Ladies and gentlemen, welcome to the PSP Swiss Property H1 Results 2021 conference call. I'm Sasha, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode. The conference is now 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 is my pleasure to hand over to Mr. Giacomo Balzarini, CEO of PSP Swiss Property. Please go ahead, sir.
Thank you, good morning to everybody. As always, I will just do a very quick introduction and then leave the floor for Q&A. We are obviously very pleased about the results we have released this morning. They come on the back of a rather strong rental income growth, which demonstrates on the one hand, the acquisitions we have done last year and the completion of our pipeline projects.
Secondly, quite strong revaluation gains, which demonstrates the strength and resilience of the prime transactional market, which then goes hand in hand with the confirmation of our full-year EBITDA guidance and a slightly improved vacancy guidance of below 4.5%. Organization-wise, we are all back into the office since the beginning of June.
We are confronted with a stable letting market on the prime locations, as we have wrote in our report, and we are quite confident for the second half of the year being it on the letting market as what we see on the resilience of the transactional market. Having said that, I know that there are already questions on the line, and I would rather spend time in going through your questions and your interests. I give back to the operator.
We'll now begin the question and answer session. Anyone who wish to ask a question or make a comment, may press star and one on their touchtone 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 use only handsets while asking a question. Anyone who has a question or comment may press star and one at this time. The first question comes from the line of Pascal Furger from Vontobel. Please go ahead.
Good morning. three questions, if I may. The first one with regards to your revaluation gains. Going back, since your IPO, if I'm not mistaken, it's sort of a record level, and it's like CHF 7 per share. Can you give us please some more flavor on what you expect, where we go from there going forward?
Maybe comparing the discount rate and transactions yields, can you confirm that you still will be able to sell sort of prime assets in your portfolio at the premium, towards your upward revised book values? The 2nd question is with regards to your vacancy rate guidance. You fine-tuned this, and you communicated earlier it's rather back-end loaded this year, and we are currently at 3.1%.
Can you please give us some more granularity with your expected quarterly development, so towards Q3 and Q4, and sort of in which months will you be able to have a better visibility on where we stand towards the end of the year? My last question is with regards to COVID-19. Still a topic, unfortunately.
Can you just explain briefly why your rent collection is at 99%, but your receivables increased to CHF 9 million? I think you still have some open cases in front of the court. If you could just give us please an update on your current legal situation, maybe in general for Switzerland. What's your view on that? Thank you.
Thank you, Pascal. On the valuation gains, yes, you're right, it's the highest half-year valuation gain since the IPO. It's predominantly CBD-driven, CBD Zurich and CBD Geneva. It's a combination of yield compression and clearly also in some cases, letting successes. As we saw in Q1, completion of development projects.
If you look at the transaction market, we can say this has also been said by the valuer, it's based on transactional evidence. To your question on premium, we have sold in the first half of the year an asset in Zurich at the 60% premium. Clearly, it's linked to a project and a partial redevelopment case. If I look at the transactional evidence, I think on the single asset basis, from a pure theoretical point of view, we think that we could sell still at the premium.
Now, how you would translate that through the portfolio and the read across. I think it's not on us, but we feel comfortable on the value set by the valuer based on what we see on the market. On the other hand, we have also to see that we went with our yields over the last year quite a long way.
We are, I wouldn't say priced at market, but we are priced at market. With regard to the vacancy rate guidance, we are typically not doing now quarterly forecasts, but you're right, it's back-end loaded towards Q4.
If I have to guess, say that Q3, we are somewhere around perhaps 3.5%, and then we see certain expiries, which we have already highlighted in Q4, which we know that we will not be able on such a short notice to fill up, because in some cases we have to fill back or rebuild back the space.
For the year-end, we have a little bit of an increase on the vacancy, but we are comfortable that we should be below at 4.5%. With regard to the rent collection, the 99% are based on the ones which are not at risk and excludes the receivables in that case.
We have started with a CHF 5 million receivable line on Q1, and we are now at CHF 9 million, but we are pretty confident also with the recent legal court case that the rent is due, that we are in a good position in our current negotiations. I think here that's already embedded also in our forecast.
I think we are well-positioned. You might be aware about the recent court case in Zurich, where a judge clearly stated that the rent is due also in a COVID phase. What other cases might follow, we don't know, but this is the first, I would say, important case we have seen. Is that okay, Pascal?
