PSP Swiss Property Stock

Ladies and gentlemen, welcome to the PSP Swiss Property Half Year Results 2026 Conference Call. I am Myra, 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. Good morning, everybody, and welcome to our release of the half year results. As always, I will do a quick rundown of the key highlights and then open for questions as I have seen, we have many participants.

We are pleased to report strong half year results. The predominantly driven by the already announced disposal of the Richtipark sale. We report an adjusted like-for-like growth of 1.7%. You remember that Q1 '25, we had a one-off effect on the costs, which would have had a negative impact. So without that, it is 0.7%, but on a like-for-like basis and adjusted 1.7%. We report a strong valuation gains of CHF 112 million on the back of already a reported gain in Q1. And we demonstrate and continue to demonstrate a very strong cost discipline and a very stable financials, which has been recognized by Moody's with an upgrade on the rating from an A3 to A2.

Furthermore, we have seen again lower taxes, release of deferred taxes more than CHF 10 million in the first half, which clearly helps the earnings per share growth on an EPRA basis. If you look at the market, we are confronted with a very healthy letting market. The vacancy rate in the half year went slightly up to 4%. That's driven by the reclassification of the Hôtel des Postes. But also here, we have a strong visibility for letting successes. And here, we are already at the letting status of more than 70%. So the vacancy rate by year-end will come back down to 3.5%.

And we see some early signs of recovery in Basel, especially in the Peter Merian building. We had some letting successes, and we are in discussions for further lettings. So we see first signs of a recovery also in that market. On the transactional side, we continue to see a very strong market. Also, there are rather little opportunities in our target segment. But clearly, the valuation gains were a demonstration by the strong market, but also by a strong cash flow development.

Our outlook is confirmed at the EBITDA guidance of CHF 335 million was the vacancy rate. Guidance is confirmed at 3.5% despite a slight increase in the half year. The top line will come a bit down by the year-end due to the disposals of the Richtipark and the Gurten of last year and developments which are going on. But overall, we are on target to continue our shareholder-friendly dividend policy throughout the year. So all in all, a very solid and strong half year result.

With that, I would like to end my entry remarks and hand over for Q&A.

[Operator Instructions] The first question comes from the line of Ken Kagerer from ZKB.

The first two with regards to the financing, the credit financing. Firstly, I mean, I've seen that the duration is becoming shorter and shorter. What is the strategy behind here? Do you just intend to go more below 3 years? Or is it again something that you think about a longer duration?

The second one is with regards to the pricing of potential bonds following the rating change by Moody's. What is the impact there we can expect in your opinion? And the last one is on the like-for-like growth. You have shown some adjustments here. Could you please detail the reasons for those?

Thank you, Ken. On the duration, as you remember, we are of the opinion, first of all, that we have a very strong inflation linked in the portfolio of more than 90%. So we have a strong protection on inflation increase, which in our view, would then clearly be triggering the interest increase. We have seen that in the last cycle.

Secondly, the low debt and the lowering debt is an additional protection for us. And I think if you look back historically, we always navigated within a duration of 2.5 to 4 years. What we try to do is to have a constant maturity of the debt. And then whenever we have a maturity, we clearly look at the curve.

So for us, a 3 year is fine. But obviously, whenever we see that there's a window, we go a bit longer. But with the protections I mentioned with inflation linked and with the low debt, I think we are fine to be a bit on the shorter end of the duration, which has been a bit our strategy over the last 25 years.

With regard to the pricing of the bond, I think it's a bit early days. I think what can be said that it's a rating improved. So it's clearly, if you look at the bond pricing and credit pricing, they're very strongly linked to a rating. How much this then makes up, we will see when we come up with the next bond pricing. We are in discussions continuously with the banks and the DCM teams. So I would expect an improvement. However, I think we talk on a single-digit levels with regard to spread levels. And you have also keep in mind that those spread levels change also over the time. So it's also difficult then to compare with former spread levels.

