PSP Swiss Property AG ($PSPN)

Ladies and gentlemen, welcome to the PSP Swiss Property Q1 2026 Results Conference Call. My name is [ Youssef, ] the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] 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, and good morning, everybody. Welcome to this short presentation and Q&A, as always, in the Q1 and Q3. I will limit myself to some headline updates and then leave the room for the questions. Today, we reported a very solid Q1 results in line with our expectations. We show a solid top line growth, very stable cost base, basically very line and very predictable. The like-for-like growth was 0.6%. If you take out the one-off on the cost of last year and [indiscernible], the like-for-like would have been 1.7%. And that's also what we roughly guide for the full year, around 1.5%, 1.8% on the like-for-like. The letting and transactional market is unchanged since we last speak end of February 2026, it's very supportive to our strategy. And what we observed is that our strategy to focus on the prime assets, the primary cities is certainly the winning one. Letting success in the first quarter led to an appreciation of one property on the Lowenbrau. As you recall, we normally value the portfolio twice a year. But if we have a significant letting success, which has an impact on assets of more than CHF 5 million, we have to value that asset by the valuer. This was the case in Lowenbrau and resulted in a valuation uplift of more than CHF 13 million. On the projects, and we will come into that in the Q&A, I'm sure, everything progresses as planned. especially nice is the development on the [indiscernible] Bank, which if you look at the whole site, which is more than 35,000 square meters, we are basically let. We are left with the 2 Petitot buildings, which make up roughly 2,500 square meter. We confirm our outlook on the vacancy rate of 3.5%, and we confirm our EBITDA guidance of CHF 310 million for the full year. With that, I would hand over to the Q&A.

[Operator Instructions] Our first question comes from Ken Kagerer, ZKB.

I've got 3 questions, very short ones. First one, what did you pay for the Wallisellen asset that you acquired during Q1?

This was a very small amount in the single digit.

Okay. Second one, could you give us a timing on the Wallisellen sales? And could you also tell us if this goes through, would you issue a press release? Or would this just come with the H1 results as a general communication?

I would confirm what I said end of February that we are in negotiations on this disposal that it is probable and likely that we have a chance to get through by midyear. However, we are in full negotiations. So visibility is not guaranteed. And I also said that if this transaction would go through, this would have an impact on the EBITDA guidance, and this would appear with the closing of the transaction. If this happens before the midyear or after midyear's results, I cannot tell you.

Okay. And the third and last one, how will you deploy the cash that you will receive from the potential sale of the Wallisellen assets?

In those situations, I think our overall funding strategy is pretty simple. Whenever we have a cash inflow coming it for rental income, coming it from disposals, it will go against that. So this is the normal procedure.

Our next question comes from Tommaso Operto, UBS.

I have just 2 questions. First, maybe if you could elaborate a bit on the vacancy reduction. How do you get from the 3.9% to 3.5%? And then secondly, on Lex Koller, could you share maybe your view on what the impact could potentially be with all the -- all that's happening on the political front, especially geared to Lex Koller?

Thank you Tommaso. Well, on the letting, we have already several letting successes, which start Q2, Q3, Q4, which give us the visibility that we are currently in line with getting to this 3.5%. These are a variety of lettings in Zurich, starting from the [indiscernible] but also letting successes which we have in Basel in 2 instances in Lausanne, in Geneva. So I think this is based on actual letting successes plus visibility on expiries, which we, at this point, are comfortable to get to this 3.5%. On the next call, if that's okay, I think in general, what we have to keep in mind that's nothing new. We are confronted with this topic since 2013. In various instances, we had 4 or 5 such motions and initiatives. They had a lifetime from a few months to 13, 14 months on the political process. So this is clearly always unpleasant because it creates uncertainty, but it's completely misguided to the subject. The federal government issued also -- asked an expert party to issue a broadly established study on potential implication. The findings of this study were clear that these measures have really no -- no source and no reasons to help to the residential market. This was issued by land partner. The federal government account anyway issued this consultation phase. In our view, it is a political exercise. But we have to keep in mind that technically, this is a very long political process, also linked to most likely the popular initiative of the CHF 10 million Switzerland. So we are clearly following that very closely. We are talking to political exponents. But in our view, it is very, very unlikely that this goes through. And please keep in mind, as we always said in 2013, in 2017, 2020. 2022 this takes -- it's a political process, which takes several years to go through all the upper house and lower house, and it always vanished. So from today's point of view, we take it very seriously. But the last proposal is completely disconnected with the fundamental issue on the real estate market.

