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Edited Transcript of PSPN.S earnings conference call or presentation 15-Aug-19 8:30am GMT

Q2 2019 PSP Swiss Property AG Earnings Call (Q&A)

Zug Aug 19, 2019 (Thomson StreetEvents) -- Edited Transcript of PSP Swiss Property AG earnings conference call or presentation Thursday, August 15, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Giacomo Balzarini

PSP Swiss Property AG - CEO, CFO & Member of the Executive Board

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Conference Call Participants

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* Andreas von Arx

Baader-Helvea Equity Research - Analyst

* Kai Malte Klose

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

* Ken Kagerer

Zürcher Kantonalbank, Research Division - Research Analyst

* Pascal Furger

Bank Vontobel AG, Research Division - Analyst

* Robert Woerdeman

Kempen & Co. N.V., Research Division - Research Analyst

* Rolf Frey

Maerki Baumann & Co. AG - Head of Indirect Real Estate Investments

* Timothy Leckie

JP Morgan Chase & Co, Research Division - Head of European Property

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the PSP Swiss Property Half year Results 2019 Conference Call. I am Hailey, the Chorus Call operator. (Operator Instructions) The conference is being recorded. (Operator Instructions) At this time, it's my pleasure to hand over to Mr. Giacomo Balzarini, CEO of PSP Swiss Property. Please go ahead.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [2]

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Good morning to everybody, and welcome to the half year results 2019 of PSP. After a very short introduction, I will go directly into the Q&A session. I think this has proved to be valuable for all the participants.

In a nutshell and as you have seen from results, we benefit from the good underlying letting market, which helped us and combined with our efforts taken on the letting side, helped us to bring down the vacancy fill to 4% and to improve our guidance for year-end. The strong investment market in the prime locations, combined with the vacancy reduction led to a further valuation gain of bit more than CHF 100 million. The operating costs are under control, stable. We tried to improve those operating costs continuously in order to keep at least an EBITDA margin of 80%. Currently, we are a bit north of 82%. And we are further optimizing the financial expenses, average cost of debt on June 30 was 73 basis points. After that, we issued a negative bond, and this morning, currently, we are in the market with new corporate bond of 11 years 2/3 -- 2030 with a 0 coupon. And the reported release of the deferred taxes came in at the same amount as we always inform the market. So in a nutshell, I think we are happy with the results, both operationally and financially. And I think at this point, I really would like to go into the Q&A and into the questions.

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Questions and Answers

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Operator [1]

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We will now begin the question-answer session. (Operator Instructions) And the first question comes from the line of Pascal Furger of Vontobel.

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Pascal Furger, Bank Vontobel AG, Research Division - Analyst [2]

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I have 3 questions from my side, I will ask them probably one after the other. First one would be on vacancy rate. Here, year-to-date, you're down 1% to 4%. So could you please provide us with sort of a bridge, so basically which properties contributed to this and what was the impact also of the properties that you have sold? And maybe with regards to next year, so 10% will expire of rents. So where do you see the biggest risk there?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [3]

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To the bridge from the 5% to 4%. Clearly, we sold the Bahnhofstrasse and the Route des Arsenaux, which contributed roughly 0.3 percentage point to it. Then there was the reletting in Warbern, Bern, Gurten, the big one; then in Zurich, the Gerbergasse 5, which was a renovation and then completely -- basically complete relet; the letting successes in Biel, Bahnhofplatz, then the renovation of Bahnhofplatz is fully let; and then to a few smaller lettings in Zurich West at Lausanne.

On the other hand, we had also an increase in the vacancy portfolio. You see that in also the detail. On Uraniastrasse, we are marketing now 2 floors. And also Hardturmstrasse/Förrlibuckstrasse, we had, due to reclassification from development property to investment property, we had a net increase in the vacancy. All whole, this 1% is, I would say, 70% letting, 30% disposals.

With regard to the expiries of 2020. We have no major expiry, which provides a headache. And I hope you understand that we provide then a guidance for the 2020 with the full year results. But we are confident and on good tracks.