On the like-for-like adjustment, this is just -- if we would just report the like-for-like as we did and we report, it's a 0.7% increase. If you recall, last year, on the Rue du Marché in Geneva in the first quarter, we had a very strong tax benefit, which reduced the Q1 costs disproportionately. If you take out that effect, the like-for-like of this half year would be 1.7%. This is only based on the letting activities without a single cost effect coming out of the Rue du Marché.

The next question comes from the line of Holger Frisch from Raiffeisen.

I have 2 questions. First one would be on the 2 earn-out agreements relating to the sale of the Richtipark and the acquisition of the property Steinentorberg Strasse So what do the earn-out agreements entail? And what is the time frame for the payments? And could you remind us of the annual rental income of the newly acquired property? That would be the first one.

The earn-outs, there are 3 earn-outs on the Richtipark, which are linked to the progress of the developments and the permissions of the developments. These are earn-outs which are linked to CHF 10 million and CHF 5 million. Probability, I would say, it's difficult to say because it's really now in the hands of the new owner in that phase. And we will review every quarter what the status is and if the probability of having a successful potential earn-out is 50%, we will book out that earn-out phase. With regard to the Steinentorberg Strasse, the new rental income is roughly CHF 2 million per year.

And I...

I hardly hear you, Holger.

Maybe better this way. Second question would be on the increase in the property values in Zurich. You said they were broadly based. But were there -- are they broadly based or were the individual properties that saw more significant increases in the first half of the year?

Well, I would say they are broadly based, whatever is in CBD or close to CBD. Besides the one in the Löwenbräu side, which we reported in the Q1, the others are all around the Bahnhofstrasse. There are some also in the [indiscernible] and clearly also the Hürlimann side saw some appreciation. There was also one in Geneva, which was above the top 10.

Next question comes from the line of Alexander Totomanov from Green Street.

Two questions for me. What is the deferred taxes release expected for the full year? Is it still consistent with the guidance of about CHF 10 million? And second question, how are the discussions for the rest of the vacant area in Hôtel des Postes in Lausanne progressing? And what areas are left to lease out? I think you said that the leases commencing in Q3 and Q4 are going to take you up to about 70% occupancy.

With regard to the guidance on deferred taxes, it's roughly CHF 14 million we see for the full year. With regard to Hôtel des Postes, we are in advanced negotiation with a tech company on a larger floor. The one which are left to be rented out is the highest floor, the fifth floor, which has a rooftop tterrace.

On the rooftop terrace, we have a concept for the summer period. The other one is not a super high ceiling. So I think here, we have a couple of options. And then on the right and left side of the wings, we have some little floor plates. But with the discussions with this tech company, which is active in the AI field, we are fairly advanced. Besides that, we have a very little retail area left. So it's really then more of filling up.

We are still waiting for some building permissions for the fit-out works. So this causes a slight delay on the tenants starting their works. And clearly, with that and also a slight delay in starting of the contracts. Here, we talk about perhaps 1, 2 months delays in that. But everything is going very well.

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

I just have one question, and it's fairly speculative, so apologies. But I'm wondering on the dividend, I mean, now that you've gone through the Richtipark sale with spreads continuing to be at very tight levels, balance sheet super healthy. Is there any chance of a bigger dividend step-up potentially coming through? Or is there anything you could share on that policy front?

Thank you, Tommaso. Well, it's not a speculative question. It's just in the responsibility of the Board. I think what I can say, what we did in the past in the last 25 years, we never had special dividends. When we had a little bit higher rent increase, it was due to rather acquisitions and rather strong lettings, which changed a bit the curve. I think our policy is to be a very predictable dividend contributor. I would not exclude it because it's not in my responsibility, but I would expect the continuous development of the dividend.

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

Well, thank you very much to everybody for the inquiries. We'll be in touch in the next couple of days, and I wish you all a very good day. Thank you.

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.

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.

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.

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.

Ladies and gentlemen, welcome to the PSP Swiss Property Financial Year 2025 Results Conference Call. I am Maria, the Chorus Call operator.

