Ladies and gentlemen, welcome to the PSP Swiss Property Financial Year 2025 Results Conference Call. I am Moira, 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, Moira. 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. 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 relettings within our portfolio. 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 real estate. First and foremost, residential, but then also prime office, that has also driven the valuations last year, backed by the letting successes. If you go into the headline results, we start with slide nine, we see that the operating income went up by 9.4%, clearly driven by the new changes in fair value, which we 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 a positive contributions by the finish of the projects in Basel, in Zurich, and by the 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 contribute to CHF 7.7 million gain. We have no gains out of disposed 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 CHF 11 million.
Besides that, we have and demonstrate continuously high cost discipline. We turned in this year with an EBITDA margin slightly above 85%. Financial expenses on slide 11 have leveled out, roughly at CHF 35 million. This is our own rate. We should see also on 26, considering today's interest rate environment. The taxes of CHF 95.5 million were separated, CHF 31 million in current taxes and CHF 65 million deferred taxes, whereof CHF 50 were linked to the valuation gains. With that, the board proposes again an increase in the dividend of CHF 0.05 to CHF 3.95. You see that on slide 12, which results in a payout ratio of 80%. If you go into the portfolio on slide 15 and 16, we 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 Biel, the Güterstrasse, which, with the current lettings, is let by almost 80%, and we are confident that we will lease out the remaining spaces over the next couple of months. The second big letting success is your Fischerstrasse, where we are today at a letting of almost 85%, that have advanced negotiations of the remaining small retail space and one office floor. On the lease expiry on slide 17, the major highlight is that for this year we are almost done.
We are left with 16% of lease expiries, and that helped us to give also guidance of 3.5% vacancy rate for 2026. The major highlight for 2027, always the big question on the lease renewal on Google. Google made a public statement beginning of the year that they will concentrate on two sites in Zurich. One is the Europaallee and secondly, is the Hürlimann-Areal site. On this end, we are now in the paperwork and final. This lease expiry is still within the numbers of 2027. If you go to the valuation gains and the overall portfolio appreciation for 2025 was roughly 2.9%, if you include the investment. The valuation gains per se was CHF 231 million. The one part, 13.7, was in Q1.
We added another CHF 97 in the half year, and for the fourth quarter, another CHF 118.5 million. Besides the yield 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 a rent of above 25% plus to the in-place rent, and this triggered a revaluation gain in Q4. It may 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 street 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 heart. All the funds coming from the bonds, coming from the credits, and coming from the private placements, are linked to our ambition to reduce emissions. Overall, on the debt, we have still roughly CHF 1 billion of committed unused credit lines. 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 one hand, the valuation gains into portfolio predominantly. Today, we fund at roughly 80, 90 basis points over on a four, five year. 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 the Hotel des Postes. We are there with a lease of leasing level of 50%. We have leased out the retail space. We have signed roughly six office leases, all at rents between CHF 450 and CHF 490, we have a reasonably good letting level that we expect that we could lease out the whole building within the next six to twelve months. The overall Quartier des Banques develops very well. If you look at the detail, for instance, on the number 5, the Darstowitz is almost fully let. We are left with one floor. As you know, we have let also to a private bank on slide 27, the full building Banque Aubert.
On slide 28, we have received the building permission for Rue Jean-Petitot 15, and are in negotiation with the bank. On 12, Rue Jean-Petitot, we are still waiting the building permissions. I will address the Valais and Risky part at the end. On slide 29, I would like to first highlight the progress on Leuenberg. 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 Leuenberg by end 28. To third project in Bern, Eigerstrasse, slide 31. Here we are planning service departments. We are in the phase of submitting the building permissions.
Rue des in Geneva, we will start this year in summer, the reconversion in the hotel, where we have fully signed lease agreement. On slide 33 and 34, we are starting the works in Marktplatz in Basel, 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 Basel. Mühlestrassen is a very small project, but it's on the Staufenen, where you will hear more over the next couple of years on what we plan to do on that site. A quick update on Wallisellen, 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 Richti part and the acquisition of a very centrally located asset.
We have signed head and terms, all in a final due diligence on with the two parties. This is something, if everything goes well, should be expected within the next six months. However, this is quite a complex transaction, we will have to continue to work on it. This leads me to the end and to the guidance for 2026. We guide for an increased EBITDA of CHF 310 million for 2026, and a guide 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 one on their 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. Anyone who has a question may press star and one at this time. The first question comes from the line of Steven Boumans from ABN AMRO-ODDO BHF . Please go ahead.