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Pascal Furger, Bank Vontobel AG, Research Division - Analyst [4]

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Okay. So second question, with regards there to like-for-like, profit was strongly up 1.9%. So you renewed most of the contracts for this year so there is limited risk for the remainder of the year. So is it fair to assume that this is like-for-like cost will remain on this level and make any projections going forward on that?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [5]

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Yes, like-for-like clearly came through vacancy reduction. This happened compared to last year, predominantly the first half of the year. So this 1.9%, probably will translate into a full year 1.2%, I guess, 1.1%, 1.2, as we guided the year-end vacancy to stop vacancy mid-year. The big driver is the vacancy reduction, we see -- we see a positive like-for-like growth for next year. But also here, I would refer more perhaps then to the February numbers, it depends a bit on indexation and clearly depends then on the renewals. But I would expect next year from today's point of view a less strong like-for-like growth as the majority of the vacancy reduction happened. But still a positive number.

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Pascal Furger, Bank Vontobel AG, Research Division - Analyst [6]

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Okay. And maybe the last question on revaluation gains. If could just please share with us maybe the major changes of the portfolio and where the negative change as well? For instance, when I look at Geneva, you reported CHF 12 million gains, but if I look at Rue du Marché with already like CHF 18.5 million. So was it negative on an underlying basis?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [7]

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If you look on 170 assets, you have always pluses and negatives. So I think what we can say from the CHF 117 million report of existing portfolio, CHF 95 million come from the investment portfolio and CHF 22 million come from the development portfolio. The drivers are the yield compression (inaudible), this vacancy reduction and it is also adjustment through the value from the structural vacancy.

If you look at the biggest pluses, these are clearly assets, which have been either the Rue du Marché, which is the single biggest revaluation gain or then assets in prime locations with a strong vacancy reduction. The largest negative ones are rather small value-wise, but these are assets where you have the expiry coming closer or we anticipate the renovation, but they are not value-wise as big as the single largest positive ones.

With regard to Geneva, there's nothing particular to say. We are progressing well on the letting side. Clearly, the Rue du Marché had a double impact, first, good progress on the letting, prime spot and then the letting of the retail space above-market. And as you remember, one part of it was already taken in Q1. A second, in relation here was taken in Q2. But it's broadly -- the rest is broadly diversified to the portfolio.

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Operator [8]

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The next question comes from the line of Ken Kagerer of ZKB.

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Ken Kagerer, Zürcher Kantonalbank, Research Division - Research Analyst [9]

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Some of my questions have been answered already now, but I would still also like to highlight the expiry profile again. I understand you don't want to talk a lot about 2020, 2021 and 2022 or anyway some kind of peak years with 16% each. Are there any larger contracts that you're worried about or locations that you're worried about? And then I would also like to know with this regards, what your strategy is for the swing business parking value sale and how it looks going forward with Microsoft?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [10]

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Thank you, Ken. Right, it's not that we are not -- we do not want to talk about 2020, '21, '22. I think what we can say in -- for instance, in 2020, the largest expiry we have is a rental contract of CHF 1.2 million, which has already prolonged. So we talk about expiry -- single expiries, the largest ones between CHF 400,000 and CHF 700,000. That's not -- I would say we're working on those, we have a good visibility, but there's not a big one coming up.

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Ken Kagerer, Zürcher Kantonalbank, Research Division - Research Analyst [11]

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Sorry, Giacomo, just to clarify, the CHF 1.2 million that you have prolonged, is it still part of the 10%? Or it's already excluded?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [12]

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No, it's still part. Still part because it expires. It will come out then once the deadline comes.

Then if you look at 2021, we have also there, I would say, the largest ones, which are around CHF 1.4 million where we have a very good visibility that they want to be there. So there, we have one large one in Bahnhofstrasse, which we will prolong for 1, 2 years and then this building will be renovated. On the other hand, we have -- if we look at our top line projection, we see continuous growth through 2020, '21 and '22. And if you look then into the '22 one, also there, we have, I would say, good visibility on the expiries. So from that end, we don't have really the big cost. With regard to Richtipark, I hope you understand that I will not talk specifically about the tenant. It is public that Microsoft will move out. It is not clear yet what the date will be. Our strategy has been now since a year a more aggressive letting approach. We updated the surrounding area. So we have a big park in this business park, which have been upgraded. We have shown letting success through a tech company last year, and we are in advanced negotiation for another letting, which we hope comes through in Q3. It's clear that in Zurich North, the supply is strong, that the alternatives are there for tenants, but we try to compete through product and through price and are working also on this expiry of the mentioned tenant. But also there, one has to put in for perspective that the single largest leases are below 1% of total rental income. So it's relatively modest, but it is one of our focus points, absolutely.

