PSP Swiss Property with very pleasing annual results and successful letting activities. Proposal for an increased dividend of CHF 3.60 per share.
With CHF 256.1 million, ebitda 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 3.5% at the end of 2019 (end of 2018: 5.0%).
Real estate portfolio
At the end of 2019, the carrying value of the total portfolio was CHF 7.982 billion (end of 2018: CHF 7.442 billion). Early in 2019, a number of properties in Bern’s city centre and in Bern-Liebefeld were acquired. As part of the portfolio streamlining process, two properties were sold, one in Zurich-Altstetten and one in Fribourg. In addition, two development projects located at Rue Saint-Martin 7 in Lausanne and at Hardturmstrasse 161/Förrlibuckstrasse 150 in Zurich West were successfully completed and reclassified to the investment portfolio.
At the end of 2019, the vacancy rate stood at 3.5% (end of 2018: 5.0 %). The reduction was the result of several new lettings and the saleof the two properties located in Zurich-Altstetten and Fribourg. 0.7 percentage points of all vacancies are due to ongoing renovations. Of the lease contracts maturing in 2020 (CHF 31.7 million), 85% were already renewed at the end of 2019. The wault (weighted average unexpired lease term) of the total portfolio was 4.2 years. The wault of the ten largest tenants contributing around 30% of the rental income was 5.7 years.
Sites and development properties
At the beginning of the year, the last condominium on the Löwenbräu site in Zurich was sold. Furthermore, two development projects were disposed, one in Uster and one in Geneva. As per the end of 2019, 29% of the units of the “Residenza Parco Lago” residential project in Paradiso/Lugano (completion mid-2020) were sold. A further 13% are reserved.
The new "ATMOS" building in Zurich West is proceeding according to plan. The completion of the office building consisting of around 24’000 m2 rental space is scheduled for the beginning of 2021. One year before completion, "ATMOS" is already fully let. With On (Swiss running shoe brand, renting 62% of the space), Barry Callebaut (leading global manufacturer of chocolate and cocoa products, 16%), Scandit (provider of mobile scan solutions, 14%) as well as Monoplan (architectural office, 4%) and Roots (gastronomy company, 3%) the tenant mix is well-balanced.
Annual results 2019
Net income excluding gains/losses on real estate investments amounted to CHF 215.2 million (2018: CHF 176.2 million). This corresponds to an increase of CHF 39.0 million or 22.1% compared to the previous year. CHF 22.1 million of this improvement refer to the exceptional release of deferred taxes following the lowering of profit tax rates in a number of cantons. In operational terms, higher rental income (+ CHF 11.1 million), increased income from the sale of development projects respectively condominiums (+ CHF 2.4 million), lower operating expenses (- CHF 1.2 million) as well as lower financial expenses (- CHF 2.9 million) contributed to the improved result. Earnings per share excluding gains/losses on real estate investments, which is the basis for the dividend distribution, amounted to CHF 4.69 (2018: CHF 3.84).
Net income reached CHF 453.4 million (2018: CHF 308.2 million). The increase of CHF 145.3 million or 47.1% compared to the previous year resulted mainly from the portfolio appreciation of CHF 244.2 million (2018: CHF 166.7 million) as well as the aforementioned release of deferred taxes. In addition, there was a profit of CHF 15.0 million from the sale of two investment properties (2018: CHF 2.5 million). Earnings per share amounted to CHF 9.89 (2018: CHF 6.72).
At the end of 2019, net asset value (NAV) per share was CHF 97.02 (end of 2018: CHF 90.63). NAV before deducting deferred taxes amounted to CHF 115.82 (end of 2018: CHF 109.20).
Strong capital structure
With total equity of CHF 4.450 billion (end of 2018: CHF 4.157 billion) – corresponding to an equity ratio of 55.4% (end of 2018: 54.6%) – the equity base remains strong. Interest-bearing debt amounted to CHF 2.596 billion, corresponding to 32.3% of total assets (end of 2018: CHF 2.511 billion or 33.0%). At the end of 2019, the passing average cost of debt was 0.73% (end of 2018: 0.87 %). The average fixed-interest period was 4.4 years (end of 2018: 3.0 years). Currently, unused committed credit lines amount to CHF 700 million. An existing credit line of CHF 350 million was recently extended for 10 years at very attractive conditions.