[Operator Instructions]

At this time, it's my pleasure to hand over Giacomo Balzarini, CEO of PSP Swiss Property. Please go ahead, sir.

Thank you, Maria, and good morning to everybody to our release of the annual results of 2025. As every year, I will have a quick rundown through the major highlights of the year, and then I will open for the Q&A in order to have enough time to address the questions. As stated already at the press release, clearly, we are happy and pleased to report an excellent year-end results for 2025, which is predominantly backed by very good business sentiments in our major markets of Zurich and Geneva, which reflects roughly 80% of our portfolio.

We have seen major relettings within our portfolio, and we are very positive on the letting market in general in those areas, specifically in the city areas. There's a clear bifurcation between city center and surrounding and secondary locations. That's a trend we have seen now since a couple of years. Second point, we are confronted with a huge amount of liquidity, which needs to be invested in the real estate, first and foremost residential, but then also prime office and that has also driven the valuations last year, backed by the letting successes. If we go into the headline results, and we start with Slide 9, we see that the operating income went up by 9.4%, clearly driven by the net changes in fair value, which we will address separately. The rental income was flat, also driven by the fact that we have disposals last year, which has reduced the top line. On the other hand, we had positive contributions by the finish of the projects in Basel, in Zurich and [indiscernible] acquisition in Geneva. We had one slight gain from a disposal of an investment property in Bern, Gurten, which ends basically the development side we owned in Bern and contributed CHF 7.7 million gain. We have no gains out of disposal from inventories, and we have seen no acquisitions during the year. I will come later to that point.

On the expense side, you see an overall reduction of the operating expenses by a further 1.2%. The biggest contributor was the property tax refund we had in Geneva last year, which reduced the operating expenses by 12.8%. For the ongoing year, you will see a bit of a rebalancing of that line back to the roughly CHF 11 million. Besides that, we have and demonstrated continuously high cost discipline and we turned in this year with an EBITDA margin slightly above 85%. Financial expenses on Slide 11 have leveled out roughly at CHF 35 million. This is a run rate we should see also on '26, considering today's interest rate environment and the taxes of CHF 95.5 million were separated CHF 31 million in current taxes and CHF 65 million deferred taxes, whereof CHF 50 million were linked to the valuation gains. With that, the Board proposes, again, an increase in the dividend of CHF 0.05, CHF 3.95. You see that on Slide 12, which results in a payout ratio of 80%. If we go into the portfolio on Slide 15 and 16, we see that the vacancy rate came in as expected to 3.5%. We had a higher vacancy report in Q3. If you remember that, I think this can always happen depending on the expiry profile, but we were pretty convinced that we get to this 3.5%.

If you look on the details, Slide 16, we see letting successes in [indiscernible] , the Grubenstrasse, which with the current lettings is led by almost 80%, and we are confident that we will lease out the remaining spaces over the next couple of months. And the second big letting successes were at [indiscernible] where we are today at letting of almost 85%, but have advanced negotiations of the remaining small retail space and one office floor. On the lease expiries on Slide 17. The major highlight is that for this year, we are almost done. We are left with 16% of lease expiries that helped us to give also a guidance of 3.5% vacancy rate for '26. And the major highlight for '27, always the big question on the release renewal on Google. Google made a public statement beginning of the year that they will concentrate on 2 sites in Zurich, one is [ Europaallee ] and second is the Hurlimann site. And on this end, we are now in the paperwork and finalizing the renewal. These lease expiries still within the numbers of '27. If you go to the valuation gains and the overall portfolio appreciation, for '25 was roughly 2.9% if we include the investments. The valuation gains per se was CHF 231 million. The one part, CHF 13.7 million was in Q1. We added -- the value added another CHF 97 million in the half year and for the fourth quarter, another CHF 118.5 million.