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Ken Kagerer, Zürcher Kantonalbank, Research Division - Research Analyst [13]

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Maybe 2 further ones. I mean, one is, again, on the vacancy. Obviously, I mean, you've achieved a very impressive 4% now and if I understood correctly 1% is even due to renovations, brings us down to 3%. You also talked about the reduction of the structural vacancy in some properties by the external value. So now, could you give us an update where you see the structural vacancy of your portfolio going forward, especially as you seem very confident with the renewals in the coming years?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [14]

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I think, here, I would say the structural vacancy is set by the value and the valuation. Clearly, they had -- they will have to adjust this new based on the fact that we reduced the vacancy. I think we said that on an CHF 8 billion portfolio, a run rate vacancy rate should be around 4% to 5.5%, 6%. You always can have, once a tenant moving out, I think what we need to have is, if that happens, that we have an explanation, a clear answer what we do and how we intend to bring it down. We have today, no visibility that it moves up to 6%. But obviously -- and we will try to further optimize the vacancy rate. But I think this is a plausible range 4%, 5.5%. And then it can be that once you are below and you can be once up, but you have a multitude of tenants behind. I think important is really that we have an answer once we have an expiry coming up, which -- we know which will not be relet and that rather quickly and efficiently we can fill up the space.

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Ken Kagerer, Zürcher Kantonalbank, Research Division - Research Analyst [15]

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Sure. And maybe the last one on Paradiso, Residenza Parco Lago. I mean, is this going to be the new Löwenbräu-Areal? Or do you really think you will be able to sell those units in a sensible time horizon?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [16]

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I hope it will be the new Löwenbräu because Löwenbräu is a success.

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Ken Kagerer, Zürcher Kantonalbank, Research Division - Research Analyst [17]

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Took you a while.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [18]

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No. We were left with 3 apartments out of 58 and the last one was sold later. I think on Parco Lago, we have now the mockup of apartments, the development progress is as planned. We are behind schedule -- we are behind schedule on the disposals, but we still believe this is a good product. And result-wise, we are also a bit independent from it, but we are confident that the end it comes out. Clearly, it is a bit disappointing. And we said that, that the disposal is moving ahead, a bit less speed as we thought. But if you go on spot, it's not that, that's a bad product. It's a good product, and in our view, well priced.

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Ken Kagerer, Zürcher Kantonalbank, Research Division - Research Analyst [19]

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Okay. Just that the wish I want to reiterate from last time, to give a bit more detail on the taxes in the interim report, if that would be possible because I saw it hasn't happened yet?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [20]

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Thank you, Ken. We will take this up with the taxes and we thought we'd take it up with the full year and starting then with respective entry. But thank you.

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Operator [21]

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The next question is from the line of Robert Woerdeman of Kempen.

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Robert Woerdeman, Kempen & Co. N.V., Research Division - Research Analyst [22]

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This is Robert. Question, if I look at the loan-to-value, that's creeping up perhaps a little bit faster than anticipated. Actually from 31.8% to 34.6%, which is a little bit surprising given the fact that you acquired but not to that significant amount and you have your revaluation. Is the letting success accompanied with a lot of additional CapEx? Or what are the moving parts in this higher loan-to-value?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [23]

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Thank you, Robert. No, I think the letting success is not followed by a relevant CapEx. We bought for CHF 450 million roughly. If you look at Bern, Geneva, clearly, we had a revaluation gain. We had also now a full dividend payment. So if you adjust for it, we're around 34%. But clearly, the loan-to-value is creeping up, but not on a level which we're worrying. We always said that for acquisition opportunities we are happy to move up the LTV, but we want to be short of 40% clearly, and we are far off from it. But I reiterate these letting successes embed some fit-outs. In certain cases, you have to provide fit-out, but it's in no way in any magnitude compared to loan-to-value considerations.

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Robert Woerdeman, Kempen & Co. N.V., Research Division - Research Analyst [24]

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Okay, that's clear. But is it more or less that you need to spend on fit-outs clause, let's say, compared to 2 or 3 years ago?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [25]

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Well, it's interesting, which we're on a bit of an incentive overview. And if I look generally on incentives today, on the largest leases we have signed year-to-date, we talk about rent-free periods of roughly 2 months on average. And then we provide an additional incentive in fit-outs and step-up rents of another 3 to 5 months whereby these fit-out investments, I would say, historically said, can be reused every second time. So I would say, net-net, we are to these 3, 4, 5 months of incentives, on average. And that's, as I said, in Q1, coming slightly down.

