2018 Quarterly report Q1 Short report
2 PSP Swiss Property Short report Q1 2018 Key figures Key financial figures Unit 2017 1 Q1 2017 1 Q1 2018 +/ 2 Rental income CHF 1 000 272 454 68 375 69 123 1.1 % EPRA like-for-like change % 1.1 2.9 0.3 Net changes in fair value of real estate investments CHF 1 000 83 253 0 3 873 Income from property sales (freehold apartments) CHF 1 000 19 614 860 1 481 Income from property sales (investment properties) CHF 1 000 627 0 0 Total other income CHF 1 000 5 043 708 3 583 Net income CHF 1 000 256 890 39 744 40 257 1.3 % Net income excluding gains/losses on real estate investments 3 CHF 1 000 177 738 39 744 43 204 8.7 % Ebitda excluding gains/losses on real estate investments CHF 1 000 242 187 56 533 60 600 7.2 % Ebitda margin % 81.5 80.8 81.7 Total assets CHF 1 000 7 384 243 7 465 391 1.1 % Shareholdersʼ equity CHF 1 000 3 988 560 4 033 539 1.1 % Equity ratio % 54.0 54.0 Return on equity % 6.6 4.0 Interest-bearing debt CHF 1 000 2 491 087 2 530 504 1.6 % Interest-bearing debt in % of total assets % 33.7 33.9 4 Portfolio key figures Number of properties Number 157 167 Carrying value properties CHF 1 000 6 383 901 6 706 780 5.1 % Implied yield, gross 5 % 4.2 4.3 4.1 Implied yield, net 5 % 3.5 3.6 3.5 Vacancy rate (CHF) 5, 6 % 8.2 8.5 Number of sites and development properties Number 12 11 Carrying value sites and development properties CHF 1 000 661 892 564 802 14.7 % Employees End of period People 86 89 Full-time equivalents FTE 81 85 Per share figures Earnings per share (EPS) 7 CHF 5.60 0.87 0.88 1.3 % EPS excluding gains/losses on real estate investments 7 CHF 3.87 0.87 0.94 8.7 % Distribution per share CHF 3.40 8 n.a. n.a. Net asset value per share (NAV) 9 CHF 86.96 87.94 1.1 % NAV per share before deduction of deferred taxes 9 CHF 104.22 105.37 1.1 % Share price end of period CHF 92.35 93.20 0.9 % 1 Restated due to initial application of IFRS 15, Revenue from Contracts with Customers. 2 Change to previous year's period 1 January to 31 March 2017 or to carrying value as of 31 December 2017 as applicable. 3 See definition Net income excluding gains/losses on real estate investments on page 6, footnote 1. 4 Exluding debt capital invested as fixed-term deposit totalling CHF 125 million: 32.8 %. 5 For investment properties. 6 Equals the lost rental income in % of the potential rent, as per reporting date. 7 Based on average number of outstanding shares. 8 For the 2017 business year. Cash payment was made on 11 April 2018. 9 Based on number of outstanding shares.
PSP Swiss Property Short report Q1 2018 3 Real estate portfolio Shareholders equity 6.6 6.7 6.9 7.0 7.3 10.0% 8.5% 9.3% 8.2% 8.5% 3.8 3.9 3.9 4.0 4.0 4.6% 4.9% 3.5% 6.6% 4.0% 2014 2015 2016 2017 Q1 2018 2014 2015 2016 2017 Q1 2018 Portfolio value in CHF billion Vacancy rate end of period in % Shareholders equity in CHF billion Return on equity in % Ebitda Net income components 232.7 241.6 242.2 82.0% 81.3% 81.5% 80.8% 81.7% 26.4 161.3 172.5 79.2 177.7 56.5 60.6 2015 2016 Ebitda excl. gains/losses on real estate investments in CHF million Ebitda margin in % 2017 Q1 2017 Q1 2018 2015 39.7 43.2 37.7 2.9 2016 2017 Q1 2017 Net income excl. gains/losses on real estate investments in CHF million Contribution gains/losses on real estate investments in CHF million Q1 2018
4 PSP Swiss Property Short report Q1 2018 Q1 2018 report Substantial renovations, conversions and redevelopments are crucial success factors that s part of our strategy. Business development In Q1 2018, we integrated the property portfolio purchased from Edmond de Rothschild (Suisse) S.A. consisting of nine high-quality office buildings. Furthermore, we completed the new construction Grosspeter Tower in Basel. It has become one of the city s most distinctive buildings with a hotel and state-of-the-art offices. Recently, this highrise tower won the renowned Swiss Solar Award. Letting activities remained at the top of our agenda, especially the pro-active management of leases that are due for extension. Overall, we are very satisfied with the rental success, in particular considering the standing of our new tenants. For example, we signed a long-term lease agreement with No18 (premium brand of International Workplace Group, IWG) for our property opposite Zurich s main train station at Bahnhofplatz 1, Bahnhofquai 9/11/15, which is currently undergoing a comprehensive renovation. As from the end of 2019, No18 will rent around 4 700 m 2 to be used as premium co-working office space and lounges. The entire building complex will become very attractive due to the ongoing renovations and the prominent new tenants (which will also include Ruby Hotels & Resorts on the Beatenplatz side as from early 2021). IWG, which is already a tenant at a number of our properties, will also move into Richtipark in Wallisellen with its Regus brand from mid-2018, offering its clients a state-of-the-art business centre with flexible office solutions. Westhive, another provider of co-working space, has moved into our property at Hardturmstrasse 161 / Förrlibuckstrasse 150 in Zurich-West, providing space mainly for