Hi, good morning. Thank you for taking my questions, of course. I've got some questions on the investment markets. Could you please update on the general investment markets, so how much deals are in the market versus six months ago? Second, you mentioned the one acquisition. Can you provide a bit of idea on the size, and also if there is possibility, are you looking at more than that only deal? The third one, what is the probability that you would accept equity markets to fund external growth in 2026?
On the first question, the number of deals, we see more liquidity in the market. We have seen a huge amount of raisings through the funds. On our spectrum, on the really prime, there are a few transactions we are observing, but as always, on that level of quality, there's not a huge amount of transactions available. I think this will clearly support, in my view, the leads, and probably even put a bit pressure on the leads.
Number of transactions have not materially changed. I hope you understand, I cannot give you insights on the transaction related to Wallisellen we are pursuing. I think this is a highly delicate operation at the moment. Yeah, I think by the rest, we are looking at acquisitions. We would only tap the equity market if we see a substantial large portfolio which is accretive day one, and only then. Considering that, I would exclude it for the moment.
Okay, that is very clear. If I may, one last question on artificial intelligence. Could you provide me any updates on the perceived risks there? For example, has there been any tenants stating that they want to downsize due to that? Just any color would be helpful. Thank you.
I think it's a quite broad topic, which is a topic which we follow very intensively, probably like all the market participants. In a nutshell, we see optimizations within our organization. By seeing that, clearly we see that also with other corporates. What we observe, I think this is especially true a bit for the major cities of Zurich and Geneva, that the impact of this optimization within the organization will leave more of freeing up space in larger plots and larger office spaces outside of the city centers. In the city centers, the buildings are typically of a smaller size. The companies which are there, they're trying really to have their key people there.
I think from a first wave, if we see optimizations with the tenants, which we currently are not seeing on a big scale, leaving space, this would be absorbed rather quicker in the city centers than outside. Without any question, there will be an optimization of space. I think our tactic over the last years has been to provide grade A space in very central locations, and within that, we see that there's a continuous demand for it. It's clearly something we continue to observe, and therefore, that's also a very important reason we are very conservative in acquiring buildings which are not centrally located, which have large floor plots, and which are then perhaps a bit more exposed to optimizations of tenants.
Very clear. Thank you so much.
Thank you.
The next question comes from the line of Ken Kagerer from ZKB. Please go ahead.
Yes, good morning, everyone. My first question refers to the relatively low LTV ratio that you carry currently, that should give you, theoretically, the opportunity to do accretive acquisitions. Nevertheless, you've said prices are high. What can we expect from you there? Is there any way that you come back to a growth trajectory for your company?
Well, I think the accretive transactions, if I may say, will depend on from the loan-to-value. It's just that we have a bit more firepower to do the acquisitions.
No, that's clear. I just mean the could do acquisitions as opposed to others
Absolutely.
Out of an increase in the leverage.
Absolutely. I think it's a valid point. However, I think we keep going on with a very strong discipline on the acquisitions. We need, when we buy a building, we need to be able to create value in the medium term, by either increasing the rents, by either increasing the floor price, or by either having a very good visibility that the land value will increase due to the scarcity. The things we have observed, the transaction last year have not led to that. I think at the premise, we observed that an investor can also leverage himself, so we will leverage if we really see those accretive transactions.
From a pure earnings per share point of view, it's a no-brainer. We have a significant or an interest in yield pickup, but this does not justify just the sake of a transaction. We are convinced, if you look back over the last five years, we bought for more than CHF 600 million. We have not done acquisitions last year. We are monitoring the market, and we are for sure that if there is something interesting to us, we can, we can be ready to do those acquisitions.
Thank you. The next question, refers to the integration of Credit Suisse into UBS. Could you give us an update on the threats and opportunities that you see from the consolidation of the office space, predominantly in the Zurich region and Geneva region?
On the Zurich region, I think what we learned from the announcement of Google is that they take over space, which is giving back by UBS in the Uetlihof. What we observe is that UBS and what they publicly say, is concentrating their activities around Bahnhofstrasse, Paradeplatz, with significant investment, especially in the Paradeplatz, which is, I would say, central for us. This is a very, very strong commitment of the bank in this central location.
How they then plan tactically their three location, being in Oerlikon, being in Uitkijk and being in Uetliberg, I think that's a question to be addressed to them. The direct impact for us is due to the concentration positive. As I said before, on AI, also, they will optimize their space. By their commitment to the city center, I fundamentally believe that they attract other companies who want to be close to the bank and to the financial center. To that end, I'm very positive on that combination. With regard to Geneva, I would say it's neglectable in a broad, large scale. It's not comparable to what we observe in Zurich.