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Robert Woerdeman, Kempen & Co. N.V., Research Division - Research Analyst [26]

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Okay, that's clear. And again, the 2 months/the 3 to 5 months that you were referring to, that's based on a 10-year lease, I reckon?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [27]

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No, this is based on 5 plus 2 5-year options. So generally, I would say, even on a 15-year, because typically after 5, for sure, sometimes after 10, the contract is renewed based on indexation.

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Robert Woerdeman, Kempen & Co. N.V., Research Division - Research Analyst [28]

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Yes. All right. That's clear. Now obviously, lots of things have been said on the letting markets and that's improving perhaps faster than anticipated. Is it a function of lower supply being added to the market or a higher demand for just office space? And where is the higher demand coming from? And to what extent is this, let's say, a structurally higher demand, let's say, for the foreseeable future?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [29]

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Well, as I said, at the beginning, our vacancy reduction comes through having the right product on the right spot. It's still a competitive [mark] payment, I think we said also. But we are seeing a good demand, but it's not as strong that you really can increase rents. We have shown also in the presentation that, on average, we don't have yet rent growth. So it's probably letting success on single good product, the supply in the areas of the CBD are limited and the trends to move into modern space and to invest are intact. But as I told before, when Ken asked assets in Zurich North like the Richtistrasse, they suffer significant competition. And also, in Geneva the supply around the city is creeping up. Clearly, on smaller spaces in good locations, we are letting well. So we are -- I think we are positive on the market. We have -- we see good sentiment on the demand.

On your question on sectors, it's across a variety of service sectors of technology, of fin sectors, clearly governmental entities. But I would say, having said that, it's not enough for a letting market.

But if you reduce the vacancy from 5% to 4%, this has an impact on the DCF. If the structural vacancy come down from -- or the vacancy once comes down from 9% to 4%, it will have an impact on structural vacancy. And if on larger contracts, new products we can underwrite better then from the value, this has an impact on value. So I think these are the elements which come through based on then also the yield compressions stemming from -- on the value.

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Operator [30]

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The next question comes from the line of Tim Leckie of JPMorgan.

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Timothy Leckie, JP Morgan Chase & Co, Research Division - Head of European Property [31]

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Just one question. I think you've touched on market conditions quite well. But unless I missed it, I'm just after some specific comments on supply, particularly in the submarkets around Zurich, if that's okay.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [32]

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Thank you, Tim. On the surroundings, as I mentioned, you have supply coming in on the airport. This is The Circle product. It's a new product, which is a bit more priced than Zurich North, but will attract tenants. And also we don't own these assets. For us, it's important that this project is a success because it's the entry point to Zurich. You see new supply coming in Zurich North, that's what I was referring to. There is limited really supply in the CBD and Zurich West, you see there repositioning of assets. So there's always a bit of a product coming in, but not large surfaces. So from that end, we are confronted with a rather moderate supply view in our markets. Then you have in the outskirts of Geneva and also in Basel supply coming into the market, but less so in our specific locations.

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Operator [33]

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The next question comes from the line of Rolf Frey of Maerki Baumann & Co. AG.

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Rolf Frey, Maerki Baumann & Co. AG - Head of Indirect Real Estate Investments [34]

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I just wanted to touch on taxes. Now you have had these tax benefits onetime and what is the benefit in the future of lower tax rates that you could pay, like a higher dividend? This is my first question.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [35]

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Thank you, Rolf. As we mentioned, this tax reform has 2 impacts. One is the onetime effect coming especially from Geneva and Basel. The recurring tax impact, we said also in past calls, is quantified in between CHF 0.05 to CHF 0.07 per share or if we say from an average 20.5% tax rate to an 18.5% tax rate, give or take, from today's perspective. But we say CHF 0.05 to CHF 0.07 per share.

I wouldn't link it to the dividend payment. Our dividend policy, we'd like to pay out at least 70% of the earnings per share and we look predominantly to EPRA earnings per share. And having said that, we also look at very stable dividend development in swiss franc-wise. So I wouldn't link now these effects directly to the dividend.