Yes, perfect. Thank you.
Thank you.
The next question comes from Ken Kagerer from ZKB. Please go ahead.
Yes. Good morning, everyone. I have a couple of questions. First one is related to the financing profile. I've seen that you have two private placement maturities of CHF 114 September and CHF 115 December. What can we expect there in terms of interest rate development, in your opinion, and where do you see the average loan maturity profile going in the midterm? That's the first one.
The second one is related to the expiry profile of rents. I mean, we all know in 2022 and 2023 you have a kind of increased maturity situation. Did you work already on those maturities, and could you achieve some successes? Where do you think the vacancy rate might go in 2022? I know it's early, and you typically don't like to talk too early about that, but maybe you can give us a hint on that.
The other one, the third one, is on the transaction market, where I would like to ask if you still find at those levels that we are seeing at those price levels attractive opportunities to buy in prime locations, or if you're withdrawing from the transaction market in the current environment. Could you give us some flavor there? The last one is actually on the dividend situation.
I have realized that you have already achieved quite high EPS contribution in the first half. EPRA EPS at CHF 2.2, and adjusted EPS is at CHF 2.45. Can we expect a dividend increase in the range of CHF 0.05-CHF 0.10 as we basically were used to in the recent past, or could you imagine that there might come a larger step in terms of dividend payout? Thank you very much.
Thank you, Ken. With regard to the financing part here, yes, we have the CHF 140 million private placement coming up in September and the CHF 150 in December. As we stated, we have roughly CHF 1 billion of unused credit lines, we don't need to tap into the market. The market for us is interesting to get duration.
If you have now a duration of five-year, clearly we try to look at 7, 8, 9, or 10-year bonds, and this would increase a bit our duration. We look at the traditional credit market, as I said. We look at the traditional capital market. We look also at a bit more innovative solutions. Here we try clearly always to be a bit best in class and further reduce our marginal cost of debt, which is currently at 37 basis points.
The aim is with these two renewals to be even lower at an all-in cost of CHF 37 and be net higher than the five-year average duration we have. With regard to the renewals of the contracts, clearly we are, I would say, well ahead on the 2022, 2023. There's a very large maturity in 2022 we have already talked about. Here we are confident that we will prolong that contract. We are obviously always in discussion negotiations, but this is by far the largest one for 2022.
In 2023, the largest one is in Basel. Here we have a repositioning project which we're working on, where we aim to try to get an additional value by repositioning the asset, and the remaining parts, and the renewals are in a magnitude of CHF 1 or below CHF 1 million of rental income.
If you look at the 2022 and 2023, it's a very quite diversified renewal pattern. Here, unfortunately, I cannot give you a vacancy indication, but we are confident that we will be below or at our structural vacancy. We have, I would say, a very solid setup, good assets, and we're working towards keeping a reasonable low vacancy rate.
The vacancy rate guidance, if you don't mind, we'll provide beginning of the year. With a rent contract which can be canceled with a six-month notice, it's very difficult to give a guidance 18 months ahead.
I get that. Sorry. Could you just remind us about the structural vacancy rate in your portfolio?
It's the structure set by the Wüest Partner is 5%-5.5%. Don't pick me that I said we expect 5%-5.5% vacancy rates. I know the question. We are now on a 3.1%. We said we are below 4.5%. Our aim is to be on that range, but it's too early now to give a vacancy guidance for next year. We have a very solid portfolio.
We have a very high cash flow visibility. I think, as you said, this leads me to your last question, and then I will take that one of the market transaction, the dividend. As you said, we have an EPRA EPS of CHF 2.20, and we base our dividends on the EPRA EPS. We have a very good visibility that we will be with our dividend path below our EPRA EPS.
You know also from historical views that we are a bit against erratic dividend payments. We prefer high visibility, slightly continuous growth. I would, as far as I can, it's in the judgment of the board, but I would today exclude that we have any special dividends coming up.
CHF 0.10 step is the most realistic probably then.
I would say if you look on the past, we had CHF 0.05 increases. What it will be then next year, we will see. It's important that we show a continuous good dividend growth. The visibility we have for the next, I would say three to five years, is that we can continue on that dividend growth pattern. On the transaction market, it depends really on the asset.
