PSP Swiss Property achieved very good operating results and confirms the guidance of an ebitda of CHF 300 million and a vacancy rate below 4% for the 2024 business year.

Real estate market

The portfolio of PSP Swiss Property reflects a specific segment of the property market in Switzerland: commercial properties in central locations in the main economic centres. The demand for attractive rental space remained stable in this segment, especially in the city centres of Zurich and Geneva. By contrast, the market for older office properties in B and C locations and non-food retail spaces in secondary locations remained challenging.

The transaction market for attractive properties in good city-centre locations hardly changed in terms of prices and initial yields in the reporting period. Required yields for such investment opportunities remained low. Properties with high cash flow visibility are the most preferred. There is hardly any pressure to sell such assets and, consequently, there are only few buying opportunities. However, investors expect higher returns than in the past for properties in peripheral locations and for properties with poor sustainability profiles.

Real estate portfolio

At the end of H1 2024, the value of the real estate portfolio was CHF 9.7 billion (end of 2023: CHF 9.6 billion) and the vacancy rate was 4.0% (end of 2023: 3.6% resp. end of Q1 2024: 4.1%). The portfolio included 157 investment properties. In addition, there were two sites and eight development properties.

As of 28 June 2024, a commercial property with a letting area of around 5 000 m² located in Geneva’s "Quartier des Banques" district was bought for CHF 58.0 million. Six smaller investment properties in secondary locations were sold for a total of CHF 82.5 million as part of the ongoing portfolio optimisation during the reporting period. The sales proceeds exceeded their last valuation by CHF 11.3 million (16.1%). The last residential unit in the “Residenza Parco Lago” development project in Paradiso was already sold in Q1 2024 for CHF 3.5 million.

Overall, revaluations of the properties by the independent external valuation expert resulted in an appreciation of CHF 44.7 million in the reporting period (of which CHF 31.2 million were already recognised in Q1 2024). Of the total revaluation, CHF 33.4 million were attributable to the investment portfolio and CHF 11.3 million to sites and development properties; the revaluation of the property purchased in Geneva at the end of June 2024 also had a positive effect. The revaluation in Q1 2024 was due to property-specific factors for three investment properties and one development property. There were also selective changes to the discount rate and market rent as a result of lettings. The weighted average discount rate for the entire portfolio remained unchanged at nominal 3.85% as at mid-2024 (end of 2023: 3.85%).

Of the lease contracts maturing in 2024 (CHF 31.3 million), 7% were open at the end of H1 2024. The wault (weighted average unexpired lease term) of the total portfolio was 4.7 years at the end of H1 2024. The wault of the ten largest tenants, contributing 25% to the rental income, was 5.5 years.

Consolidated half-year results

The operating result, i.e. net income excluding gains/losses on real estate investments, decreased by CHF 36.9 million or 24.5% to CHF 113.6 million (H1 2023: CHF 150.5 million). The previous year's result for H1 2023 was impacted by the release of deferred taxes of CHF 30.6 million (H1 2024: CHF 3.4 million). Rental income increased by CHF 12.9 million or 7.9% to CHF 176.2 million in the reporting period (H1 2023: CHF 163.3 million). Lower income from the sale of development projects and condominiums by CHF 9.7 million, lower capitalised own services by CHF 1.7 million, a CHF 0.4 million increase in operating expenses and a CHF 8.5 million increase in net financing costs had a negative effect. The reason for the higher financing costs is the increase in market interest rates since autumn 2022. However, it should be noted that financing costs were still low in relative terms, with an average cost of debt of 0.95% over the last four quarters (end of 2023: 0.72%).

Earnings per share excluding gains/losses on real estate investments, which form the basis for the dividend distribution, amounted to CHF 2.48 (H1 2023: CHF 3.28).

Net profit reached CHF 156.3 million (H1 2023: CHF 76.9 million). The increase by CHF 79.4 million or 103.2% was due in particular to the portfolio appreciation of CHF 44.7 million (in H1 2023, there was a devaluation of CHF 90.7 million). Earnings per share amounted to CHF 3.41 (H1 2023: CHF 1.68).

