Ladies and gentlemen, welcome to the PSP Swiss Property Half Year 2025 Results Conference Call. I am Matilde, the 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 Giacomo Balzarini, CEO of PSP Swiss Property. Please go ahead, sir.
Thank you, Matilda. Good morning, everybody, and thanks for dialing in. As usual, with the half-year results, the quarter results, I will do a rather quick introduction and then go directly into the Q&A. As we reported this morning, we are satisfied with the very solid operating results. As I've seen it, it's a bit lower in a previous year's comparison. As mentioned, this is due to two specific one-off effects we had in the first half of 2024. We have seen a valuation gain of about CHF 100 million, which is predominantly driven by the Zurich CBD portfolio. Thanks to the continuous cost discipline, we operate at an EBITDA margin of above 85%. We are on track with the various development sites. Here and there, it might take a bit longer, but we can go through that in the Q&A.
Generally, we are pretty satisfied with the developments and the demand. On the acquisition side, we have nothing we acquire or dispose. Clearly, we are looking at the transactions in the market. As per now, we have not seen anything which would suit our portfolio. The successful news came out from Wallisellen. We got the permission and the new rezoning code, so we are working there on the next strategic steps. We have the reclassification of the full site. On the funding side, we were able to launch the first three-franc floating rate loan a couple of weeks back, which we reported as a subsequent event. We were able to secure extremely interesting margin conditions on a rather shorter issue, 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. As I mentioned, I prefer rather going directly into the Q&A and go through 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'll 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. Anyone who has a question may press star and one at this time. The first question comes from the line of Matteo Lindauer from Consulte. Please go ahead.
Yes. Good morning, everyone. Thank you for taking my questions. I have two questions. First, how is the progress on the renewing rental agreements, which are expiring in 2026? The second one is on 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. Typically, with the majority of those, you start six to nine months before. We have one larger maturity, which comes up in Geneva. It is the end of Q1, where we have the tenant moving out. We were very close in signing a lease agreement, which didn't materialize a few days back. This is the biggest one, which will mature, which makes approximately 1% of the rental. We are very positive that we can tackle it. The others, I think that's the usual ongoing business we have. Regarding the Löwenbräu, I think there are two partners. We are on the building repositioning modules. Clearly, we talk with contracts and 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 Finance and SalesOft. Please go ahead.
Hello, good morning. Can you hear me?
Absolutely.
Thank you very much for answering questions. You said that demand was selective and increasingly price sensitive, even in the central locations. What does this imply for PSP? Your portfolio profited from substantial revaluation gains coming from Zurich's central locations. Is the price-sensitive behavior of tenants more an issue for the market in general, or does PSP feel some implications too?
I think generally, if you look at the market you mentioned, we are letting well, and we are especially in the office reaching our rental expectations and selectively also seizing. Also, on the highest retail, we are reaching our rental expectation, and we see a solid demand. It is clearly, you see a bifurcation between CBD and non-CBD. As you get closer, if you take specifically Tuesday's transit, perhaps there we have to adjust a bit our rent expectation because it's not super, super prime. Generally, we see that we can translate our rent expectation that materialized also in the valuation uplift of the first half of the year.
Thank you very much.
We now have a question from the line of Steven Boumart from Otto BHS. Please go ahead.
Hi. Good morning. Thank you for taking my questions. I have two separate questions. The first one relating to the pre-lettings in Geneva's Côte d'Argent. What is your opinion on the strength of the Geneva leasing market compared to one year ago? Second, maybe provide some color under the questions that you have today, including on where rental levels are likely to fall and expected asking for the moment of delivery. That's the first one.
I would say on the Geneva CBD Cartier de Banque, I think 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 re-letting of a full building. On Askivis, we are going into a multi-tenant strategy, and we are in negotiation, and we have rental contracts out there. I think the positive is we will deliver a complete new product to the facts what we have beforehand. We see a solid demand on all those. On one of the 32 buildings, we have to go first through the building permission. Sometimes those take a bit longer, and then also the letting starts, obviously, a bit later. Compared to one year ago, I would say we didn't have this product, but I would say the demand is stronger.