Last year, we bought Hôtel de Banque in Geneva, and we were very happy that we bought that asset, and we had already a very good letting success. We are, I would say, on plan with our repositioning of the asset, and clearly that's something we look at. Prime with some expected vacancies, with a sale and partial leaseback. There we are bidding.
We are not withdrawing from the market, but we invest if we think that we can create value over time. We are not just buying for the yield differential. Clearly we are on the market, we are on the acquisition side, we look at the market, and we are also active on continuously cleaning up the portfolio where we can achieve perhaps substantial premiums on a B+ asset and then reinvest that if we have the opportunity on a prime asset.
Excellent. Thank you very much.
Thank you, Ken Kagerer.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Andreas von Arx from Baader. Please go ahead.
Good morning. Thank you for taking my questions. Could you elaborate maybe a bit more on the CHF 70 million revaluation gains you had on your development portfolio? If that is just also discount driven or just on the developments or maybe some flavor on single developments that have seen significant revaluations? First question.
Second question is also on the revaluations. I think everybody is a bit surprised given the high number, especially since this seems to be at the high end compared to what we have seen at more residential-focused players.
I think the general market expectation is that residential prices have increased significantly and probably commercial prices a bit less given the home office discussion. Your insights into that theme would be of interest to me. The third question is on Zurich North. If you could give an update here.
I've noticed that you expect to re-let one of your properties relatively quickly in Wollishofen, whereas for the other one, you continue to see low demand. A, what is the difference between the two and how do you see the situation in Zurich North in general? Thank you very much.
Thank you very much for your question. On the CHF 70 million development, it's basically on two assets. The one we have already disclosed in Q1, which is the building in Hardturmstrasse, Förrlibuckstrasse, the Atmos, which contributed almost half to it. The secondly is basically the completion of the Bahnhofplatz/Waisenhausplatz.
We're typically not disclosing single assets valuations, but if you look on the development pipeline and you see that we will deliver, and we already delivered, floors to the tenants. It's a fully let complex, and clearly here, risk probably was taken out by the valuer on the development side, and there was more discount rate reduction on this prime asset at completion, fully let building. I would say this is the source of the CHF 17 million.
On the general comment on the valuation, if you look, for instance, on page 56, 57, and 58, and you look on where the assets are, which we own, and then compare that with transaction evidence in those locations, I think this explains why the valuer adjusted yields. Overall, we had a yield compression of roughly 10 basis points, and this has this contribution to the valuation.
I would say it's pretty much that, and I would now compare that with residential portfolios. Our understanding is that there is enough transactional evidence and demand for prime assets at that locations with this rental income pattern, and investors are ready to pay those yields. The valuer has to adjust.
If I may. No question about that, would you then say it's fair to say that your significant revaluations are really very much driven just by the central locations, and that already, let's say, at secondary locations like Zurich North, maybe even Zurich West, the revaluations then are already less, or would that be not a fair picture? Thank you.
It's absolutely a fair picture. You see a bifurcation in the market. I would exclude now Zurich West from this, but there's a bifurcation between CBD and non-CBD, on the yields and on the valuations. Also we had negative valuation changes in our portfolio, and those are linked more than on the assets, as you mentioned, for instance, Zurich North or on perhaps more B+ locations or with some expected vacancies coming up.
The prime ones, and this is then defined also by the quality of the portfolio, had a disproportional high contribution. Zurich West, I would see on the positive side due to the demand also on the letting side. We have seen that also in our valuation gains on Atmos, which had a significant contribution especially in Q1. On your comment on Zurich North.
Here we are in letting discussion for half of a floor on the Richtistrasse 11. That's correct. The demand on Zurich North is rather limited. We are marketing the floors. We are considering also repositioning of certain assets, but the overall area has an oversupply, and it's not only, I think, the rent level, it's really just too much product out there.
Luckily, we have a limited amount of surface available. Clearly, it's always popping up, but if you have a 3% vacancy, the last ones pop up, but I can promise you that we are working on it. We try to let it. We consider also repositioning of the area of single assets. Yes, it's half a floor we are close to let. In others, we are slightly in discussions, but the demand is rather limited.
Thank you.
Thank you.
For any further questions, please press star and one on your telephone. There are no more questions at this time.
I would like to thank you, everybody, for participating, and I look forward to the exchange over the next couple of weeks and wish you a nice day and a happy weekend. Thank you. Bye-bye.
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