PSP Swiss Property expects vacancy rate to fall
According to the company, PSP Swiss Property's half-year results are only slightly affected by the lockdown. The real estate company confirms its Ebitda forecast and improves its vacancy forecast to the end of 2020.
The challenges of the Corona crisis have been mastered well, says PSP Swiss Property at the presentation of the half-year results 2020. For the full year, the company sees itself "optimally positioned" thanks to its high-quality portfolio with a low vacancy rate and a solid capital structure.
The main use is office space, and the tenant diversification is broad-based. PSP Swiss Property is convinced that the development projects, most of which are already well let, will generate further growth. In addition, the Company has a solid equity base and sufficient sources of financing.
For the 2020 financial year, PSP therefore confirms an Ebitda excluding gains/losses on real estate investments of around CHF 260 million (previous year: 256.1 million). In terms of vacancies, the company expects a lower ratio of around 3% by the end of 2020, previously the forecast was around 3.5%.
Profit decreases, rental income increases
In the first half of 2020, PSP Swiss Property recorded a profit excluding gains/losses on real estate investments of 98.3 million. This is 17.1 million or almost 15% less than in the same period last year (115.3 million). The reason for the decrease was said to be positive one-off effects in the first half of 2019, when the reduction of income tax rates in the cantons of Basel-Stadt and Geneva resulted in a release of deferred taxes totaling 58 million, of which 21.6 million had a positive impact on profit excluding gains/losses on real estate investments. Earnings per share excluding gains/losses on real estate investments amounted to CHF 2.14 compared to CHF 2.51 in the previous year.
At 121.8 million, net profit was 137.0 million or 53% lower than in the previous year (258.8 million). Here, too, the reason lies in the positive prior-year effects. In addition to the tax effects of the previous year, the portfolio revaluation of 31.1 million was significantly lower in the first half of 2020 compared to the first half of 2019 (124.7 million). In addition, PSP recorded a gain of 15.0 million from the sale of two investment properties in the prior-year period. Earnings per share were CHF 2.66 (previous year: CHF 5.64).
Rental income increased by 1.7 million to 146.7 million (previous year: 145.0 million), although rent reductions in the amount of 2.3 million were recorded in the second quarter in connection with the lockdown, according to PSP Swiss Property. Of the total of around 2,300 tenants, around 220 were directly affected by the imposed closure of their businesses, PSP Swiss Property said. By the end of June 2020, 350 tenants had applied for payment deferrals or rent adjustments, it said. As of June 30, 2020, outstanding rent receivables due to the lockdown stood at 5.2 million. The proposed legislation, which requires a retrospective rent reduction of 60% in favor of tenants who were affected by the lockdown, would be estimated to provide rent relief totaling an additional approximately 0.7 million, PSP added.
Value of the real estate portfolio increases
The balance sheet value of the entire portfolio as of the reporting date at the end of June was CHF 8.127 billion (end of 2019: 7.982 billion). The revaluation of the properties resulted in an appreciation of 31.1 million, according to the company. Of this amount, 26.4 million was attributable to the investment portfolio and 4.7 million to sites and development properties. According to PSP, the appreciation resulted mainly from the lower discount rate (nominal 3.29% compared to 3.32% at the end of 2019), as well as from various lettings and the reduction of vacancies. On the other hand, more cautious earnings forecasts in connection with the Covid 19 pandemic would have reduced value in individual cases.
At the end of June 2020, the vacancy rate was 3.4% (end-2019: 3.5%). 0.6 percentage points of this was due to ongoing redevelopment work, PSP said. Of the 31.7 million worth of leases expiring in 2020, 92% have already been renewed. The so-called Wault (weighted average unexpired lease term) of the overall portfolio was 4.1 years. The Wault of the ten largest tenants, which contribute around 30% of rental income, was 5.8 years.
As of the end of June 2020, equity per share (net asset value; NAV) was CHF 96.07; a dividend of CHF 3.60/share was distributed on April 17 of this year (end of 2019: CHF 97.02). NAV before deduction of deferred taxes amounted to CHF 115.23 (end of 2019: CHF 115.82).