We are talking to tenants we wouldn't have talked to a year ago because there was a completely different product. We are positive on the Cartier de Banque. You have to first develop those products. You have to go through the building permission. You have to lease them. You will deliver very nice offices and also reasonable sizes. These are not really super large floor plans. I think the market will absorb this product.
Okay. You expect them at delivery to be almost fully free lease?
I would say that we have a very high letting status, yes.
Okay. Second question. What is the expected timing of the Rixty Park residential disposal? Second, do you see more residential redevelopment potential in the portfolio?
Yes, thank you. On the Rixty Park, we just came out of the rezoning. I think now our priorities, on the one hand, are to really work on the project of having and being able to deliver a project which includes all the requirements. In parallel, we have been approached on a potential asset swap, which we are going through. I think that's a parallel move we have, and that was also the reason why you had to reclassify it for sale. I would say here it's a bit premature to talk about timing, because you can imagine it is a larger project, which involves also a variety of tenants. Clearly, it's on the highest priority for us. Clearly, we are very positive to be able now to deliver a nice product for the region.
If at the end, we see that delivery is of somebody else, I think that's something we will have to and we will go through in the next couple of quarters.
Okay. Clear. On the second one, do you expect some other residential redevelopment potential in your portfolio?
If you look historically, we had always the approach of the highest-based use. We have two assets which we are working on, which are the Sihlstrasse and the Flurstrasse. We are clearly glancing through the portfolio also when we see that perhaps an office building is rather up for a rental. It will not be the substantial driver of our strategy. This is a continuous asset management approach throughout the organization. For sure, there will be some redevelopments in the residence. As I said, it will not be the dominant one.
Very clear. Thank you so much.
Thank you.
The next question comes from the line of Tom Kielerer from Zürcher Kantonalbank. Please go ahead.
Yes. Good morning, everyone. Thank you for taking my question. The first one is on the vacancy rates. Could you just give us some granularity how you want to get that down from the currently 4% to the intended 3.5% by year-end?
This will go through a letting of the retail showcases on the Fützlichstraße by year-end, through a temporary letting of that space and the parallel letting activity for the long term. This will be the main driver of the reduction.
What is the average rent per square meter for a temporary letting, please?
I would say it's not a substantial driver. The important thing is that you want to show showcases. Clearly, we are working on a fixed rent for the first part of the surface. We are foreseeing to have a full letting of the overall surface if you are not able to have a letting agreement by the year-end.
Thank you. 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 is 3.6 years, if I see that correctly. Where would you want to see that in the midterm?
Yes, that's correct. If you look very historically, we were even shorter. We were even at three or below. With the negative rates, we try to go as long as possible. I think the way we see it, first of all, we have basically a full inflation hedge on the top line. We have the ability to go a bit toward the plus. We have a relatively low loan-to-value. I would say whatever is around this 3.5, 4.5 is an area where we feel comfortable. Within that area, we try to act opportunistically on diversification of funding sources and to having attractive spreads.
Excellent. Another one on Zurich. As I understand it, you have had a very significant uplift in valuations 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 rent and absorption of vacant buildings?
Do you talk about disposals or about lettings?
No, lettings. More on lettings, guys.
Yes. I think that the thing we see is that perhaps in 2026, 2027, there will be some office space coming to the market. The way we see it and the strength of the market, this will be absorbed. It could lead to temporary vacancies in buildings. I think it's not a huge amount of service which comes. The demand in the CBD for modern offices is solid. That's what we observe in our buildings. I think that's not in our view really a substantial influence.
What is your view on retail on the paradise lots?