start-ups as well as marketing and tech companies. We are pleased with our operating results in Q1 2018: the net income (excluding changes in fair value) of CHF 43.2 million represents an increase of CHF 3.5 million or 8.7 % compared to the previous year s period (Q1 2017: CHF 39.7 million). With total equity of CHF 4.034 billion (end of 2017: CHF 3.989 billion) corresponding to an equity ratio of 54.0 % (end of 2017: 54.0 %) the capital base remained strong. In the current market environment, substantial renovations, conversions and redevelopments are crucial success factors. Our goal is to grow organically by optimising the existing property portfolio according to tenants changing requirements with regard to sustainability, quality and flexibility of the office space. For our sites and development properties, we have budgeted CHF 331 million in the coming years. On top of that, investments totalling approximately CHF 60 million are earmarked for individual properties in our investment portfolio in 2018. Property market Investment market On the investment market for office properties, prices seem to be stabilising at a high level. Demand remains strong, especially for high-quality objects in business centres. Given the already low yields, the average initial yield decline on the transaction market slowed down. Letting market In the economic regions of Zurich, Geneva and Basel, the supply of available office space has stabilised. The situation varies, however, from subsegment to subsegment. Everywhere, renting
PSP Swiss Property Short report Q1 2018 5 remains a challenge. In peripheral areas (both with regard to geography and business activity), reducing vacancies will be especially lengthy and arduous, particularly in those regions where new construction projects will further increase supply. In Zurich s Central Business District and in trendy Zurich-West, demand for modern office space is increasingly picking up. The situation is more difficult in Zurich-North. There, building activity continues and vacancies keep rising accordingly. In Geneva, certain market segments suffer from relatively high vacancy rates; in addition, a number of new developments will come on the market in the coming years, which will put even more pressure on older office properties in less attractive locations. In Basel, the supply of available office space decreased slightly, while an increasing number of modern new constructions will come on the market soon; however, this additional space may be absorbed relatively easily from today s perspective. In the retail sector, times remain particularly difficult for objects in peripheral regions as well as traditional shopping centres. Online business and exchange rate being the main influencing factors. The recent weakening of the Swiss franc is expected to relieve some of this pressure. Premium shops in good locations ( high street retail ) are much less affected by the internet trade and keep a solid position. Most of our retail properties are in such excellent locations. Market outlook The forecasts for Switzerland s economy are promising. We expect that the predicted economic expansion will have a positive impact on the demand for office space, at least in central locations. In the Zurich area, which is particularly important for us, the bright economic prospects should especially benefit employment in the office sector, which should result in additional demand for office space. The greatest growth rates are likely to occur in the Central Business District and in Zurich-West two of our geographical focus areas. The outlook for retail space in central locations is also significantly better than for objects on the periphery. With regard to the investment market, demand for investments in prime commercial properties will hardly diminish in 2018 due to the continuing low-interest-rate environment. Portfolio At the end of March 2018, our real estate portfolio included 167 office and commercial properties. In addition, there were eleven sites and development properties. The carrying value of the total portfolio was CHF 7.3 billion. Investment properties As per 1 February 2018, we purchased a prime property portfolio consisting of nine representative office buildings from Edmond de Rothschild (Suisse) S.A. All properties are centrally located and perfectly maintained. Strategically, this acquisition fits perfectly into our existing portfolio and strengthens our position particularly in the French-speaking part of Switzerland. We completed the Grosspeter Tower in Basel and reclassified it into the investment portfolio. We are also actively streamlining our portfolio. In December 2017, we signed a sales agreement for the property located at Av. des Morgines 8/10 in Petit-Lancy. The execution is conditional upon the buyer s pending satisfactory confirmation relating to the so-called Lex Koller (the federal law on the acquisition of real estate in Switzerland by non-residents). Furthermore, sales negotiations are under way for the properties at Bernerstrasse Süd 167/169 in Zurich and Route des Arsenaux 41 in Fribourg.