Besides the yield compression overall of 2 basis points, one of the key drivers on the Q4 valuation gain was the letting of 2 high street retail contracts at the rent of above 25% plus to the in-place rent, and this triggered a revaluation gain in Q4. It may make up the full amount, but clearly, it was a significant contributor. And as we observed over the last 2, 3 years, the high street retail, especially in Zurich, at the right location is sought after, and there is quite a lineup of tenants looking for those spaces. If you go into the capital structure, I will not go into the detail of the green finance policy authorities at our [indiscernible] . All the funds coming from the bonds, coming from the credits and coming from the private placements are linked to our ambition to reduce emissions.

Overall, on the debt, we have still roughly CHF 1 billion of committed unused credit lines. But if you go to Slide 23, for us, the highlight is really that the loan-to-value came further down to 33.1% today, clearly backed by the one hand, the valuation gains in the portfolio predominantly. Today, we fund at roughly 80, 90 basis points or on a 4, 5 years. So I think the funding environment for us continues to be very interesting. Some highlights on the developments. If you look on 25, we are finishing the Hotel des Postes. We are there with a lease of leasing level of 50%. We have leased out the retail space. We have signed roughly 6 office leases, all at rents between CHF 450 million and CHF 490 and we have a reasonable good letting level that we expect that we could lease up the whole building within the next 6 to 12 months. The overall Quartier des Banques develops very well. If you look at the detail, for instance, on the #5, the Rue de l Arquebuse is almost fully let. We are left with one floor. As you know, we have let also to a private bank on Slide 27, the full building Banques Henriette.

And on Slide 28, we have received a building permission for Jean-Petitot 15 and they are in negotiation with the bank. On 12 Jean-Petitot, we are still waiting the building permissions. I will address the Wallisellen Richtipark at the end. On Slide 29, I would like to first highlight the progress of Lowenbrau Red, Slide 30. We got the building permission. We have identified an operator. We are signing contracts with that operator. And we are positive that we will soon be able to open a hotel in Lowenbrau Red by end '28. Two further projects in Bern, Eigerstrasse, Slide 31. Here, we are planning serviced apartments. We are in the face of submitting the building permissions. Rue de Hesse in Geneva will start this year in summer, the reconversion in the hotel where we have fully signed lease agreement and on Slide 33 and 34, we are starting the works in Marktplatz in Basel. Very central building location. The rendering is not really providing the full beauty of that building, but it's on the central marketplace of Basel and Muhlebachstrasse is a very small project, but it's on the Stadelhofen where you will hear more over the next couple of years on what we plan to do on that side.

A quick update on Wallisellen and I think this will be then also part of the Q&A. We are in final negotiations on 2 transactions, which would include the disposal of the Richtipark and the acquisition of a very center located asset. We have signed head on terms and are in a final due diligence on -- with the 2 parties. So this is something -- if everything goes well, should be expected within the next 6 months. However, this is quite a complex transaction. So we will have to continue to work on it. This leads me to the end, to the guidance for '26. We guide for an increased EBITDA of CHF 310 million for 2026 and a guidance on the vacancy rate of roughly 3.5%. That would end my outlines, and I would like to hand over for the questions.

[Operator Instructions]

The first question comes from the line of Steven Boumans from ABN AMRO-ODDO.

I've got some questions on the investment market. So could you please update on the general investment markets or how much deals are in the market versus 6 months ago? Second, you mentioned the one acquisition, can you provide a bit of idea on the size? And also if there is possibility, are you looking at more than that's only deal? And the third one, what is the probability that you would equity markets to fund external growth in '26?

On the first question, the number of deals, we see more liquidity in the market. We have seen a huge amount of raisings through the funds. On our spectrum on the really prime. There are a few transactions we are observing. But as always, on that level of quality, there's not a huge amount of transactions available. I think this will clearly support in my view, the yields and probably even put a bit pressure on the yields, but number of transactions not materially changed.

I hope you understand I cannot give you insights on the transaction related to Wallisellen we are pursuing. I think this is a highly delicate operation at the moment. And yes, I think by the rest, we are looking at acquisitions, we would only tap the equity market if we see a substantial large portfolio, which is accretive day 1 and only then. And considering that, I would exclude it for the moment.

