PSP Swiss Property: Income increases, profit decreases

PSP Swiss Property reports net income excluding gains/losses on real estate investments of CHF 159.7 million for the first three quarters of 2020. This is 7.7 million or 4.6% less than in the same period last year (167.4 million). The decrease was due to positive one-off effects in the same period of the previous year, the real estate company said: the release of deferred taxes due to the reduction of the income tax rates in the various cantons had had a positive impact of 22.1 million on the profit excluding gains/losses on real estate investments in the previous year. Earnings per share excluding gains/losses on real estate investments amounted to CHF 3.48 (previous year: 3.65).

Rental income increased by 4.2 million to 221.2 million (previous year: 217.0 million), PSP Swiss Property added, even though rent reductions of 2.8 million were recognized in the reporting period in connection with the lockdown. Income from the sale of condominiums and projects reportedly increased by 1.7 million to 11.1 million (previous year: 9.4 million). Rental collections stood at 98% in the third quarter, up from 94% in the second quarter. As of September 30, 2020, outstanding rent receivables due to the lockdown stood at 4.7 million (mid-2020: 5.2 million).

Net profit decreases by over 40%

Net profit decreased by 42.2% or 131.6 million to 179.9 million (previous year: 311.5 million). According to the real estate company, this was also a consequence of the previous year's effects. In addition to the tax effects, the portfolio revaluation was lower in the reporting period at 28.0 million compared to the first three quarters of 2019 - at that time, the revaluation was 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.

As of the end of September 2020, equity per share (net asset value; NAV) amounted to CHF 97.35 (end of 2019: CHF 97.02). NAV before deduction of deferred taxes amounted to CHF 116.63 (end of 2019: CHF 115.82).

Portfolio value increases

The balance sheet value of the entire real estate portfolio reached around 8.5 billion at the end of September (end of 2019: around 8.0 billion). Overall, the revaluation of the real estate portfolio for the first nine months amounts to 28.0 million. In this context, the appreciation as of mid-2020 had still amounted to 31.1 million, mainly due to the lower discount rate as well as various lettings and the reduction in vacancies. In contrast, more cautious revenue projections related to Covid-19 had a sporadic impact on value, PSP said. As a result, the third quarter saw a total write-down of 3.2 million.

As of the end of September, vacancy in the portfolio stood at 3.3% (end-2019: 3.5%), of which 0.6 percentage points are due to ongoing refurbishment work, according to PSP. Of the leases expiring this year (31.7M), 95% have already been renewed, it said. The WAULT (weighted average unexpired lease term) of the overall portfolio was 4.2 years. The WAULT of the ten largest tenants, which account for around 30% of rental income, was 5.4 years.

Despite the current worsening of the Corona crisis, PSP Swiss Property considers itself well positioned for the current year, as the portfolio mainly consists of office space and the tenant base is broadly diversified. For the 2020 financial year, the real estate company therefore confirms its forecasts: Ebitda excluding gains/losses on real estate investments is expected to be around 270 million (2019: 256.1 million) and the vacancy rate is expected to be around 3%. (ah)