PSP Swiss Property AG (PSPN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the PSP Swiss Property Update Conference Call. I am Sandra, 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 is my pleasure to hand over to Giacomo Balzarini, CEO of PSP Group. Please go ahead, sir.

Good morning, everybody, and thanks for joining this quick PSP update. As you have seen, we have released a press release Friday night on the disposal of our Richtipark, a project we have been talking since a while since a few years, we are working on a rezoning on redevelopment of the whole site and successfully, we were able to dispose it on Friday. With that disposal at a price of CHF 175 million, CHF 150 million an immediate payment and CHF 25 million roughly in an earn-out structure, we triggered the EBITDA guidance, and that was the reason why we had to release this announcement. The EBITDA guidance increased by not the CHF 40 million because we had it on the books for CHF 110 million, but for CHF 25 million as we postponed the disposal of another development project not because it is a bad one. We had the building permission, but we see further potential to optimize it. And most likely, we will dispose that project in 2027. So Richtipark was disposed on Friday, triggered an increase of the EBITDA guidance, which is new at CHF 335 million. With that, we closed basically 4 years of reposition, redevelopment, a huge success, I think, for us, undermines our focus on super prime, considering really earnings quality, prime office, prime retail, prime commercial, and we're also further strengthening already a very strong balance sheet. I think with that, I'd like to go directly into the potential questions and happy to answer them. Thank you.

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

I've actually got 2. The first one regards the deployment of cash. If I remember correctly, you said you would buy something once you sell the Richtipark. Could you just give us an update here, please?

Well, the deployment of cash is roughly 50%, we will pay back debt with the other 50%, indeed, we did buy an asset also last Friday for a consideration of CHF 75 million. We didn't put it into announcement because it is not EBITDA guidance relevant, and we will provide more details then also in the half year.

And the second one regards on a stand-alone basis now, the lost top line that results from the sale of Wallisellen on a run rate, for example, of 2025?

Yes. We will lose roughly CHF 4 million of net rental income on a full year basis. With the acquisition, we are gaining another CHF 2 million. So net, it is a loss of the run rate of roughly CHF 2 million.

Excellent. And I'm right with my assumption that 50% of the revenue was still taken into your books and the other 50% for the second half are lost then?

Yes. It's -- whatever we got until last Friday is on the books, whatever starts today is lost.

The next question comes from [indiscernible] from SFP.

I have a more broadly question on the rental situation. And could you give there like an outlook at the moment and also in particular with Google, what's going on there?

Thank you. As we outlined in our press release, we confirmed our vacancy rate guidance for the full year. This independently of the disposal and the acquisition. With regard to Google, we have -- as I mentioned in the Q1, we were in advanced negotiations. We had plans to renew by midyear. And so we did. We renewed the rental contract with Google on the Hurlimann side for until 2033 with options until '43 with then also respective early breaks. But the contract with Google on the Hurlimann side has been renewed.

Yes. And for how long, excuse me, I didn't quite catch that.

It was a classical renewal until '23 with option until '43 and then also embedded early breaks.

So '23, you mean...

'33 until '43.

'33, okay. '33 and an option for '43.

[Operator Instructions] The next question comes from Tommaso Operto from UBS.

I have 2 questions, if I may. So first on the earn-out of these roughly CHF 25 million. Could you kind of elaborate what the main conditions are and potentially give -- or how the timing could potentially look? And if you have ideally also some probability weightings? That's the first one. And then secondly, on the unchanged guidance for the vacancy rate, I mean you alluded to it just before quickly, but does it have any impact from -- so now that Wallisellen won't be in the portfolio anymore, do you expect any other properties to kind of have a higher vacancy rate? Or is the entire rest of the portfolio kind of unchanged in that regard?

Thank you, Tommaso. On the earn-out, these are 3 earn-outs, 2 of CHF 10 million and one of CHF 4.75 million. They are linked to project development milestones, attaching a probability, I would say, is not relevant. I think we are confident that the new owner will be able to achieve those milestones as this would mean that he can realize the project. It's a reasonable project. But clearly, they are defined in the, I would call it, the near future. But a reasonable, well documented and very clear milestones linked to that. With regard to the vacancy rate, as a reminder, the Wallisellen vacancy was not part of the vacancy rate. And we don't have other projects or big sites, which would include potential vacancy increase, which we have not talked about. I think we give our vacancy rate guidance for the full year. We thought today, as we did an ad hoc announcement, we have to reiterate our view for the full year. there's nothing else I would say, would add to the vacancy rate, if you don't mind.

Got it. Yes. That's perfectly clear. And just a small follow-up. Does it impact your CapEx plans in any way?

Well, clearly, the development of Richtipark would have meant if we would have done the project a substantial CapEx, which clearly now is not on the table. But for us, as mentioned already a year ago, with the rezoning, we would enter a residential development, which is not in our focus. So clearly, it would free up a potential CapEx, but we didn't really consider to develop it ourselves. We might have continued the project and further improve the project. But it was for us, pretty clear that we will not move into residential development with social housing in this dimension.

The next question comes from Matteo Lindauer from Vontobel.

Just a quick one. Could you give us some more information on the newly acquired property of CHF 75 million?

Yes. We bought an asset in Zurich at Pfingstweidstrasse [indiscernible] which we bought for CHF 75 million and a rental income of roughly CHF 2.1 million which is adjacent to our buildings on Kolinplatz, [ Hotel Ruby ] on this and walking to the [indiscernible] and the main station.

Mr. Balzarini, so far, there are no further questions. Back over to you for any closing remarks.

Thank you very much to everybody for attending this quick call. We appreciate it very much and look forward to further conversation and wish you a nice summer at this point. Thank you. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.