PSP SWISS PROPERTY AG Press release
26 February 2019
Annual results as per 31 December 2018
PSP Swiss Property with solid results and successful letting activities. Proposal for an increased dividend of CHF 3.50 per share.
With CHF 176.2 million, net income (excluding gains/losses on real estate investments) is in line with expectations of the Company. Thanks to the positive development of the demand and supported by the ongoing portfolio optimisation, the vacancy was reduced to 5.0% at the end of 2018 (end of 2017: 8.2%).
Real estate portfolio
At the end of 2018, the carrying value of the total portfolio was CHF 7.442 billion (end of 2017: CHF 7.046 billion). The property portfolio purchased from Edmond de Rothschild (Suisse) S.A. is included since Q1 2018. All properties are centrally located and perfectly maintained. Strategically, this acquisition perfectly fits the existing portfolio of PSP Swiss Property and strengthens its position in particular in the French-speaking part of Switzerland. Furthermore, the land related to a building in Bern was acquired. In spring 2018,the "Grosspeter Tower" in Basel was completed. It has become one of the city's most distinctive buildings with attractive offices and a modern hotel. Streamlining the portfolio, three investment properties and one development project were sold during the reporting period.
At the end of 2018, the vacancy rate stood at 5.0% (end of 2017: 8.2 %). The improvement was mainly due to several new lettings as well as the sale of the property located at Av. des Morgines 8/10 in Petit-Lancy (Geneva). 1.1 percentage points of all vacancies are due to ongoing renovations. Of the lease contracts maturing in 2019 (CHF 31.0 million), 70% were already extended at the end of 2018. The WAULT (weighted average unexpired lease term) of the total portfolio was 4.5 years. The WAULT of the ten largest tenants representing around 30% of the rental income was 6.2 years.
Development projects
The new construction "ATMOS" in Zurich West is on track. The two former buildings located at Förrlibuckstrasse 178/180 and Hardturmstrasse 181/183/185 will be replaced by a modern office building. PSP Swiss Property will invest approximately CHF 130 million in this project, which should be completed by early 2021. The new commercial property (23'600 m2 letting space) will significantly strengthen the positioning in Zurich West. With the lease agreement signed with On, Zurich, an innovative Swiss running shoe brand, 45% of the space is already pre-let.
The renovation work at the property Hardturmstrasse 161, Förrlibuckstrasse 150 in Zurich West will be completed by early 2020. Thanks to its new appearance and modern interior design, this property has already become much more attractive.
Since March 2017, the "Residenza Parco Lago" in Paradiso (Lugano) is under construction. The investment total for this new building complex, consisting predominantly of condominiums, amounts to approximately CHF 80 million. Completion is expected early 2020. All units will be sold.
Following a major fire in August 2018, the clean-up work on the two properties located at Bahnhofplatz 1 and Bahnhofquai 9/11/15 is still in progress (stage 1 of the large-scale renovation project "Bahnhofquai/-platz" opposite Zurich's main train station). At the same time, the necessary planning was started. The still existing façade, which is protected as a historic monument, will be retained, while the buildings will be restored based on their previous appearance. Currently, it is assumed that stage 1 will be delayed by around 1.5 years and re-construction will take until mid-2021. The cause of the fire is still under investigation by the police authorities. Fortunately, stage 2 (under construction) and stage 3 (under review) were not affected by the blaze. Stage 2 (Waisenhausstrasse 2/4, Bahnhofquai 7) will be completed by the end of 2021. The space for stage 2 has already been fully pre-let. Ruby Hotels & Resorts (a German hotel group) will open a 210-room hotel. And Candrian Catering AG will operate an innovative catering concept with approximately 200 indoor and 300 outdoor seats.
Recently, a lease was signed with Aeschbach (a traditional Geneva store) for the remaining retail space at the "Rue du Marché" project in Geneva. As a result, all spaces are now fully pre-let. The comprehensive renovation of this property will last until 2020. The main tenant is the prominent hotel operator citizenM, which will open a boutique hotel with 144 rooms.