Okay. That is very clear. Then if I may, one last question on artificial intelligence. Could you provide me any updates on the perceived risks there? For example, has there been any tenant stating that they want to downsize due to that? Just any color would be helpful.

I think it's a quite broad topic, which is a topic which we follow very intensively probably all the market participants. In a nutshell, we see optimization within our organization. And by seeing that, clearly, we see that also with other corporates. What we observed, and I think this is especially true a bit for the major cities of Zurich and Geneva that the impact of this optimization within the organization will lead more of freeing up space in larger plots, larger office spaces outside of the city centers. In the city centers, the buildings are typically of a smaller size. The companies which are there, they are trying really to have their key people there. So I think from a first wave if we see optimizations with the tenants, which we currently are not seeing on a big scale, leading space, this would be absorbed rather quicker in the city centers than outside.

But without any question, there will be an optimization of space. I think our tactic over the last years has been to provide Grade A space in very central locations. And within that, we see that there's a continuous demand for it. But it's clearly something we continue to observe and therefore, that's also a very important reason. We are very conservative in acquiring buildings, which are not centrally located, which have large floor plots, and which are then perhaps a bit more exposed to optimizations of tenants.

The next question comes from the line of Ken Kagerer from ZKB.

My first question refers to the relatively low LTV ratio that you carry currently that should give you theoretically the opportunity to do accretive acquisitions. Nevertheless, you've said prices are high. What can we expect from you there? And is there any way that you come back to a growth trajectory for your company?

Well, I think the accretive transactions, if I may say, is independent from the loan to value. It's just that you have a bit more fire power to do the acquisitions.

So that's clear. I meant you could do acquisitions as opposed to others out of an increase in the leverage.

Absolutely. I think it's a valid point. However, I think we keep going on with a very strong discipline on the acquisitions. We need -- when we buy a building, we need to be able to create value in the medium term by either increasing the rents, by either increasing the floor price or by either having a very good visibility that the land value will increase due to the scarcity. The things we have observed the transaction last year has not led to that.

I think at the premise, we observed that an investor can also leverage himself. So we will leverage if we really see those accretive transactions. From a pure earnings per share point of view, it's a no-brainer. We have a significant or an interesting yield pickup, but this does not justify just the sake of a transaction. We are convinced, if you look back over the last 5 years, we bought for more than CHF 600 million. We have not done acquisitions last year. We are monitoring the market, and we are for sure that if there is something interesting for us, we can be ready to do those acquisitions.

The next question refers to the integration of Credit Suisse into UBS. Could you give us an update on the threats and opportunities that you see from the consolidation of the office space, predominantly in the Zurich region and Geneva region?

On the Zurich region, I think what we learned from the announcement of Google is that they take over space, which is giving back by UBS in the Europaallee. What we observed is that UBS and what they publicly say is concentrating their activities around [indiscernible] Paradeplatz with significant investments, especially in the Paradeplatz, which is, I would say, central for us. So this is a very, very strong commitment of the bank in the central location how they then plan tactically. Their 3 locations being in [indiscernible] [indiscernible] and [indiscernible] I think that's a question to be addressed to them.

The direct impact for us is due to their concentration positive. Then as I said before, on AI, also they will optimize their space. But by their commitment to the city center, I fundamentally believe that they attract other companies who want to be close to the bank and to the financial center. To that end, I'm very positive on that combination. With regard to Geneva, I would say it's neglectable in a broad large scale. It's not comparable to what we observed in Zurich.

And maybe 2 quick ones. One on the [indiscernible] part? Could you tell us if it's accretive on the yield post investment, the new use compared to the previous years? Or what would be the impact there?

We are signing a quite a long lease with a very good tenant in a residential type although it's a hotel or similar to a hotel concept. So I would expect same or slightly reduced yields. However, for us, it's an attractive rental contract, which provides higher rent than in-place rents, we would have. So I think from that end, predominantly reason for entering it that is to increase cash flow yield. But I think it's a derisking of that asset in that location.