6 PSP Swiss Property Short report Q1 2018 Vacancy development At the end of March 2018, the vacancy rate stood at 8.5 % (end of 2017: 8.2 %). The slight rise is due to the completion and reclassification of the new construction Grosspeter Tower in Basel (vacancy rate end of Q1 2018: 68.4 %). As of May 2018, the lease with the anchor tenant Bayer started, leading to a reduction of the vacancy rate in this building to around 30 %. A further reduction of this figure is expected in the next months. 1.0 percentage points of all vacancies are due to ongoing renovations. Of the lease contracts maturing in 2018 (CHF 29.1 million), 64 % were renewed respectively extended at the end of March 2018. Due to our successful lease management activities, we now expect a vacancy rate of around 7.5 % at year-end 2018 (previous guidance: 8.5 %). Sites and development properties The ongoing work at several projects proceeded as planned during the reporting period. For information on the current projects see page 8. Consolidated quarterly results (January to March 2018) Due to the initial application of IFRS 15, Revenue from Contracts with Customers, the previous year s period Q1 2017 and FY 2017 were 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 Q1 2017 resp. FY 2017. In the reporting period, we achieved a net income (excluding gains/losses on real estate investments) 1 of CHF 43.2 million (Q1 2017: CHF 39.7 million). The increase by 8.7 % resulted mainly from a rise in capitalised own services related to the portfolio purchase (Edmond de Rothschild) and higher other income (totalling CHF 2.9 million) as well as a decline in financial expenses by CHF 0.6 million. Rental income rose by CHF 0.7 million to CHF 69.1 million (Q1 2017: CHF 68.4 million). Earnings per share (excluding gains/losses on real estate investments), which is the basis for the dividend distribution, amounted to CHF 0.94 (Q1 2017: CHF 0.87). Operating expenses increased by CHF 0.2 million to CHF 13.8 million (Q1 2017: CHF 13.6 million). Financial expenses declined by the above-mentioned CHF 0.6 million to CHF 6.0 million (Q1 2017: CHF 6.6 million). Net income (including gains/losses on real estate investments) reached CHF 40.3 million (Q1 2017: CHF 39.7 million). The initial valuation of the purchased portfolio resulted in a valuation loss of CHF 3.9 million. Furthermore, tax expenses increased by CHF 0.2 million to CHF 10.3 million (Q1 2017: CHF 10.0 million). Earnings per share (including gains/losses on real estate investments) amounted to CHF 0.88 (Q1 2017: CHF 0.87). At the end of March 2018, net asset value (NAV) per share was CHF 87.94 (end of 2017: CHF 86.96). NAV before deducting deferred taxes amounted to CHF 105.37 (end of 2017: CHF 104.22). Capital management With total equity of CHF 4.034 billion (end of 2017: CHF 3.989 billion) corresponding to an equity ratio of 54.0 % (end of 2017: 54.0 %) the capital base remained strong at the end of March 2018. Interest-bearing debt amounted to CHF 2.531 billion, corresponding to 33.9 % of total assets (end of 2017: CHF 2.491 billion respectively 33.7 %). Excluding debt capital invested as fixedterm deposit totalling CHF 125 million, the debt ratio was 32.8 %. At the end of March 2018, we had unused committed credit lines of CHF 910 million. At the end of March 2018, the passing average interest rate was 0.97 % (end of 2017: 0.99 %). The average fixed-interest period was 3.7 years (end of 2017: 3.6 years). 1 Net income excluding gains/losses on real estate investments corresponds to the consolidated net income excluding net changes in fair value of the real estate investments, realised 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.