Annual results 2018
With the adoption of IFRS 15, Revenue from Contracts with Customers, FY 2017 had to be restated. Revenues relating to condominium sales are now recorded using the so-called percentage-of-completion-method. The application of IFRS 15 did not have any material impact on FY 2017.
In 2018, net income (excluding gains/losses on real estate investments) reached CHF 176.2 million (2017: CHF 177.7 million). The decrease by CHF 1.5 million or 0.8% compared to the previous year resulted mainly from lower income from apartment sales. On the other hand, rental income as well as capitalised own services developed positively, both also related to the portfolio purchase (Edmond de Rothschild). Rental income rose by CHF 6.9 million to CHF 279.4 million (2017: CHF 272.5 million), capitalised own services by CHF 2.0 million to CHF 4.6 million (2017: CHF 2.6 million). Income from apartment sales decreased by CHF 9.1 million to CHF 10.5 million (2017: CHF 19.6 million). Other income increased by CHF 1.2 million to CHF 3.5 million (2017: CHF 2.4 million). Earnings per share (excluding gains/losses on real estate investments), which is the basis for the dividend distribution, amounted to CHF 3.84 (2017: CHF 3.87).
Operating expenses increased by CHF 2.7 million to CHF 58.6 million (2017: CHF 55.9 million). Financial expenses declined by CHF 2.4 million to CHF 22.0 million (2017: CHF 24.4 million).
Net income (including gains/losses on real estate investments) reached CHF 308.2 million (2017: CHF 256.9 million). The increase of CHF 51.3 million compared to 2017 resulted mainly from the portfolio appreciation of CHF 166.7 million (2017: appreciation of CHF 83.3 million). On the other hand, tax expenses increased by CHF 34.6 million to CHF 78.4 million (2017: CHF 43.8 million). In this regard, it should be taken into account that the new lower corporate tax rate in the Canton of Vaud was applied for the first time in 2017. This resulted in a positive effect (release of deferred taxes) in the amount of CHF 17.0 million in 2017. Earnings per share (including gains/losses on real estate investments) amounted to CHF 6.72 (2017: CHF 5.60).
At the end of 2018, net asset value (NAV) per share was CHF 90.63 (end of 2017: CHF 86.96). NAV before deducting deferred taxes amounted to CHF 109.20 (end of 2017: CHF 104.22).
Strong capital structure
With total equity of CHF 4.157 billion (end of 2017: CHF 3.989 billion) - corresponding to an equity ratio of 54.6% (end of 2017: 54.0 %) - the capital base remains strong. Interest-bearing debt amounted to CHF 2.511 billion, corresponding to 33.0% of total assets (end of 2017: CHF 2.491 billion respectively 33.7%). Excluding financial debt invested as fixed-term deposit totalling CHF 125 million, the debt ratio was 31.8%. At the end of 2018, the passing average interest rate was 0.87% (end of 2017: 0.99 %). The average fixed-interest period was 3.0 years (end of 2017: 3.6 years). Currently, unused committed credit lines amount to CHF 820 million.
PSP Swiss Property has ratings from two international rating agencies: Senior Unsecured Rating A- (outlook stable) from Fitch and A3 Issuer Rating (outlook stable) from Moody's.
Subsequent events
Acquisitions: Retroactively per 1 January 2019, three properties in Bern's historic town were acquired for CHF 48 million. Also retroactively per 1 January 2019, the so-called "Carba portfolio" consisting of six properties in Bern-Liebefeld, valued at CHF 180.5 million, was acquired by purchase of shares. Disposals: As per 15 January 2019, the property located at Bernerstrasse Süd 167/169 in Zurich was sold for CHF 31 million. As per 6 February 2019, the property located at Route des Arsenaux 41 in Fribourg was sold for CHF 30 million. And finally, the last freehold apartment on the Löwenbräu site in Zurich was sold for CHF 5.6 million on 16 January 2019. On 8 February 2019, the 1.0% bond of CHF 120 million due was repaid. Also on 8 February 2019, a 0.7% bond with a volume of CHF 100 million and a maturity in 2027 was issued. There were no further material subsequent events.
