Street View, and this is somewhat an unusual property in your city center-centric portfolio. What are the plans here?
Andreas, you passed on Wollishofen, so I pass on Rüschlikon. No. Sorry for the joke. No. You know, we have more than 180 properties, and there's always one on the bottom. You know, Rüschlikon, it's not one of our, I would say, key objects and key properties. We have a vacancy there. We're working on that vacancy. It's clearly the plan that once we fill it up, we might sell that asset. You know, this is one of the assets which was good as long it was full. It was not really a priority to expose it. Now we have it. If you look at the overall value of the assets, it's neglectable in the portfolio. It's clearly it's a pain for the property manager and for the letting team.
It's not, it's not so evident, but we don't feel it in the P&L. More important, Wollishofen here, I think we have a conviction that we can change a bit the zoning. We're working on it. If we are then able to do it, we will see. Clearly, we put a lot of efforts in it. We have also some interested potential tenants which are coming up now. Here as we were perhaps on the paying side for the last two years, perhaps we have a lucky punch now, and we have some re-latings. Both assets are not relevant for our guidance.
Okay. Finally, on valuations on your external value, and I take fully note of your comment that this is not management's job. However, I would like to just point out that in the past, when discussions were on external valuations, there were always two angles: transaction market and the model view. Now, I haven't heard anything about the model view where the interest rate environment would be a driving factor.
I mean, if we now do an external valuation 100% driven only by the transaction market, completely not taking into account the interest rate environment, wouldn't that then mean that going forward, the external valuations should get much more volatile, given that the slightest change on the transaction market should immediately one-to-one get effect into the external valuation, similar to what we see in other European markets, where then also share prices react much more volatile to slight changes in transaction markets? Thank you.
I think I mentioned the both sides. I mentioned the positive contributors which come out from inflation indexation, higher indexation, rent growth, development projects which we are letting. This is the positive contribution. On the second element are the yields, and the yields are coming from the value. They're based on transaction evidence. If it is one single transaction, do you need to have more evidence? I think this is the question for the valuer. I don't expect more volatile values going forward, but clearly we are in a lower yield environment, and that means that if the yields move on that end, the movements are a bit bigger than perhaps 10 years ago.
As I mentioned, I think it's evident that we are coming out of a ride of 10 years of yield compression, that sooner or later, the yields could or should move up. Considering, however, the market constituents, the limited leverage, the little for sellers, I would expect that if that happens, that that happens over quarters and not all of a sudden. As I mentioned at the beginning, I think this is the valuer's job, we, as a management company, have to make sure that we can live with all possible scenarios which come out of that side. Considering our earnings quality, considering the vacancy rate, considering the debt profile, the Loan-to-Value, I think we are very well positioned for all the extreme scenarios.
If you mentioned that inflation protection, I mean, in my simplified Excel sheet, I mean, yes, you get a higher rental income, but compared to last year, your inflation component is also 50 basis points higher. I mean, does that then really have net positive impact, or it's just, you know, the higher rent being offset by the higher interest rate component in this country?
I think it has a certain protection, but clearly not a full protection. It takes up a little bit of yield widening, but as soon as yields move up a bit more, I fully agree with you that this is a limited protection. It's a positive element into the total, not a negative. How, how positive it is, it depends on how much the yields move. Yeah, I fully agree. It's only a partial protection, but we never said it's a full.
Thank you very much, and I'll give it back to the operator. Thank you.
Thank you.
The next question comes from Mike King from CNS. Please go ahead.
Hi, Giacomo. Just a quick question. Just a bit more of market color. I know Zurich has been bit of a, let's say, tech hub in recent years. Could you just give me a bit more color about how the evolution of demand from technology companies? Thank you.
Yes. You're absolutely right that clearly especially Zurich has moved to become a tech hub. In relative perspective, so I think size-wise, not so comparable to, I would say, other cities. Here, it's very much linked towards the Technical University and concentrate on the three, four companies. Clearly the new pickup came predominantly also from Google, besides other companies like Apple and the likes, and we have to see on how this evolves. This global hiring freeze and stop of development projects globally from Google is valid, as we understand also from Zurich. That means We have not heard that from the Zurich teams. Clearly, they are evaluating on this, on the future.
I think if you look the size of their position and the importance what you hear from key people, know-how, development, research and development, university, we are not negative on the future outlook. I think they are generally somehow to stop and to evaluate where are we going here. From us, it has no major impact at the moment. We have renewed our contract. We have one expansion project on the Hürlimann site, which will probably be postponed. That means also the CapEx will be postponed and that we will not locate the pro-property. Here we are also a bit on the observing modus, and generally positive on the future development of Zurich to be and stay a take-off. It's knowledge-based, it's, as I mentioned, very strongly linked to ETH, and it's still quite limited headcount-wise.
Very clear. Thanks, Giacomo.
Thank you, Mike.
As a reminder, if you wish to register for a question, please press star and one. The next question comes from Pierre Paren from DWS. Please go ahead.
Hi. Good morning. Can you hear me well?
Absolutely.
Great. You provided details on why the consolidated EBITDA is going down in 2023 versus 2022, which is mostly driven by lower property sales, if I understood correctly? Is it fair to assume that despite consolidated EBITDA going down year-on-year, EPRA earnings on the other end should see a positive growth, mostly driven also by positive top-line growth? Should we look at it like that?
We never, you know, we never give the EPRA EPS outlook. However, if I would look at it, you have clearly a negative impact for increased financial expenses, which could be slightly higher than the top-line growth. Having said that, I would expect, I wouldn't say an almost equal EPRA EPS, perhaps, from today's point of view, slightly lower. However, still an EPRA EPS which is fairly above a potential future dividend increase and dividend payout.
Okay. On the higher financing costs, what would it be driven by? What are the assumptions behind it?
When you change the interest rate environment, you know, we had a passing cost of delta 47. We did a great new bond at 2%. I think this will go directly to the financial expenses. Clearly, as I mentioned, we can offset the majority of it or even a bit more with the inflation indexation. If we had CHF 11 million of financial expenses, we. You know, this is an internal forecast. We forecast 20 for 2023, but this is based on the new financial environment. As I said, we capture it on the top line, so we think this is net-net going through.
Okay. No, it's fair. Yeah, like bottom line is stability on net earnings, implied by your current EBITDA guidance if we exclude property sales. That'd be fair.
Yes.
Okay. Thank you.
Mr. Balzarini, so far there are no more questions.
Okay. I would like to thank everybody for attending the call. I wish you all a great day. Thank you. Bye-bye.
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