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Rolf Frey, Maerki Baumann & Co. AG - Head of Indirect Real Estate Investments [36]

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Okay. And my second question, can you give us a little bit an update on the Bahnhofplatz? You mentioned in the presentation that it looks like the same, but can you say what is going on really in -- did you start reconstruction? And how is it going with the (inaudible)? And maybe then you could touch a little bit on your talks in ATMOS for further letting?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [37]

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Yes, well, on the Bahnhofplatz, Waisenhausplatz , we are working full speed on both. As you know, the building is fully let. On the Bahnhofplatz with the IBG Group, we have a very small, little surface on the ground floor, which we are marketing, but this makes up 5% and is fully let on the backup side with the Ruby Hotel and the Candrian. We are -- we have cleared all the items with the building protection authority. So we expect the final go from the building permission, which is expected shortly. We have a clear view on time line with completion mid '21 on the Bahnhofplatz and completion end '21 on Waisenhausplatz. So from that end, we are running on plan. With regard to -- is that okay for you?

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Rolf Frey, Maerki Baumann & Co. AG - Head of Indirect Real Estate Investments [38]

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Yes, I was just -- I was just wondering, whether there could be problems or not. But it seems that you are on track, and therefore, it's okay, you don't have to renegotiate with IWG, I think. What...

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [39]

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No, we have in place contracts and we work according to those and according to our development plan.

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Rolf Frey, Maerki Baumann & Co. AG - Head of Indirect Real Estate Investments [40]

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Okay.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [41]

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On the second question on ATMOS. We are working full speed on new lettings. On the one hand, we are working on the whole leasing up of the conferencing, restaurants, fitness part, which is more geared towards the tower where we have [own] in with the headquarter and this is a close relationship with them. And then on the other side, we are currently in talks for a further 5,000 to 6,000 square meters with 3 larger companies and we hope to be able to announce letting successes in the next couple of months. Clearly, these talks with those tenants are also linked to their ability to move out of letting agreements in '21, '22, so they take a bit longer. But we are positive, really on the development, on the construction side, together with our general contractor and on the letting discussions with also the type and quality of tenants.

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Operator [42]

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(Operator Instructions) The next question comes from the line of Kai Klose of Berenberg.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [43]

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I've just got 2 questions. The first one is on Page 30 of the presentation. Just to verify, the lower expected CapEx for Rue du Marché and ATMOS by June compared to March is simply because of the progress and the amount you spent in Q2, I guess.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [44]

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Absolutely.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [45]

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Okay.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [46]

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Absolutely correct.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [47]

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And second question would be on Page 51 of the first half report. Just to understand, the 6.1% at a like-for-like change in other locations and obviously other locations, a small portion, but can you be more specific what's behind that? And from the same page, the like-for-like CapEx -- EPRA CapEx spend on a like-for-like basis was lower compared to first half last year. Do you expect it to ramp up in the second half? Or is this lower level overall for the full year to be expected?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [48]

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Well, the like-for-like growth on the other locations, I'm lucky that Pascal Furger asked about the vacancy reduction, the delta because that was predominantly been, which contribute to this like-for-like reduction -- like-for-like increase in the vacancy reduction.

On the CapEx comparison, half year, half year, I see slightly higher CapEx on the EPRA and this is linked towards the Bern acquisitions compared to the lower Geneva acquisitions.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [49]

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Yes, sure. But in the table, you show like-for-like portfolio, H1 '18 was CHF 24.9 million and H1 '19 was CHF 20.9 million. It was a...

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [50]

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I was on the EPRA Slide 49, I apologize. You are on?

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [51]

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Page 51 in the first half report.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [52]

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On the presentation on 51.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [53]

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No. In the first half report.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [54]

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Sorry, sorry, sorry. I was on the presentation slide, I apologize. 51. Sorry. The CapEx like-for-like, CHF 24 million to CHF 20 million?

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [55]

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Yes.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [56]

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This has predominantly to do that last year, we finished up the Hardturmstrasse/ Förrlibuckstrasse , which this year we classified, and includes also the repositioning of the Rue Saint-Martin, which was reclassified and finished. And I wouldn't expect now a substantial creeping up of this CapEx number for this year considering what we are working on the CapEx.

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Operator [57]

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The next question comes from the line of Andreas von Arx of Baader-Helvea.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [58]

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I have 4 points I would quickly like to touch. First one is on Page -- Chart 18 of your presentation, on the discount rates. I mean the biggest improvement that you show is in the rate -- the discount rate is in the other locations. So is that refer -- is that due to the Biel development and Fribourg or which other region you see developing so attractively whereas in your normal comments, you say biggest improvements are normally in the big city centers of Zurich and Geneva. Shall we go one by one? Or shall I continue with the questions?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [59]

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No. I can answer this. I think it's also linked to the disposal. I know we disposed 2 assets in the other locations and this might have had an impact, but it's not -- it's, I think, value-wise, it has not such an impact that I would have to say one asset specifically comes out.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [60]

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So it's like, I don't know, the Zug region being more favorable...