PSP Swiss Property Short report Q1 2018 7 PSP Swiss Property has ratings from two international rating agencies: a Senior Unsecured Rating A- (outlook stable) from Fitch and an A3 Issuer Rating (outlook stable) from Moody s. Subsequent events The ordinary Annual General Meeting on 5 April 2018 approved all proposals of the Board of Directors. Among other resolutions, the payment of an ordinary dividend of CHF 3.40 per share for the 2017 business year was approved (previous year: CHF 3.35 per share). The payout totalling CHF 156.0 million was made on 11 April 2018. Luciano Gabriel was re-elected as Chairman of the Board of Directors (one-year term of office). All remaining six current members of the Board of Directors were also re-elected (one-year terms of office). Ernst & Young AG, Zurich, was re-elected as Statutory Auditors for the 2018 business year. Proxy Voting Services GmbH, Zurich, was re-elected as independent shareholder representative (oneyear term of office). The Compensation Committee and the Audit Committee consist of Peter Forstmoser (Chairman), Adrian Dudle, Nathan Hetz and Josef Stadler. The Nomination Committee consists of Josef Stadler (Chairman), Corinne Denzler and Adrian Dudle. Outlook We have a clear focus for 2018: modernisations of individual investment properties, further development of our projects as well as reinforced letting activities resp. vacancy reduction. Acquisitions in our strategic investment areas only are aimed for in case of potential added value in the long-term. In financing, we will continue to pursue our proven conservative approach. And, as in the past, we will consider tapping the debt capital market if required. For the 2018 business year, we still expect an ebitda (excluding gains/losses on real estate investments) of more than CHF 235 million (2017: CHF 242.2 million). While rental income is likely to increase by around CHF 8 million, income from condominium sales will fall. The predicted decline in ebitda therefore mainly reflects the lower expected income from condominium sales. With regard to the vacancies, we now expect a rate of around 7.5 % at year-end 2018 (previous guidance: 8.5 %; end of March 2018: 8.5 %). There were no further material subsequent events.
8 PSP Swiss Property Short report Q1 2018 Portfolio summary Q1 2018 C 2 6 3 A D E 1 B 5 4 Areas 4 Sites 7 Projects Project pipeline 1 Lausanne, project Rue Saint-Martin CHF 13 million 2 Zurich, project Hardturmstrasse / Förrlibuckstrasse 3 Zurich, project Bahnhofquai/-platz CHF 65 million CHF 55 million (stage 1) CHF 33 million (stage 2) 4 Paradiso, Residenza Parco Lago CHF 80 million 5 Geneva, project Rue du Marché CHF 30 million 6 Zurich, project Orion CHF 130 million 2015 2016 2017 2018 2019 2020 2021 2022
PSP Swiss Property Short report Q1 2018 9 Portfolio value by area 8% Sites and development properties 6% Other locations 5% Lausanne 4% Bern 9% Basel 56% Zurich 13% Geneva Portfolio key figures A Zurich area B Geneva area Portfolio value CHF 4.0 billion Portfolio value CHF 0.9 billion Rental income CHF 40.4 million Rental income CHF 7.9 million Implied yield, net 3.5 % Vacancy rate 5.3 % Rentable area 501 659 m² Implied yield, net 3.0 % Vacancy rate 14.5 % Rentable area 93 816 m² C Basel area D Bern area Portfolio value CHF 0.7 billion Portfolio value CHF 0.3 billion Rental income CHF 6.7 million Rental income CHF 3.3 million Implied yield, net 3.6 % Vacancy rate 13.5 % Rentable area 110 067 m² Implied yield, net 3.6 % Vacancy rate 9.3 % Rentable area 57 727 m² E Lausanne area Other locations Portfolio value CHF 0.4 billion Portfolio value CHF 0.4 billion Rental income CHF 4.2 million Rental income CHF 5.2 million Implied yield, net 4.0 % Vacancy rate 10.9 % Rentable area 77 988 m² Implied yield, net 4.2 % Vacancy rate 12.9 % Rentable area 97 274 m²
10 PSP Swiss Property Short report Q1 2018 Rent by use 5% Parking 4% Gastronomy 11% Other 17% Retail 63% Office Rent by type of tenant 17% Other 19% Retail 6% Government 8% Gastronomy 18% Services 9% Technology 12% Financial services 12% Telecommunication Rent by largest tenants 4% 10% Swisscom Google 2% Edmond de Rothschild 2% Roche 2% Schweizer Post 69% Other 9% Next five largest tenants
PSP Swiss Property Short report Q1 2018 11 Goethestrasse 24, Zurich
12 PSP Swiss Property Short report Q1 2018 Bleicherweg 10 / Schanzengraben 7, Zurich