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
Two bonds were issued on 4 February 2020; a 0.00% bond with a volume of CHF 100 million (maturity in 2021) and a 0.15% bond with a volume of CHF 150 million (maturity in 2029).
Material proposals to the Annual General Meeting on 9 April 2020
For the business year 2019, the Board of Directors proposes an increase in the ordinary dividend payment to CHF 3.60 per share (previous year: CHF 3.50). In relation to net income excluding gains/losses on real estate investments, this corresponds to a payout ratio of 76.7%; in relation to the 2019 year-end share price of CHF 133.60, it corresponds to a yield of 2.7%.
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. In addition, the Board of Directors proposes to the Annual General Meeting of 9 April 2020 the election of Mr. Henrik Saxborn as new member of the Board of Directors. Mr. Henrik Saxborn, born 1964, Swedish national, domiciled in Gothenburg, Sweden, Master of Science KTH (Stockholm) in Real Estate Economy, is the CEO of Castellum AB, a listed Swedish real estate company domiciled in Gothenburg with focus on commercial properties. Before that, Mr. Saxborn worked in various positions in the field of real estate asset management and advisory in Sweden (for his biography see also www.psp.info > company > board). 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, Josef Stadler (Chairman), Corinne Denzler and Adrian Dudle.
Furthermore, the Board of Directors proposes the re-election of Ernst & Young AG, Zurich, as statutory auditors for the business year 2020.
Market environment and outlook 2020
PSP Swiss Property does not expect any significant changes in the letting, neither for offices nor for retail space in prime locations. Demand will remain strongest in central and easily accessible locations, while marketing and letting in peripheral regions will stay difficult.
The focus of PSP Swiss Property remains on the modernisation of selected properties, the further development of sites and projects as well as ongoing letting activities. Acquisitions are considered primarily in the strategic investment areas.
For the business year 2020, an ebitda excluding gains/losses on real estate investments of above CHF 260 million is expected (2019: CHF 256.1 million). With regard to the vacancies, a rate of below 3.5% is expected at year-end 2020 (end of 2019: 3.5%).
With CHF 256.1 million, ebitda 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 3.5% at the end of 2019 (end of 2018: 5.0%).
Real estate portfolio
At the end of 2019, the carrying value of the total portfolio was CHF 7.982 billion (end of 2018: CHF 7.442 billion). Early in 2019, a number of properties in Bern’s city centre and in Bern-Liebefeld were acquired. As part of the portfolio streamlining process, two properties were sold, one in Zurich-Altstetten and one in Fribourg. In addition, two development projects located at Rue Saint-Martin 7 in Lausanne and at Hardturmstrasse 161/Förrlibuckstrasse 150 in Zurich West were successfully completed and reclassified to the investment portfolio.
At the end of 2019, the vacancy rate stood at 3.5% (end of 2018: 5.0 %). The reduction was the result of several new lettings and the saleof the two properties located in Zurich-Altstetten and Fribourg. 0.7 percentage points of all vacancies are due to ongoing renovations. Of the lease contracts maturing in 2020 (CHF 31.7 million), 85% were already renewed at the end of 2019. The wault (weighted average unexpired lease term) of the total portfolio was 4.2 years. The wault of the ten largest tenants contributing around 30% of the rental income was 5.7 years.
Sites and development properties
At the beginning of the year, the last condominium on the Löwenbräu site in Zurich was sold. Furthermore, two development projects were disposed, one in Uster and one in Geneva. As per the end of 2019, 29% of the units of the “Residenza Parco Lago” residential project in Paradiso/Lugano (completion mid-2020) were sold. A further 13% are reserved.
The new "ATMOS" building in Zurich West is proceeding according to plan. The completion of the office building consisting of around 24’000 m2 rental space is scheduled for the beginning of 2021. One year before completion, "ATMOS" is already fully let. With On (Swiss running shoe brand, renting 62% of the space), Barry Callebaut (leading global manufacturer of chocolate and cocoa products, 16%), Scandit (provider of mobile scan solutions, 14%) as well as Monoplan (architectural office, 4%) and Roots (gastronomy company, 3%) the tenant mix is well-balanced.