Next question comes from Holger Frisch Zurcher Kantonalbank.

I have 2. First one would be an add-on on the Wallisellen. So with the release of the full year results, you said that you are in final negotiations on 2 linked transactions, the disposal and the potential acquisition. So now you're talking about the sales negotiations. So I would be interested what is the current status of the potential acquisition? Are we still talking about 2 linked transactions?

No, no, go ahead.

Okay. Second one would be about the fixed interest period, which has now fallen to 3.1 years. If I recall correctly, you want to consider the range of 3.5 to 4.5 years to be comfortable with. So currently being below that range, does the range still apply? Or do you intend to continue deliberately going for short-term financing?

Thanks Holger. To the first one, can I ask only about the disposals, I answered only about the disposals. It's clear that we look at both transactions and we are negotiating on those transactions. And that for us, this is rather a combination of the transactions. The second, we did 2 taps and end of the first quarter to lengthen a bit. It's -- I would say, it's clearly an objective, but it's not a fixed target. We are always very opportunistic on the capital market. We look at when is probably a better time to issue. If you look today, Amazon is coming out with a jumbo issue. So it's probably likely that we wait for a few weeks to have the volume passed, and we are not so [indiscernible] it's now 3.1 or 3.4 years. But clearly, if you look historically, we had besides a few years where we are below 3 years, 3.5 years is a period we like. But I think we very much look also on how the market looks like.

Our next question comes from Matteo Lindauer, Vontobel.

I've got a question on the open maturities of 11%. Can you give us some more information on what kind of spaces are still open to be renewed? And any new information regarding the progress on the 2027 renewals?

If you start with the second one, the biggest expiry is the Google one, [indiscernible] which we mentioned already a couple of times we are finalizing the extensions. There is nothing, I think, more to add that, but the largest one. We have another expiry, which is a smaller one, which is on the [indiscernible], which will move out mid of next year. But also there, we are already in discussions. So for '27, there's nothing really material, I would say, to come up. With the expiries of the end of this year, well, the one which has no impact on the vacancy rate in Q3, the Rothschild Bank, that this building will be then reclassified and has been fully let. The same is true for the [indiscernible]. We have some expiries coming up in [indiscernible]. We have some expiries coming up in -- one in Basel, but there's nothing really, really material, which I would say gives us a sense that we cannot get to our 3.5% target from today's point of view.

[Operator Instructions] Our next question comes from Thomas Rothaeusler, Deutsche Bank.

Just a general question on -- actually on the Middle East conflict and potential impact on the Swiss economy and real estate sector, particularly. I mean, do you see any specific risks, I mean, upside or downside for Switzerland?

Well, it's a complicated question because we definitely don't feel too much at the moment. So I think there could be examples where some players benefit, others suffer. I think it's really a mix of exponents. If you look at the trading companies, probably they benefit a bit also some luxury hotels destination when there were conventions. If you look at our tenant base at the moment, we don't feel it. We don't see it on the -- also on the capital market interest rate level. It's not even not a big topic, I have to admit. But clearly, we are -- I think our business model with also the low debt level with a very concentrated portfolio in inner cities with, on average, smaller floor plates. If you think our average tenant lease is 500, 600 square meters. So the impact of such shocks is always much more limited than perhaps other instances where they have bigger exposure. So that's something we don't feel currently. And it's also difficult to monitor. But when we talk about tenants, we don't get the same that our tenants are in the first line of action.

Our next question comes from Rene Locher, ODDO BHF.