Equity per share (net asset value; NAV) amounted to CHF 113.35 at the end of H1 2024 (end of 2023: CHF 113.82). NAV before deduction of deferred taxes totalled CHF 134.30 (end of 2023: CHF 134.48). It should be noted that a dividend distribution of CHF 3.85 gross per outstanding share was made on 10 April 2024.

Capital structure

With total equity of CHF 5.199 billion at the end of June 2024 – corresponding to an equity ratio of 53.4% – the equity base remains strong (end of 2023: CHF 5.221 billion or 53.3%). Interest-bearing debt capital amounted to CHF 3.435 billion or 35.3% of total assets (end of 2023: CHF 3.466 billion or 35.4%). At the end of June 2024, the passing average cost of debt was 1.02% (end of 2023: 0.91%). The average fixed interest rate was 3.9 years (end of 2023: 3.9 years).

At the time of publication of this report, PSP Swiss Property had CHF 0.975 billion in open credit facilities, of which CHF 0.745 billion were committed.

PSP Swiss Property Ltd has an Issuer Rating A3 and a Senior Unsecured Rating A3 (outlook stable) from Moody’s.

Outlook

In the market segment relevant to PSP Swiss Property, especially in the economic centres Zurich and Geneva, demand for office and retail space is expected to further improve slightly. The Berne letting market remains stable, whereas the market in Basel is more difficult.

Rental income in the 2024 business year is expected to be higher than in 2023, mainly thanks to properties purchased. Further reasons are the indexation of rental agreements to inflation, increasing turnover-linked rents as well as additional rental income from completed development projects. Income from the sale of development projects and condominiums will decrease compared to last year, while operating costs are expected to remain stable. Financial expenses will increase compared to 2023 for known reasons.

Ebitda excluding gains/losses on real estate investments is still expected to be CHF 300 million for the 2024 financial year (2023: CHF 297.7 million). The vacancy rate is still expected to be below 4% at the end of 2024 (end of June 2024: 4.0%).

Key financial figures

Unit

2023

H1 2023

H1 2024

+/-¹

Rental income

CHF 1 000

331 905

163 339

176 201

7.9%

EPRA like-for-like change

%

5.1

5.0

5.0

Net changes fair value real estate investments

CHF 1 000

-161 261

-90 712

44 697

Income from property sales (inventories)

CHF 1 000

14 012

10 312

568

Income from property sales (investment properties)

CHF 1 000

910

910

11 288

Total other income

CHF 1 000

7 000

3 397

1 751

Net income

CHF 1 000

207 595

76 916

156 329

103.2%

Net income excl. real estate gains²

CHF 1 000

339 213

150 522

113 599

-24.5%

Ebitda excl. real estate gains

CHF 1 000

297 742

150 470

152 302

1.2%

Ebitda margin

%

84.4

85.0

84.9

Total assets

CHF 1 000

9 786 900

9 737 644

-0.5%

Shareholders’ equity

CHF 1 000

5 220 722

5 199 117

-0.4%

Equity ratio

%

53.3

53.4

Return on equity

%

4.0

3.0

6.0

Interest-bearing debt

CHF 1 000

3 465 833

3 435 459

-0.9%

Interest-bearing debt in % of total assets

%

35.4³

35.3

Portfolio key figures

Number of investment properties

Number

162

157

Carrying value investment properties

CHF 1 000

9 046 911

9 086 379

0.4%

Implied yield, gross

%

3.6

3.7

3.8

Implied yield, net

%

3.2

3.3

3.4

Vacancy rate (CHF)

%

3.6

4.0

Number of sites and development properties

Number

11

10

Carrying value sites and development properties

CHF 1 000

560 582

578 656

3.2%

Headcount

Employees/FTE

Number

101/90

98/87

Per share figures

Earnings per share (EPS)⁴

CHF

4.53

1.68

3.41

103.2%

EPS excl. real estate gains⁴

CHF

7.40

3.28

2.48

-24.5%

EPRA EPS⁴

CHF

7.17

3.11

2.46

-21.0%

Distribution per share

CHF

3.85⁶

n.a.

n.a.

Net asset value per share (NAV)⁶

CHF

113.82

113.35

-0.4%

NAV before deduction of deferred taxes⁶

CHF

134.48

134.30

-0.1%

EPRA NRV⁶

CHF

137.10

136.98

-0.1%

Share price end of period

CHF

117.60

115.30

-2.0%