PSP Swiss Property: First quarter profit decline

According to PSP Swiss Property, net income excluding gains on real estate investments was 48.1 million, a decrease of 2.4 million or 4.8% compared to the same period last year (Q1 2019: 50.5 million). In the same period of the previous year, the reversal of deferred taxes and higher gains from the sale of condominiums and projects, respectively, had had a positive impact.

Meanwhile, in the first quarter of 2020, rental income increased by 1.6 million and operating expenses (-0.9 million) and financing costs (-1.2 million) decreased. Earnings per share excluding gains/losses on real estate investments, which form the basis for the dividend payment, declined from CHF 1.10 in the first quarter of 2019 to CHF 1.05 now.

Net profit for the period was 47.9 million, down from 79.7 million in the first quarter of 2019 - a decrease of 31.8 million or 39.9%. The reason for the decline was also prior-year effects, PSP Swiss Property said. In addition to the effects from the reversal of deferred taxes and sales, the first quarter of 2019 - in contrast to the current reporting period - was positively impacted by a portfolio appreciation of 19.7 million and a gain of 15.0 million from the sale of two investment properties, it said. Earnings per share declined from CHF 1.74 to CHF 1.04.

The net asset value (NAV) per share increased. It rose from CHF 97.02 at the end of 2019 to CHF 98.05 at the end of March 2020. NAV before deduction of deferred taxes amounted to CHF 116.94 after CHF 115.82 at the end of 2019.

Real estate portfolio grows

The balance sheet value of the entire portfolio had risen to 8.06 billion as of the reporting date at the end of March;at the end of 2019, it was still around 7.98 billion.

At the end of March 2020, the vacancy rate was 3.2%, down from 3.5% at the end of 2019. The reduction was the result of several new leases, PSP Swiss Property said. Of the total vacancy, 0.6 percentage points were due to ongoing refurbishment work, it said. Of the 31.7 million worth of leases expiring in 2020, 85% had been renewed as of the end of March, it said. The wault (weighted average unexpired lease term) of the overall portfolio was 4.2 years, and the wault of the ten largest tenants, which contribute around 30% of rental income, was 6.0 years.

PSP Swiss Property considers itself well prepared

An outlook on the future economic development is more difficult than ever, writes PSP Swiss Property on the outlook for the full year. It is equally difficult to predict the impact of the coronavirus crisis on the real estate sector. The real estate company expects demand for office space to stagnate temporarily and the market for retail space, which was already challenging before the outbreak of the pandemic, to remain tight for the time being.

However, the real estate company believes it is "well prepared for the times ahead. It has a high-quality portfolio with a low vacancy rate, the main use is office space and the tenant diversification is broad-based. In addition, the equity base is solid and financing sources are sufficient, it added. Around 21% of the rental income is attributable to the sectors most affected by the coronavirus crisis, such as non-food retail, gastronomy or leisure operations.

For the 2020 financial year, PSP Swiss Property now expects an Ebitda excluding gains/losses on real estate investments of approximately 260 million, compared to the previous forecast of more than 260 million. Compared to the previous forecast, rental income is expected to be slightly lower at the previous year's level. In addition, there will be a slight delay in the Residenza Parco Lago development project in Paradiso/Lugano and the sale of the apartments. The loss of income is expected to be compensated for the most part by lower operating costs and income from the early sale of other development projects. The vacancy rate is now expected to be around 3.5% by the end of 2020, whereas PSP Swiss Property previously targeted a vacancy rate below 3.5%. (ah)