I had to give an interview yesterday. Different buildings, you're close to a dead zone if you want to get there by foot. I think it's very difficult to see what concept comes. We heard that there's retail coming, but we have also heard that's not so clear what kind of retail. I think the demand for retail generally on Bahnhofstraße is very high. I think also that the further away corner of the Bahnhof upon the Paradeplatz is not so attractive like the Bahnhofstraße Paradeplatz surface just from the view accessibility. The underlying demand, what we see from tenants, is quite strong.
Maybe a last one from my side. We're seeing that Mobimo has done an M&A deal. Obviously, we always ask you, what are you seeing in the market? Do you see some consolidation activity where you could take part of? If so, how would you finance that?
Yes. With all respect, I think it was a small M&A deal. You can call it M&A deal. We look at the market. We look at transactions. We are, as always, very sensitive to try to do accretive transactions in the long term. We are very diligent on capital allocation. We do not see really a lot of assets which would suit our portfolio. If we find something really of interest, I think that funding is least of the issues.
Okay, thank you very much.
Thank you, okay.
We now have a question from the line of TBS Vinci 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 asset-by-asset specific. I think we have buildings where we know that we can increase the rent. 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. Clearly, the ambition is to increase the rental income and to increase the like-for-like. Also, 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. What I say and see with our position of the assets, we have alternative tenants, and we are generally positive that we can increase the rent, yes. It's very, very asset-specific.
Okay. Clear. On guidance, I would say you typically have the tendency of upgrading guidance in H1. Historically, you've been a bit more conservative from the start of the year. This time, you'd only confirm guidance. How should I read this?
I would read it the way we communicate it. We never issued a 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 we guide that we can get a higher, we issue a higher. Here we said clearly around 300, not with an ambition to beat that. We try to be this, but it's not something we hold on the back end. I would read it that this is the guidance we give for the full year.
Okay. Thanks. Maybe just one last one. Of course, looking at valuations, it does screen that the latest sales 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 activities, not only from an EPS point of view, but also from an NAD point of view, we clearly look at it and decide to buy it. Just the fact that a yield is higher, a bit in a less prime location, doesn't intrigue us to say now we have to go and buy it. We look at all the transactions, and we take the decisions asset by asset. We don't feel under pressure that we need to buy. If you look historically, we grew top line by almost CHF 70 million in the last six years. We find opportunities, and we don't chase opportunities.
Okay. Thank you very much. That's all from my side.
Thank you. Thank you.
The next question comes from the line of Eleanor Few from Basel. Please go ahead.
Thank you very much for the Q&A. Just one, so not a question from commissions, but maybe thinking about disposals. Do you think you should 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 last day. 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 apart. I wouldn't expect now a large disposal in the second half.
Thank you.
Thank you.
We now have a question from the line of Andreas von Art from Bader Höller. Please go ahead.
Yeah. Good morning. My first question is on tax bills, more specifically deferred taxes. Could you elaborate a bit on the moving parts here? I think that's probably the key reason why you have missed the expectations on the net profit. I'm specifically thinking about the minus CHF 6.3 million impact from changes in tax rates. Maybe you could also elaborate on the effects, you know, that long-term revaluation of assets that you had in the previous periods, what the effect here was on the first half to better understand what's going on with the deferred tax.
I have the second question. Basically, it's the 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 balances and put it at work, rather increasing LTVs with acquisitions and projects. You stick to your conservative approach of low LTV and, let's say, not prompting for acquisitions. Why do you think investors are better off with your conservative strategies 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 this closely, but we had a tax rate increase in the canton of Geneva, which had an impact on deferred taxes. This is an alignment of the local taxes which goes on.
On the acquisition front, I think here, and we try to evidence that over the last years, 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. The sensitivities are very high. I think, therefore, we are a bit more selective with our in-place portfolio and with the development pipeline. Although it doesn't seem large, we have other developments in the portfolio which will come through the next 12-1 8 months, we feel that it's more opportune to wait for the opportunities when there's a stress. Like we bought the Hotel de Banque during COVID. We bought the West Ties when not many were able to buy it.
