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 achieved a property sales gain of CHF11.3 million from the disposal of six assets.
- The net asset value (NAV) increased by 1.9%.
- The company confirmed its upgraded EBITDA guidance of CHF300 million for the full year 2024.
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 Basel market remains challenging, with subdued demand and no short-term disposal plans.
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: (Giacomo Balzarini, CEO & CFO) The disposals were core assets in secondary locations, ranging from CHF5 million to CHF25 million. The interest rate movement helped potential investors. We found two to three potential bidders for each asset, and the sales were not under pressure, allowing us to achieve a premium to book value.
Q: On valuations in general, would you consider that valuations are bottoming?
A: (Giacomo Balzarini, CEO & CFO) The valuation gains were property-specific and leasing up items. The data points confirmed the valuations in the book, indicating the market holds up. It's a regular valuation cycle, and I wouldn't specifically talk about bottoming.
Q: Can you say more about the Geneva acquisition of the Edmond de Rothschild headquarters and your plans to turn it into a hotel?
A: (Giacomo Balzarini, CEO & CFO) We are in early stages of planning. We have an LOE with a potential hotel operator and are considering both hotel and office use. The building is well-suited for hotel utilization, which would complement our office spaces in the area.
Q: Would you think about divesting assets in Basel given the challenging market?
A: (Giacomo Balzarini, CEO & CFO) We don't have short-term disposal plans for Basel. We are negotiating with a potential tenant for one of our larger vacancies. Basel is not the most solid market, but there's no reason to think of disposal at this moment.
Q: Could you provide an update on the tenants Google and Globus?
A: (Giacomo Balzarini, CEO & CFO) There are no updates on Google; they lease our spaces. Globus is building out the surface they have rented from us in Globus Bellevue. The lease agreement is progressing as expected.
Q: On the acquisition in Quartier des Banques in Geneva, was the seller motivated, and how did you negotiate the yield?
A: (Giacomo Balzarini, CEO & CFO) The seller is concentrating their activities in the Quartier des Banques. We bought it at a 4% yield, which would come down to 3.7% if repositioned as a hotel. The seller's motivation is difficult to speak for, but the valuer confirmed the valuation.
Q: Were the property sales motivated by the recent acquisition?
A: (Giacomo Balzarini, CEO & CFO) The disposals were part of our ongoing strategy to focus our portfolio in resilient markets. The Rothschild acquisition was an independent opportunity, and we continue to screen our portfolio for further strengthening.
Q: Could you remind us of your energy intensity ambition and the expected CapEx needed to reach this?
A: (Giacomo Balzarini, CEO & CFO) We aim to become net zero by 2050 and halve our emissions by 2035 compared to 2019. The CapEx needed is already foreseen in our investment plans, with no additional CapEx required.
Q: Why is the average lease term rising, contrary to market trends?
A: (Giacomo Balzarini, CEO & CFO) The rise is due to renewing long leases, such as Google and Swisscom, which have an immediate impact on the overall duration. We see fewer requests for early breaks, which also contributes to the longer average lease term.
Q: Is there any change in your appetite for acquisitions or developments given the favorable environment?
A: (Giacomo Balzarini, CEO & CFO) We are long-term investors and do not play cycles. We take accretive opportunities as they arise, focusing on strong cities and sustainable buildings. Our strategy remains opportunistic rather than cyclical.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