Material proposals to the Annual General Meeting on 4 April 2019
For the business year 2018, the Board of Directors proposes an increase in the ordinary dividend payment to CHF 3.50 per share (previous year: CHF 3.40). In relation to net income (excluding gains/losses on real estate investments), this corresponds to a payout ratio of 91.1%; in relation to the 2018 year-end share price of CHF 96.85, it corresponds to a yield of 3.6%.
All members of the Board of Directors and the Compensation Committee as well as Mr. Luciano Gabriel as Chairman of the Board of Directors stand for re-election. The Audit Committee and the Compensation Committee shall consist of the same four current members: Peter Forstmoser, Adrian Dudle, Nathan Hetz and Josef Stadler; Peter Forstmoser is again foreseen as Chairman of both committees. The Nomination Committee shall also consist of the current three members, Mr Josef Stadler (Chairman), Ms Corinne Denzler and Mr Adrian Dudle.
Furthermore, the Board of Directors proposes the re-election of Ernst & Young AG, Zurich, as statutory auditors for the business year 2019.
Market environment and outlook 2019
PSP Swiss Property expects a good demand for office space. The demand will rather benefit central locations and offices with good transport links. An economic slowdown would be a further drag on the retail sector, whereby shops in peripheral locations would be more affected than those in economic centres. On the transaction market, demand for office and commercial properties will hardly diminish.
The focus of PSP Swiss Property remains on the modernisation of selected properties, the further development of the sites and projects as well as ongoing letting activities. Acquisitions are considered primarily in the strategic investment areas and must be justified by potential added value in the long-term.
For FY 2019, an ebitda (excluding gains/losses on real estate investments) of CHF 250 million is expected (2018: CHF 241.7 million). With regard to the vacancies, a rate of below 5% is expected at year-end 2019 (end of 2018: 5.0%).
Key figures
Key financial figures | Unit | 20171 | 2018 | +/-2 |
Rental income | CHF 1 000 | 272 454 | 279 373 | 2.5% |
EPRA like-for-like change | % | -1.1 | 0.9 | |
Net changes fair value real estate investments | CHF 1 000 | 83 253 | 166 692 | |
Income property sales (condominiums) | CHF 1 000 | 19 614 | 10 484 | |
Income property sales (investment properties) | CHF 1 000 | 627 | 2 472 | |
Total other income | CHF 1 000 | 5 043 | 8 172 | |
Net income | CHF 1 000 | 256 890 | 308 152 | 20.0% |
Net income excl. real estate gains3 | CHF 1 000 | 177 738 | 176 250 | - 0.8% |
Ebitda excl. real estate gains | CHF 1 000 | 242 187 | 241 743 | - 0.2% |
Ebitda margin | % | 81.5 | 80.8 | |
Total assets | CHF 1 000 | 7 384 243 | 7 619 283 | 3.2% |
Shareholders' equity | CHF 1 000 | 3 988 560 | 4 156 908 | 4.2% |
Equity ratio | % | 54.0 | 54.6 | |
Return on equity | % | 6.6 | 7.6 | |
Interest-bearing debt | CHF 1 000 | 2 491 087 | 2 511 212 | 0.8% |
Interest-bearing debt in % of total assets | % | 33.7 | 33.04 | |
Portfolio key figures | ||||
Number of investment properties | Number | 157 | 163 | |
Carrying value investment properties | CHF 1 000 | 6 383 901 | 6 778 932 | 6.2% |
Implied yield, gross | % | 4.2 | 4.1 | |
Implied yield, net | % | 3.5 | 3.5 | |
Vacancy rate end of period (CHF) | % | 8.2 | 5.0 | |
Number of sites/development properties | Number | 12 | 11 | |
Carrying value sites/development properties | CHF 1 000 | 661 892 | 663 174 | 0.2% |
Employees | ||||
End of period/FTE | People | 86/81 | 91/86 | |
Per share figures | ||||
Earnings per share (EPS)5 | CHF | 5.60 | 6.72 | 20.0% |
EPS excl. real estate gains5 | CHF | 3.87 | 3.84 | - 0.8% |
Distribution per share | CHF | 3.40 | 3.506 | 2.9% |
Net asset value per share (NAV)7 | CHF | 86.96 | 90.63 | 4.2% |