Annual results 2019
Net income excluding gains/losses on real estate investments amounted to CHF 215.2 million (2018: CHF 176.2 million). This corresponds to an increase of CHF 39.0 million or 22.1% compared to the previous year. CHF 22.1 million of this improvement refer to the exceptional release of deferred taxes following the lowering of profit tax rates in a number of cantons. In operational terms, higher rental income (+ CHF 11.1 million), increased income from the sale of development projects respectively condominiums (+ CHF 2.4 million), lower operating expenses (- CHF 1.2 million) as well as lower financial expenses (- CHF 2.9 million) contributed to the improved result. Earnings per share excluding gains/losses on real estate investments, which is the basis for the dividend distribution, amounted to CHF 4.69 (2018: CHF 3.84).
Net income reached CHF 453.4 million (2018: CHF 308.2 million). The increase of CHF 145.3 million or 47.1% compared to the previous year resulted mainly from the portfolio appreciation of CHF 244.2 million (2018: CHF 166.7 million) as well as the aforementioned release of deferred taxes. In addition, there was a profit of CHF 15.0 million from the sale of two investment properties (2018: CHF 2.5 million). Earnings per share amounted to CHF 9.89 (2018: CHF 6.72).
At the end of 2019, net asset value (NAV) per share was CHF 97.02 (end of 2018: CHF 90.63). NAV before deducting deferred taxes amounted to CHF 115.82 (end of 2018: CHF 109.20).
Strong capital structure
With total equity of CHF 4.450 billion (end of 2018: CHF 4.157 billion) – corresponding to an equity ratio of 55.4% (end of 2018: 54.6%) – the equity base remains strong. Interest-bearing debt amounted to CHF 2.596 billion, corresponding to 32.3% of total assets (end of 2018: CHF 2.511 billion or 33.0%). At the end of 2019, the passing average cost of debt was 0.73% (end of 2018: 0.87 %). The average fixed-interest period was 4.4 years (end of 2018: 3.0 years). Currently, unused committed credit lines amount to CHF 700 million. An existing credit line of CHF 350 million was recently extended for 10 years at very attractive conditions.
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
Two bonds were issued on 4 February 2020; a 0.00% bond with a volume of CHF 100 million (maturity in 2021) and a 0.15% bond with a volume of CHF 150 million (maturity in 2029).
Material proposals to the Annual General Meeting on 9 April 2020
For the business year 2019, the Board of Directors proposes an increase in the ordinary dividend payment to CHF 3.60 per share (previous year: CHF 3.50). In relation to net income excluding gains/losses on real estate investments, this corresponds to a payout ratio of 76.7%; in relation to the 2019 year-end share price of CHF 133.60, it corresponds to a yield of 2.7%.
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. In addition, the Board of Directors proposes to the Annual General Meeting of 9 April 2020 the election of Mr. Henrik Saxborn as new member of the Board of Directors. Mr. Henrik Saxborn, born 1964, Swedish national, domiciled in Gothenburg, Sweden, Master of Science KTH (Stockholm) in Real Estate Economy, is the CEO of Castellum AB, a listed Swedish real estate company domiciled in Gothenburg with focus on commercial properties. Before that, Mr. Saxborn worked in various positions in the field of real estate asset management and advisory in Sweden (for his biography see also www.psp.info > company > board). 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, Josef Stadler (Chairman), Corinne Denzler and Adrian Dudle.
Furthermore, the Board of Directors proposes the re-election of Ernst & Young AG, Zurich, as statutory auditors for the business year 2020.
Market environment and outlook 2020
PSP Swiss Property does not expect any significant changes in the letting, neither for offices nor for retail space in prime locations. Demand will remain strongest in central and easily accessible locations, while marketing and letting in peripheral regions will stay difficult.
The focus of PSP Swiss Property remains on the modernisation of selected properties, the further development of sites and projects as well as ongoing letting activities. Acquisitions are considered primarily in the strategic investment areas.
For the business year 2020, an ebitda excluding gains/losses on real estate investments of above CHF 260 million is expected (2019: CHF 256.1 million). With regard to the vacancies, a rate of below 3.5% is expected at year-end 2020 (end of 2019: 3.5%).
L'hôtellerie suisse s'est rapprochée de ses années record en 2017