I have 2 questions. So the first one on Slide 4. You are mentioning the low transaction for prime assets at Google. I was wondering if you could give us a little bit of feel where the yields are in Geneva and perhaps also in Zurich. And then the second question is on Slide 34, might be a little bit a beginning question, but the actually the potential rental income of roughly CHF 19.5 million and then [indiscernible] expected to be earned full year 2026, CHF 5.1 billion. So that means that target rent here is CHF 5.1 million in 2026. And just in this context, I was wondering how do you think about the Capital Markets Day, just a little bit of a longer-term view, let's say, out to 2028 or 2030.

Thank you very much. On the first question, on Slide 4 and the yields, if we look at the recent transactions, and please keep in mind that on prime, the transactions are very limited, not because there are no potential buyers, but there are almost no sellers. But the recent transactions we have seen were at 2 or below. So I think for a mature stabilized asset, those are the yields, the transactional yields. But then it depends always on the certain circumstances. If you look on the Slide 34, that's basically the rental income already earned within the portfolio. If you look historically, we always disclose on how much rental income those development projects are delivering. And if you look on the overall portfolio, clearly, buildings in [indiscernible] will contribute to the bottom line. This is then the additional one would be CHF 14 million. With regard to your question on the capital markets outlook '28, '30, I would kindly ask back what specific do you mean, interest rates, transactions, issuance, deployment.

Yes. No, no. I mean you have to make your projections. I mean, where do you think where your portfolio, how it will grow? And what are the yields expenses, EBITDA guidance?

I think if you look, I think forward, you can pretty much take a bit our historical track record. The company has been built in a way that we clearly, on the one hand, benefit from inflation development. So you take the inflation outlook. You have this as a top line. You have an embedded like-for-like growth due to the appreciation of the locations. And this is our view that our locations, especially in Zurich, Geneva and then will benefit. So we should have an embedded like-for-like growth in that. Besides the project pipeline you see in 34, we are working on several projects within the portfolio which will come up probably after the period in '29, '30, '31. There are projects we are working on in [indiscernible], the projects we are working on in Zurich closer to [indiscernible], but then also predominantly to invest. So I'm absolutely not worried about the growth trajectory of the company. Plus if you look historically, we were always an opportunistic buyer when there was stress in the system. We bought for more than CHF 700 million assets, prime assets in the last 5, 6 years. So I'm convinced that we will find those opportunities and continuously grow the portfolio, grow the top line and try to keep the cost base stable to really enlarge the EBITDA margin by keeping a very solid balance sheet. And I think that's something which you should and could expect from us. In which year exactly this happens, I think this is the approach we choose because at the end, we need with those projects and acquisitions, we need to create value, and so we need to acquire value.

Our next question comes from Eleanor Frew from Barclays.

Just a quick one. Can we have some thoughts on the Geneva market specifically? You noticed that the vacancy rate there increased like-for- rent growth. I appreciate there was a one-off. So maybe some thoughts on the underlying growth there and the market moving forward.

Eleanor I apologize, but I got a couple of words, but I didn't get really the question, but it was more probably sound specific.

Sorry, any better -- can you hear me now?

Yes.

Some thoughts on the Geneva market specifically, noting that vacancy rate increased the like-for-like growth was negative. I appreciate there was a one-off. So maybe some thoughts on the underlying growth and thoughts on the market in Geneva moving forward.

Well, Geneva is a super market for us, I have to admit. I have to say the like-for-like was exclusively driven by a cost benefit last year, which was this property tax free up we got for 6 years. But overall, the Geneva market, we had an excellent letting in [indiscernible], which is now basically fully let in [indiscernible]. We have let [indiscernible]. So we are letting well. We had a little vacancy increase in Q1 in [indiscernible] which tenant moved down. We have immediately relet this space. So we are very positive on the letting for our Geneva portfolio. We had -- I think the very positive one-off, it's a bit always the one-offs drag over the next quarters. So this year is a negative, but last year was a positive, but this is -- we are... [indiscernible]

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Giacomo Balzarini for closing remarks.

Thank you very much to everybody for listening in. We are available for any further questions, and I'm sure we'll see each other on the next couple of weeks, and I wish you all a very good day. Thank you. Bye-bye.

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