Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PSP Swiss Property AG (XSWX:PSPN, Financial) delivered an EBITDA of CHF152.3 million, slightly up from the previous period.
- Rental income increased by 7.9% to CHF176.2 million.
- The company confirmed its CHF300 million EBITDA guidance for the year.
- Property sales gains on investment properties amounted to CHF11.3 million, with an average gain of 16% above book value.
- The company maintained a strong capital base with an equity ratio of 53.4% and a loan-to-value ratio of 35.3%.
Negative Points
- Net income without valuation gain decreased due to a significant one-off deferred tax release in the previous year.
- Net financial expenses increased to CHF16.6 million, with an average cost of debt around 1%.
- The vacancy rate stood at 4%, with significant vacancies in certain properties.
- The market for property sales was not very deep, with only two to three potential bidders for each asset.
- The company faces challenges in the Basel market, with subdued demand and potential difficulties in letting properties.
Q & A Highlights
PSP Swiss Property AG (XSWX:PSPN) Earnings Call Highlights
Q: Could you perhaps talk a bit more about the disposals that you made in Q2? Considering a 16% premium to book value, were the book values perhaps too conservative?
A: These were core assets in secondary locations, ranging from CHF5 million to CHF25 million. The interest rate movement helped potential investors. The market was not deep, with two to three potential bidders per asset. The sales were well-prepared, and the premium achieved does not necessarily reflect a broader portfolio trend. (Giacomo Balzarini, CEO & CFO)
Q: On valuations in general, do you consider that valuations are bottoming?
A: The valuation gains were driven by property-specific items and leasing activities. The data points confirm the valuations in the book, reflecting the market's current state. It's too early to speak of bottoming or ceiling. (Giacomo Balzarini, CEO & CFO)
Q: Can you provide more details on the Geneva acquisition of the Edmond de Rothschild headquarters and your plans to turn it into a hotel?
A: We are considering the best commercial use for the area, which could be a boutique hotel. We have an LOE with a potential hotel operator and are still evaluating options. More details will be provided with the full-year results. (Giacomo Balzarini, CEO & CFO)
Q: Would you consider divesting assets in Basel given the challenging market conditions?
A: We have no short-term disposal plans for Basel. We are negotiating with potential tenants for our larger vacancies. Basel remains a part of our core markets, and we may consider selling single assets in the future. (Giacomo Balzarini, CEO & CFO)
Q: Could you provide an update on the tenants Google and Globus?
A: There are no updates on Google; they continue to lease our spaces. Globus is building out the space they have rented from us, and their CEO will present their concept at our Capital Markets Day. (Giacomo Balzarini, CEO & CFO)
Q: On the Quartier des Banques acquisition in Geneva, what was the motivation of the seller?
A: The seller is concentrating their activities in the Quartier des Banques. The yield after repositioning could range from 3.7% to 4%. The seller's motivation is not entirely clear, but it was an opportunity we could afford. (Giacomo Balzarini, CEO & CFO)
Q: How do you view the current point of the cycle regarding acquisitions or developments?
A: We are long-term investors and do not play the cycle. We take accretive opportunities as they arise, focusing on strong cities and sustainable buildings. Our strategy is not driven by cyclical changes. (Giacomo Balzarini, CEO & CFO)
Q: Could you remind us of your energy intensity ambition and the expected CapEx needed to reach this?
A: We aim to become net zero by 2050 and halve emissions by 2035 compared to 2019. The CapEx needed is already included in our investment plans, with no additional CapEx required. (Giacomo Balzarini, CEO & CFO)
Q: Why is the inflation component in your discount rate still high despite lower inflation expectations?
A: This is a question for the valuer. Adjustments may be made based on sustainable changes observed over a full year. Any reduction in the inflation component would also adjust the expected market rent growth. (Giacomo Balzarini, CEO & CFO)
Q: How do you see the development of home office work affecting office demand?
A: In CBD areas, there is a strong commitment to office spaces. Flexibility is provided by employers, but tenants are back in the office. The optimization process seems to be done, with limited additional supply. (Giacomo Balzarini, CEO & CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