Thank you. Maybe two quick ones. one on the Löwenbräu-Areal. Could you tell us if it's accretive on the yield post-investment, the new use or compared to the previous use or what will be the impact there?
We are signing a quite a long lease with a very good tenant, in a residential type, although it's a hotel or similar to a hotel concept. I would expect same or slightly reduced yields. However, for us, it's an attractive rental contract which provides higher rents than in place rents we would have. I think from that end, the predominantly reason for entering it, that is to increase cash flow yield. I think the, it's a de-risking of that asset in that location.
Thank you. The last one on Globus on Bellevue. I mean, we hear that Globus is not very happy with the performance of this location. Are you in discussions with them? What is the situation there? Thank you.
To put it in perspective, without offending, it's a very small contract in the overall piece. We are in discussions with all our tenants, but here we have a rental contract, and I think there's not much to discuss on the rental contract and to discuss today on this.
Thank you.
Thank you.
The next question comes from the line of John Wong from Bank of America . Please go ahead.
Hi, good morning. Thanks for taking my questions. If I understand it correctly, in Q4, there was another deferred tax release. Do you see more of such effects in 2026 and 2027? Should it be considered a recurring item, looking at how it also happened in 2025, 2024?
The deferred tax release you were referring goes back to a system change we have disclosed in 2022, 2023, which will take from that point on, 20 years. Today I think we are in year three, so for the next 17 years, you can probably plug in a CHF five to 10 million deferred tax release. It was a CHF 40 million last, CHF 10 million last year, CHF 40 million this year. I think that's something we can plug in, and which we have in length, I think disclosed in 2023.
Okay, that's clear. Looking at the funds that are being raised in the market, do you see these as competitors to the type of investments that you're looking at, or does this open opportunities for you to recycle some capital?
The funds which are raised are only in very limited way, probably competing with us. These are funds which will be probably deployed either on the resi, on secondary commercial, if it's a very stable prime, but for the value add, which we look at, we observe that those institutes of players, and we have seen that in the past, are not really looking to potentially buy vacancy, repositioning a prime asset, touching a historically protected building. I would say, clearly this is, these are funds in the market, but for the respective transactions we have done in the past, I don't see them so competing. Clearly they will have to deploy those funds, and this will probably drive yields a bit further down.
Okay, that's clear. Thank you.
The next question comes from the line of Tommaso Operto from UBS. Please go ahead.
Good morning. Thanks for taking the question. One question on guidance. Risky Park is not included in the guidance, right? If that's correct, where does this additional CHF 10 million of EBITDA come from? Is that really from, mostly from hotel that was being finalized? Does this also, like, take into account the selling of Aura, which has already happened this year? Or where does it come from? Thanks.
Thanks, Tommaso. It's a very good question. I can confirm that Voluben is not part of the guidance. Secondly, this additional CHF 10 million-CHF 15 million you were mentioning, are coming from development sales of industries, inventories. We are working, since we said over the last year of repositioning office buildings, which we believe are not any more office buildings for the future. In condominiums, we had reclassified those. We are in process of evaluating and conducting a disposal, and we have factored a potential gain into the EBITDA guidance in the amount plus, minus, you mentioned. I can confirm again that Voluben is not part of that equation.
Very clear. Thanks a lot. Two additional questions, if I may. One on the payout ratio or the dividend. I mean, you know, combining the relatively low payout ratio and low LTV, is there any chance that, you know, sooner rather than later, you will start raising the dividend by CHF 0.10 instead of CHF 0.05?
Normally, a payout ratios go from 0% to 100%, we are at 80. Calling this relatively low, I would say, I think it's a fair payout ratio. As we said, we want to give a continuity, we want to give a predictability. Clearly, there is room, theoretically, for a stronger increase, we prefer to first work on the cash flows and the earnings, subsequently, in case, further increase the dividends. If you look historically, our payout ratio was always around 80, 85, 90. That's correct. I think this is a fair development. On the loan-to-value, I'd like to add, without giving any signals of being bearish, we are really operating in a very low interest environment, the sensitivity is not neglectable.
We are very happy with the loan-to-value of 33. It gives us all the flexibility, but it gives us also all the protection. We have to be aware that if there is a change on the rates, which we wouldn't expect, it has not only an impact on the leverage, but it has then also an impact on the funding levels. I think here we are pretty safe to be able to continue to fund on those spreads we are currently funding, because we have quite of a lead way on the loan-to-value. Being on the funding, being and also doing opportunistic acquisitions, but we wouldn't leverage now on this strength to increase the dividends by another CHF 0.05, CHF 0.10. We are focused on earnings quality, on cashflow generation, and the continuous improvement of the payouts.
