PSP Swiss Property: Profit "within expectations
PSP Swiss Property reports net income excluding gains/losses on real estate investments of CHF 176.2 million for the 2018 financial year, compared to CHF 177.7 million in the previous year. Net income increased by a good 51 to 308.2 million.
The profit (excluding gains/losses on real estate investments) of 176.2 million is "within the company's expectations", PSP Swiss Property reports. The decrease of 1.5 million or 0.8% compared to the previous year resulted primarily from lower income from the sale of condominiums: It decreased by 9.1 to 10.5 million (2017: 19.6 million).
Real estate income, on the other hand, reportedly increased by 6.9 to 279.4 million (2017: CHF 272.5 million), while own work capitalized increased by 2.0 to 4.6 million (2017: 2.6 million). Other income increased by 1.2 to 3.5 million (2017: 2.4 million). Earnings per share (excluding gains/losses on real estate investments), which form the basis for the dividend payment, amounted to CHF 3.84 (2017: 3.87).
According to PSP Swiss Property, operating expenses increased by 2.7 to 58.6 million (2017: 55.9 million). Financial expenses decreased by 2.4 to 22.0 million (2017: 24.4 million).
Significant increase in net profit
Net income (including gains/losses on real estate investments) amounted to 308.2 million, up 51.3 million on the previous year (256.9 million). The increase was mainly the result of portfolio appreciation of 166.7 million (2017: 83.3 million). At the same time, tax expenses had increased by 34.6 million to 78.4 million (2017: 43.8 million). However, the new lower corporate tax rate in the canton of Vaud was taken into account for the first time in 2017, the company stresses. This resulted in a positive effect (release of deferred taxes) of 17.0 million in 2017. Earnings per share (including gains/losses on real estate investments) amounted to CHF 6.72 (2017: 5.60).
At the end of 2018, net asset value (NAV) per share was CHF 90.63, compared to CHF 86.96 at the end of 2017. NAV before deduction of deferred taxes amounted to CHF 109.20 (end of 2017: 104.22). The equity ratio is reported at 54.6% (end of 2017: 54.0%).
Portfolio value increases
The balance sheet value of the entire portfolio was around 7.44 billion at the end of 2018, PSP Swiss Property adds. At the end of 2017, the value was still around 7.05 billion. The vacancy rate at the end of 2018 was 5.0%, significantly lower than the previous year's figure of 8.2 %. The company cites several new leases and the sale of the property at Av. des Morgines 8/10 in Petit-Lancy (Geneva) as reasons for the positive development. Of the total vacancy, 1.1-percentage points were attributable to ongoing renovation work, the company said. Of the leases expiring in 2019 (31.0 million), 70% had been renewed at the end of 2018. The so-called WAULT (weighted average unexpired lease term) of the overall portfolio was 4.5 years. The WAULT of the ten largest tenants, which account for approximately 30% of rental income, was 6.2 years.
PSP Swiss Property further announces that the remaining retail space in the "Rue du Marché" project in Geneva has recently been leased to the traditional Geneva store Aeschbach, which means that all space has now been pre-let. The comprehensive renovation of this property will take until 2020. The main tenant is the hotel operator citizenM, which will open a boutique hotel with 144 rooms in the property.
Dividend to rise
The Board of Directors proposes an increased ordinary dividend payment of CHF 3.50 per share for the 2018 financial year (previous year: 3.40). In relation to net income (excluding gains/losses on real estate investments), this would correspond to a payout ratio of 91.1%; in relation to the year-end share price 2018 of CHF 96.85, this would result in a yield of 3.6%.
For the 2019 financial year, PSP Swiss Property expects good demand for office space. Demand will tend to be concentrated in centrally located or easily accessible locations. For retail space, an economic slowdown is likely to have an additional negative impact, with stores in peripheral locations being more affected than those in economic centers. On the transaction market, a slowdown in buyer demand for office and commercial properties is hardly to be expected.
The real estate company intends to continue its focus on the modernization of selected properties, the further development of sites and projects, and ongoing leasing activities. For fiscal 2019, the company expects Ebitda (excluding gains/losses on real estate investments) of 250 million (2018: 241.7 million). Vacancy rates are expected to decrease to below 5% by the end of the year. (ah)