NAV per share before deferred taxes7 | CHF | 104.22 | 109.20 | 4.8% |
Share price end of period | CHF | 92.35 | 96.85 | 4.9% |
1 | Restated due to first-time adoption of IFRS 15, Revenue from Contracts with Customers. |
2 | Change to FY 2017 or carrying value as of 31 December 2017 as applicable. |
3 | "Net income excluding gains/losses on real estate investments" corresponds to the net income excluding net changes in fair value of the real estate investments, net income on sales of investment properties and all of the related taxes. Income from the sale of properties which were developed by the Company itself is, however, included in the "net income excluding gains/losses on real estate investments". |
4 | Excluding debt capital invested as fixed-term deposit totalling CHF 125 million: 31.8%. |
5 | Based on average number of outstanding shares. |
6 | Proposal to the AGM on 4 April 2019 for the business year 2018: dividend payment. |
7 | Based on number of outstanding shares. |
Further information
Giacomo Balzarini, CEO · Phone +41 (0)44 625 59 59 · Mobile +41 (0)79 207 32 40
Vasco Cecchini, CCO · Phone +41 (0)44 625 57 23 · Mobile +41 (0)79 650 84 32
Report and presentation are available on www.psp.info
www.psp.info/reports
www.psp.info/presentations
Today, 3pm (CET): conference call held in English
Switzerland / Europe · +41 (0)58 310 50 00
UK · +44 (0)207 107 0613
USA · +1 (1)631 570 56 13
Agenda
Annual General Meeting 2019 · 4 April 2019
Publication Q1 2019 · 7 May 2019
Publication H1 2019 · 15 August 2019
Publication Q1-Q3 2019 · 12 November 2019
Preview
Publication FY 2019 · 25 February 2020
Annual General Meeting 2020 · 2 April 2020
Annual General Meeting of Thursday, 4 April 2019
The Annual General Meeting takes place on Thursday, 4 April 2019, at 3 p.m. at Lake Side, Bellerivestrasse 170, 8008 Zurich (doors opening at 2 p.m.).
The invitation with the agenda items and the proposals of the Board of Directors - including the reply form for ordering an admittance ticket respectively granting power of attorney to the independent shareholder representative - will be sent by post to the shareholders entitled to vote presumably on Wednesday, 13 March 2019. The invitation will also be published in the Swiss Official Gazette of Commerce as well as on www.psp.info and - in a short version - in various Swiss newspapers. Voting instructions to the independent shareholder representative may be given by reply form or by using our internet-based electronic proxy voting system on https://netvote.ch/pspswissproperty. The marked and signed reply form must be transmitted until Tuesday, 2 April 2019, 5 p.m. (CET) at the latest to the share register of the company (areg.ch ag, Fabrikstrasse 10, CH-4614 Hägendorf) respectively the independent shareholder representative (Proxy Voting Services GmbH, CH-8024 Zürich). Electronic power of attorney and voting instructions to the independent shareholder representative as well as possible amendments to the voting instructions must be transmitted until Tuesday, 2 April 2019, 11.59 p.m. (CET) at the latest.
Shareholders entered in the share register as shareholders with voting rights on Monday, 1 April 2019, 5 p.m. (CET), (record date) shall be entitled to participate in and vote at the General Meeting. The share register will be administrated until Monday, 1 April 2019. The share register will be closed from 2 April until 4 April 2019 inclusive.
In so far the General Meeting approves the proposed dividend payment, the payment date is presumably on 10 April 2019, ex-date on 8 April 2019.
Legally binding is exclusively the information contained in the invitation and the reply form, which expressly remain reserved.
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newsbox.ch www.newsbox.ch |
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