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [61]

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No, no, no.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [62]

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Okay. Then Slide 16 on the renewals, could you maybe simply comment on the contracts that you have renewed in the last quarter, how that compares to the existing contracts? I mean, is it higher level, lower level or similar level?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [63]

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If we look at the renewals, overall, Q1, Q2, we are overall marginally above. If you take the largest closings, which includes also a fill-up from vacant space, so not like-for-like, we are 5%, 6% above the value. But this includes clearly then lettings of projects under development, which are not comparable on the like-for-like. On the like-for-like, it's slightly positive.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [64]

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Very clear. And then on the disposals of Uster and Geneva, could you provide here an update? And should we expect here maybe already something to happen in the third quarter?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [65]

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Well, we will report the results of it in Q3. The updated forecast includes the disposals.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [66]

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Already announced, though?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [67]

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Yes, yes.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [68]

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Okay. And then...

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [69]

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But they are on the -- they are rather on the small side. So value wise.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [70]

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Just quickly on the Uster one because I saw in the annual report that there is a project Bankstrasse Uster, but that's not related to that disposal.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [71]

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Yes, that's this one. That's the only asset we have. This was an office building, quite central, with some residential apartments. You might remember when we had to introduce this highest, best use stand, clearly we screened the portfolio, which asset has or would have a better use. We launched a project of potential repositioning of this office building into a residential building with residential apartments and we eventually sold it this summer. We are not yet through the whole process, but we are very, very confident that this goes through and we will report on it in Q3.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [72]

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Okay. And then last one, just also on the project, could you remind me because I'm not familiar with that project Spiegel in Köniz? And what is P-West in Zurich?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [73]

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The Spiegel in Köniz is a little piece of land we are left with around the Gurten side where we are working with the local communalities that we can build something on this land and then we would sell this land with the project. But here, we talk about 2 single-family homes we could sell. It's a piece of land we have and we have disclosed.

And the P-West is our parking. We own opposite of the ATMOS opposite of the Hardturmstrasse, the opposite of the stock exchange, which we are repositioning and expect higher rentals after this CapEx is done. If you go there, you see that this parking is quite outdated. And with the markup of this neighboring building, we thought it's the good timing also to improve this building. But that you see, it's rather low in magnitude. It was important to show that we look also that the neighboring buildings benefit from this upgrade of...

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [74]

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That's the project that you show in the project list on the charts...

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [75]

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Yes.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [76]

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On fairly booked. And then very last one. Because it was in the news this morning, I thought someone else would ask. Can you comment on that Globus building? And when we should expect here basically, that to happen? And do you already have an idea of what the investment would be?

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [77]

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Yes, this is a project, which is now on the planning since more than 2 years where we have seen, obviously, that the whole area around the opera clearly improved materially. But that our building was from the technical infrastructure, but also from the look of being outdated. So we, in advance, in discussions with the tenants, terminated the lease agreements to the end of '22. We are working on a variety of scenarios. We are talking to a variety of tenants. At the end game, it will be still a mixed-use building with probably food, retail and office, which is ideal for that spot. But it's premature now to talk about CapEx. But we clearly think that on this spot, a refresh of the building has it merits.

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Andreas von Arx, Baader-Helvea Equity Research - Analyst [78]

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And the 2 years, that's a good guess of the modernization time.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [79]

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Yes. Yes, I think. This is the best case from today. It depends clearly is it renovation and how deep the renovation is. But I think it's a less relevant question for us today.

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Operator [80]

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(Operator Instructions) And there are no more questions at this time. I would like to turn the conference back over to Giacomo Balzarini for any closing remarks.

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Giacomo Balzarini, PSP Swiss Property AG - CEO, CFO & Member of the Executive Board [81]

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Yes. Thanks to everybody. I look forward to the discussions in the next couple of days, and I appreciate that we were able to do this Q&A call. I think it's the most efficient use of time of everybody. And I look forward to the next Q&A call with these Q3 numbers in November. Thank you, and have a good day, everybody.

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Operator [82]

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Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.