We tried to buy something a bit after market then come in with a new concept. We will see and get opportunities, but we need to get the additional extra in our area. Therefore, we feel also pretty comfortable with a reasonable low loan-to-value. I think this is, for us, the cradle. 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. If we do an acquisition, we need to be convinced that this creates additional value medium-long term. This is in our locations. We don't want to dilute those locations by buying something which is a bit east or west. I think that's a bit our philosophy, but that's also the way we are incentivized. We're incentivized for the long-term development.
I think every shareholder and investor has to figure out which case he wants to play. We shouldn't forget it's been a cyclical business and sensitivities are high. That's not a message of caution. I think it's a message we give things decades and we grew. I think we were the ones which grew most over the last years with single acquisitions. We are not promising it. Thank you.
The next question comes from the line of Sipel Delmalani 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? Where do you stand in terms of ERV? How do you see it across your different markets?
Yes. If I understood your question on the like-for-like, you see that the like-for-like clearly came down compared to last year. Last year, we had a much higher indexation. Plus, we had a substantial turnover component which didn't materialize in these amounts in 2025. From the 1.2 percentage points, roughly 1% was like-for-like growth through the indexation. Through the different markets, we will be able in our view to continue to go at a larger range on super prime retail. Those occur when we have maturities. We can increase the rents in prime office when we renovate the buildings and bring up a new product. I think for the majority of the others, it's clearly a stable development with indexation. I think that's a bit the message across the markets.
Okay. Gotcha.
We have a follow-up question from the line of Matteo Lindauer from Consulte. Please go ahead.
Yes. I have one more question regarding other operating income. For example, in 2024, we have seen it at CHF 11.6 million. In 2023, CHF 7 million. Now we're standing after the half year at around CHF 1 million. What can we expect going forward from other operating income, or what's your expectation?
If you take in the capitalized own services and the other income with regards to the VAT refunding, I think you could figure out another CHF 2 million by the year-end.
Okay. Going forward in 2026, 2027?
I think on an overall operating income of CHF 300 million for the half year, getting a 1% increase in 2026, 2027.
Okay.
I think it will be this minor element.
Okay. Perfect. Thank you.
Thank you. Thank you.
The next question comes from the line of Alexander Thumanov from Green Street. Please go ahead.
Sorry, I take a look at my questions. Two questions for me. How will I think discussions going on Hotel de Post in Iran given the project is in less than six months?
The discussion on Hotel de Post, I have to admit, is 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. We have basically on every floor ongoing discussions and negotiations. It's clear that I think the building is a superb building when it's finished, it's delivered. It's for this submarket, large surfaces. It's a large product, and it will take a bit of time to be absorbed. It's a bit, I would say, on the price range with respect to the quality of the products. We have signed leases. We are in discussions. I think the sentiment and the responses are picking up. At the end, you know, you have to deliver it. You have to negotiate, and this takes time.
It's thousands of square meters. We are positive on San François. It's a very nice product at the end.
Thank you. Thank you. The second question, I think that's something that others alluded to as well. Please quantify the amount of purchase of a new build asset in the Westplatz risk. You mentioned you have a conservative long-term view in terms of acquisitions. Were you in the bidding trend for the Westplatz?
It's a general asset we were aware of at the very beginning, and we didn't follow up.
Thank you very much. That's all from me.
Thank you.
As a reminder, if you wish to register for questions, please press star and one 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 equity expenses. There was a bit of a stronger rise in the first half of the year by 6%. Was anything specific in this first half or kind of a one-off that would give an indication for the full year?
The general admin cost, yes, they increased by 6%, but we are talking about CHF 200,000. We had a bit more IT costs and project costs. I would say for the role of the year, I think this is in line with last year's. 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. Thank you. Many thanks.
Thank you.
Once again, to ask a question, please press star and one 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.
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