Swiss Prime Site increases rental income despite sales
In 2023, the company can grow operationally in a difficult market environment, but makes significantly less profit. The effect of the Wincasa sale could not offset the devaluations.
Swiss Prime Site increased rental income by 4.3% (like for like) in the 2023 financial year. Indexing, new lettings and a further reduction in the vacancy rate to a record low of 4.0% are cited as the reasons. Despite sales with rents of almost CHF 10 million, an increase in rental income - to a record CHF 438 million - was also achieved in absolute terms in 2023. "The strong demand for modern, centrally located office buildings ensured good letting success with new lettings of vacant space, such as in the Prime Tower and Medienpark in Zurich and the Messeturm in Basel," writes the company.
Properties sold for 280 million
Swiss Prime Site's portfolio had a stable value of CHF 13.1 billion at the end of 2023 and comprised a total of 159 properties (previous year: 176). The share of development properties amounted to CHF 0.9 billion (previous year: CHF 1.1 billion). Negative revaluations of CHF -250 million were recorded in 2023, compared to a plus of CHF 170 million in the previous year. The devaluation corresponds to 1.9% of the starting basis for the year. The negative revaluations due to the higher discount rates were reportedly cushioned by high new rental income. Despite the higher discount rates, development projects generated value growth of CHF 19 million.
Over the course of the year, 16 properties and sites that no longer fit into the portfolio were sold for a total value of CHF 280 million, generating an average profit of CHF 7% above the last appraised value. After a long period without acquisitions, Swiss Prime Site purchased two additional properties at the end of the year: a smaller building in Basel, as an extension to an existing property, and the "Fifty-One" in Zurich-West near the Prime Tower site (IB reported).
Asset growth in asset management
According to SPS, there was a noticeable reluctance on the part of investors in asset management, particularly in the first part of the year. Despite this, the assets under management (AuM) of Swiss Prime Site Solutions increased by 9% to CHF 8.4 billion. "This was achieved primarily through organic growth, reinvestments and contributions in kind from pension funds and other investors," it says. However, income from asset management fell slightly by 4.4% to CHF 49.7 million. According to SPS, the decline was mainly due to non-executed issues and fewer transactions compared to the previous year. Meanwhile, the share of recurring income increased from 63 to 77%.
EBIT before revaluations grows significantly
SPS's consolidated EBIT excluding revaluations improved from CHF 380 million to CHF 403 million. Operating expenses fell significantly to CHF 269 million with lower expenses for real estate, personnel and other. The asset management business contributed CHF 27.4 million to consolidated EBIT, while Jelmoli's retail business posted a slight loss of CHF -1 million. By contrast, interest expenses rose from CHF 40.1 million to CHF 58.5 million and consolidated profit after revaluations fell from CHF 404.4 million to CHF 236.0 million, with revaluations having an impact of CHF -250.5 million and the extraordinary gain from the sale of Wincasa of CHF 149.3 million. FFO I, on the other hand, rose by 1.3%. A stable dividend of CHF 3.40 per share is to be proposed to the Annual General Meeting, which corresponds to CHF 82% of the FFO I generated. At the year-end price, the associated dividend yield would amount to 3.8%.
FFO to increase further in 2024
SPS points to unused, contractually guaranteed financing lines of CHF 819 million at the end of the year, which means it can "act with a very high level of operational and financial flexibility". In 2023, debt with a volume of CHF 2.9 billion was refinanced or extended. The company anticipates only a slight increase in financing expenses for the new year. Consolidated FFO I is expected to rise to CHF 4.10 to 4.15 per share, the vacancy rate should remain below 4% and the volume of assets under management should exceed CHF 9 billion at the end of the year. (aw)