PSP Swiss Property Short report Q1 2018 13
14 PSP Swiss Property Short report Q1 2018 Consolidated statement of profit or loss (January to March) (in CHF 1 000) Q1 2017 1 Q1 2018 Rental income 68 375 69 123 Net changes in fair value of real estate investments 0 3 873 Income from property sales (inventories) 4 009 3 897 Expenses from sold properties (inventories) 3 148 2 416 Income from investments in associated companies 5 8 Capitalised own services 652 2 665 Other income 52 910 Total operating income 69 943 70 314 Real estate operating expenses 2 902 3 103 Real estate maintenance and renovation expenses 3 961 3 963 Personnel expenses 4 901 4 843 Fees to subcontractors 12 10 General and administrative expenses 1 633 1 668 Depreciation 177 242 Total operating expenses 13 587 13 829 Operating profit (ebit) 56 356 56 485 Financial income 58 111 Financial expenses 6 628 6 059 Profit before income taxes 49 786 50 537 Income taxes 10 042 10 280 Net income attributable to shareholders of PSP Swiss Property Ltd 39 744 40 257 Earnings per share in CHF (basic and diluted) 0.87 0.88 1 Restated due to initial application of IFRS 15, Revenue from Contracts with Customers. Consolidated statement of comprehensive income (January to March) (in CHF 1 000) Q1 2017 1 Q1 2018 Net income attributable to shareholders of PSP Swiss Property Ltd 39 744 40 257 Items that may be reclassified subsequently to profit or loss: Changes in interest rate hedging 4 519 4 009 Attributable taxes 347 314 Items that will not be reclassified subsequently to profit or loss: Changes in pension schemes 186 1 312 Attributable taxes 41 289 Other comprehensive income 4 317 4 718 Comprehensive income attributable to shareholders of PSP Swiss Property Ltd 44 061 44 975 1 Restated due to initial application of IFRS 15, Revenue from Contracts with Customers.
PSP Swiss Property Short report Q1 2018 15 Consolidated statement of financial position (in CHF 1 000) 1 January 2017 1 31 December 2017 31 March 2018 Cash and cash equivalents 21 123 33 428 28 203 Accounts receivable 10 122 157 917 1 365 Deferrals 1 874 7 098 2 990 Current tax assets 0 0 20 454 Derivative financial instruments 0 48 42 Sites and development properties for sale 51 525 47 192 45 733 Investment properties for sale 6 685 0 0 Total current assets 91 329 245 683 98 786 Tangible assets 334 293 282 Intangible assets 0 855 1 011 Derivative financial instruments 2 664 1 531 1 180 Accounts receivable 103 628 130 641 132 226 Financial investments 9 9 9 Investments in associated companies 54 58 66 Sites and development properties 544 360 614 700 519 068 Own-used properties 35 555 34 969 35 250 Investment properties 6 255 728 6 348 932 6 671 530 Deferred tax assets 8 335 6 572 5 982 Total non-current assets 6 950 668 7 138 560 7 366 604 Total assets 7 041 998 7 384 243 7 465 391 Accounts payable 23 806 21 187 20 329 Deferrals 52 678 33 266 30 808 Current tax liabilities 7 212 1 551 0 Bonds 0 0 119 946 Derivative financial instruments 2 811 1 726 1 694 Total current liabilities 86 508 57 730 172 777 Debt 1 280 000 1 300 000 1 140 000 Bonds 968 436 1 191 087 1 270 559 Derivative financial instruments 47 653 29 552 25 218 Pension liabilities 19 947 18 735 17 607 Deferred tax liabilities 772 187 798 580 805 692 Total non-current liabilities 3 088 223 3 337 953 3 259 075 Share capital 4 587 4 587 4 587 Capital reserves 503 490 503 463 503 467 Retained earnings 3 405 469 3 508 701 3 548 958 Revaluation reserves 46 279 28 191 23 473 Total shareholdersʼ equity 3 867 267 3 988 560 4 033 539 Total liabilities and shareholdersʼ equity 7 041 998 7 384 243 7 465 391 1 Restated due to initial application of IFRS 15, Revenue from Contracts with Customers.
PSP Swiss Property Ltd Kolinplatz 2 CH-6300 Zug www.psp.info info@psp.info Agenda Publication H1 2018 17 August 2018 Publication Q1 Q3 2018 13 November 2018 Publication FY 2018 26 February 2019 Annual General Meeting 2019 4 April 2019, Lake Side, Zurich Stock exchange, trading symbol SIX Swiss Exchange: Symbol PSPN, Security number 1829415, ISIN CH0018294154 Reuters: PSPZn.S Bloomberg: PSPN SW PSP Swiss Property, 7 May 2018 www.psp.info Further publications and information are available on www.psp.info. This Short report is an extract from the Quarterly report Q1 2018. The Quarterly report Q1 2018 is available under www.psp.info/reports.