And the last one on Globus on Bellevue. I mean we hear that Globus is not very happy with the performance of this location. Are you in discussions with them? What is the situation there?

To put it in perspective, without offending, it's a very small contract in the overall piece. We are in discussions with all our tenants, but here, we have a rental contract, and I think there's not much to discuss on the rental contract and to discuss today on this.

The next question comes from the line of John Vuong from Van Lanschot Kempen.

So if I understand it correctly, in Q4, there was another deferred tax release. Do you see more of such effects in 2026 and '27? And should it be considered a recurring item looking at how it also happened in '25 -- '24?

Well, the deferred tax release, you were referring goes back to a system change we have disclosed in '22, '23, which will take from that point on 20 years. So today, I think we are in year 3. So for the next 17 years, you can probably plot in a CHF 5 million to CHF 10 million deferred tax release. It was CHF 14 million last -- CHF 10 million last year, CHF 40 million this year. So I think that's something we can plot in and which we have in length, I think, disclosed in '23.

Okay. That's clear. And looking at the funds that are being raised in the market, do you see this as competitors to the type of investments that you are looking at? Or does this open opportunities for you to recycle some capital? -- the funds, which have raised our only in very limited way probably competing with us.

The funds which we have raised are only in very limited way, probably competing with us. These are funds which will be deployed either on the resi, on secondary commercial, if it's a very stable prime, prime, but for the value add, which we look at, we observed that those institutional players, and we have seen that in the past, are not really looking to potentially buy vacancy, repositioning a prime asset, touching a historically protected building. So I would say, clearly, these are funds in the market. But for the respective transactions we have done in the past, I don't see them so competing. But clearly, they will have to deploy those funds, and this will probably drive yields a bit further down.

The next question comes from the line of Tommaso Operto from UBS.

One question on guidance. So is it -- I guess Richtipark is not included in the guidance, right? And so if that's correct, where does this additional CHF 10 million of EBITDA come from? Is that really from -- mostly from Hotel des Postes that was being finalized? Or does this also like take into account the selling of [ Aarau, ] which has already happened this year? Or where does it come from?

Thanks, Tommaso, it's a very good question. I can confirm that Wallisellen is not part of the guidance. Secondly, this additional CHF 10 million, CHF 10 million CHF 15 million you were mentioning are coming from development sales of inventories. We are working since we said over the last year of repositioning office buildings, which we believe are not anymore office buildings for the future in condominiums. We had reclassified those. We are in process of evaluating and conducting a disposal, and we have factored a potential gain into the EBITDA guidance in the amount plus/minus you mentioned. But I can confirm again that Wallisellen is not part of that equation.

Very clear and then additional questions, if I may. One on the payout ratio or the dividend. I mean, combining the relatively low payout ratio and low LTV. Is there any chance that sooner rather than later, you will start raising the dividend by CHF 0.10 instead of CHF 0.05?

Normally, a payout ratio go from 0 to 100% and we are at 80%. So calling this relatively low, I would say, I think it's a fair payout ratio. As we said, we want to give a continuity. We want to give predictability. Clearly, there is room theoretically for a stronger increase but we prefer to first work on the cash flows and the earnings and then subsequently, in case further increased the dividends. If you look historically, our payout ratio was always around 80, 85, 90, that's correct. But I think this is a fair development.

On the loan-to-value, I'd like to add and without giving any signals of being bearish but we are really operating in a very low interest environment and the sensitivity is not neglectable. So we are very happy with the loan-to-value of 33%. It gives us all the flexibility, but it gives us also all the protection. Because we have to be aware that if there is a change on the rates, which we wouldn't expect. These are not only an impact on the leverage, but it has then also an impact on the funding levels.

And I think here, we are pretty safe to be able to continue to fund on those spreads we are currently funding because we have quite of a lead weight on the loan to value. Being on the funding, big and also doing opportunistic acquisitions but we wouldn't leverage now on this strength to increase the dividends by another CHF 0.05, CHF 0.10. So we are focused on earnings quality, on cash flow generation and the continuous improvement of the payouts.