Mr. Thanks. Last question on the Güterstrasse property you sold. I mean, it was a relatively small transaction, but, the gain was quite significant. Where does the gain come from? Was the book value there just so, conservatively estimated?
We have seen that also when we did the last disposal in Rheinfelden, and when we did the last disposals on Lugano. When you do clearly the last sale, typically the book value is what is the book value, but you clean up really then the site. I think that's a bit then the last risk protection you have on those sites, which goes in, you release all your costs, and then it's the gain you realize. Clearly, it was a large project over many years. The book value is then also always very, very difficult to estimate by the value, what is less there.
Then it's a bit of p robably at the edge, also because release of reserve, because it's difficult to estimate. Is it CHF 7 million or CHF 6 million? Clearly depends also on the buyer, and for the buyer, this was key, as a key asset, and this result then this gain of CHF 7.7 million. I wouldn't now do a read across of conservatism in those book values. This is typical on those sites you have for 20 years. At the end, you clean it up, and if you find somebody really wants this plot, then you have this gain which materializes.
Thanks.
Any further questions, please press star 1. The next question comes from the line of Eleanor Frew from Barclays. Please go ahead.
Good morning, thanks for the presentation. Couple of questions. Firstly, can you help with? Can you give us any help on where you expect your EPRA earnings per share to land over the year? Would it be fair to assume similar yearly growth rate, maybe?
Well, if you look on our earnings per share, and if you take the EPRA earnings per share, and I take out this disposal gain I mentioned, we would see a slight uptick on the earnings per share. We see a flat development on the top line. As mentioned beforehand, we expect a disposal gain, but if you take that one out, we see a slight increase of the earnings per share.
Thank you. You mentioned it's a very strong lead imprint on high street retail. How does that compare to offices?
I hardly hear you. Can you try to ask again?
Oh, yeah. Just inaudible.
Yes, certainly.
You mentioned strongly less imprint on high street retail. How does that compare to offices?
I think in a magnitude, it has been never comparable, because these are completely two different worlds. The high street retail is a handful, we can say basically two handful of buildings, and if you there have, at the moment, an expiry or a new tenant coming in, you have this strong demand. However, also in the prime office in Zurich and in Geneva, we are letting at market, we are sometimes letting above market. If you look for instance, at pins, the overall rent we get is higher than the underlying we have seen. I think generally we have a solid development, but it's predominantly there, where we do investment in prime office, reposition the asset, where we can then increase the rents.
We have seen, by the way, last year, a mathematical like-for-like of 1.3%. If you take out this, if you recall, in 2024, we have to look, twice the turnover, and if you take out that one-off, we have a like-for-like of 2% coming from indexation 1%, rents, 40 basis points, and another reduction of the vacancy of 40 basis points. We expect also for this year, a like-for-like of roughly 1.5%, which is not including this high street retail, because this was an option in one year, so we will see that in 2027.
Very helpful. Thank you.
The next question comes from Matteo Lindauer, from Vontobel. Please go ahead.
Yes, good morning, everyone. Thank you for taking my question. One question on the letting activity of the high street retail segment, could you tell us the price per sq m you have renewed for? The second one is on the sixth office building. Did you have a look at it? Of course, Swiss Prime have acquired it, but did you have a look at it?
On the first question, you know, this high street retail, it's always a blend of underground, ground floor, first floor. I can just say at the moment that we significantly increased the rent, as mentioned, above 25%. We typically disclose those the per sq m from the market from the value in the annual report. This will be in 2026. We have a certain confidentiality until the tenant really moved in. From that end, I will keep it at that level and not disclose per sq m range. With regards to the asset you mentioned, it's clear we look at every asset. We have our reasons why we are perhaps not the best bidder.
As I mentioned at the beginning, for those assets in general, we observed last year, either we have seen no positive reversionary or even negative reversionary, or we have seen CapEx, which need to be invested to either fill the building or put the building back into a multi-tenant solution. Thirdly, we are very much looking on what could be the land appreciation going forward, and that's the reason why we probably didn't want to buy this asset.
Okay. Many thanks.
Thank you.
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, I'd like to thank all the participants. I wish you a great day, and clearly, we will talk soon on a separate note. Thank you. Bye-bye.
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