And then last question on the [ Gurtenbrauerei ] property you sold. I mean it was a relatively small transaction, but the gain was quite significant. So where does that gain come from? Was that book value there just so conservatively estimated?

We have seen that also when we did the last disposal in Rheinfelden and when we did the last disposals on Lugano, when you do clearly the last value. Typically, the book is what is the book value, but you clean up really then the site. And I think that's a bit then the last risk protection you have on those sites, which goes in, you release all your costs and then it's the gain you realize. But clearly, it was a large project over many years, and the book value is then also always very, very difficult to estimate by the value of what is left there. And then it's a bit of probably at the edge also a bit of release of reserves because it's difficult to estimate. If it's CHF 7 million or CHF 6 million.

Clearly, it depends also on the buyer and for the buyer, this was key as a key asset, and this results in this gain of CHF 7.7 million. But I wouldn't now do a read across of conservatism in those book values. But this is typical on those sites you have for 20 years at the end, you clean it up. And if you are fine somebody really wants this block, then you have this gain, which materializes.

The next question comes from the line of Eleanor Frew from Barclays.

A couple of questions. So firstly, some healthy guidance on EBITDA. Can you give us any help on where you expect your EPRA earnings per share to land over the year? Would it be fair to assume a similar year-on-year growth rate maybe?

Well, if we look -- if you look on our earnings per share, and if we take the EPRA earnings per share and they take out this disposal gain I mentioned, we would see a slight uptick on the earnings per share. We see a flat development on the top line. As mentioned beforehand, we expect the disposal gain. But if you take that one out, we see a slight increase of the EPRA earnings per share.

Okay. And then you mentioned some very strong reletting prints on High Street retail. How does that compare to offices?

I hardly hear you. Can you try to ask again?

Sorry, yes, is this clear now? You mentioned strong relettings on high street retail. How does that compare to offices?

Well, I think in a magnitude, it has been never comparable because these are completely 2 different worlds. The high street retail is a handful, we can say basically to a handful of buildings. And if you there have at the moment, an expiry or a new tenant coming in, you have this strong demand. However, also in the prime office in Zurich and in Geneva, we are letting at market. We are sometimes letting above market. If you look, for instance, [indiscernible], the overall rent we get is higher than the underwriting we have seen.

So I think generally, we have a solid development. but it's predominantly there where we do investments in prime office, repositioned the asset where you can then increase the rents. We have seen, by the way, last year, a mathematical like-for-like of 1.3%. If we take out this, if you recall, in 2024, we had to book twice the turnover rent, if you take out that one-off we had a like-for-like of 2% coming from indexation 1%, rents 40 bps, and another reduction of the vacancy of 40 bps. And we expect also for this year a like-for-like of roughly 1.5%, which is not including this high street retail because this was an option in 1 year. So we will see that in '27.

The next question comes from Matteo Lindauer from Vontobel.

One question on the letting activity of the high street retail segment. Could you tell us the price per square meter you have renewed for? And the second one is on the 6 office building into Quartier des Banques. Did you have a look at it? Of course, Swiss francs that acquired it, but did you have a look at it?

On the first question, the high street retail, it's always a blend of underground ground floor, first floor. And I can just say at the moment that we significantly increased the rents as mentioned above 25%. We typically disclose also the per square meter from the market -- from the value in the annual report, but this will be in '26. We have a certain confidentiality until then really moved in. So from that end, I will keep it at that level and not disclose per square meter rent.

With regards to the assets you mentioned, it's clear we look at every asset, we have our reason why we are perhaps not the best bidder. As I mentioned at the beginning, for those assets, in general, we observed last year, either we have seen no positive reversion or even negative reversion, or we have seen CapEx which needs to be invested to either fill the building or put the building back into a multi-tenant solution. And thirdly, we are very much looking on what could be the land appreciation going forward. And that's the reason why we probably didn't want to buy this asset.

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

Yes, I'd like to thank all the participants. I wish you a great day, and clearly, we will talk soon on a separate note. 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.