PSP Swiss Property achieves very good operating results and increases the dividend to CHF 3.85 per share.

Demand for attractive rental space remained strong in the centres of Geneva and Zurich, which are relevant for PSP Swiss Property. By contrast, the market for older office properties in B and C locations and non-food retail space remained challenging; PSP Swiss Property is not active in this area.

The transaction market for prime assets in good inner-city locations has hardly changed in 2023 in terms of prices and initial yields. Despite higher interest rates, required yields remain very low for such investments. The number of closed transactions, however, has decreased significantly in the reporting period; but the level of activity was sufficient to keep the valuation level stable for prime assets.

At the end of 2023, the value of the portfolio was CHF 9.6 billion (end of 2022: CHF 9.4 billion), the vacancy rate was 3.6% (end of 2022: 3.0%). Of the lease contracts maturing in 2024 (CHF 31.3 million), 24% were open. The wault (weighted average unexpired lease term) of the total portfolio was 4.7 years.

In the reporting period, we purchased the modern office building “Westpark” at Pfingstweidstrasse 60, 60b in Zurich for CHF 216.5 million. We sold the investment property at Bahnhofstrasse 23 in Interlaken for CHF 3.0 million, part of the Wädenswil site for CHF 13.0 million and the project “Spiegel” in Köniz for CHF 2.7 million. There were partial sales at the project “Residenza Parco Lago” in Paradiso and at the “Salmenpark” site in Rheinfelden totalling CHF 19.8 million.

Six projects were successfully completed, and the properties were reclassified back into the investment portfolio. The renovation of the "P-West" car park in Zurich-West was completed in Q1 2023. The “Clime” property (a sustainable wooden building) in Basel was handed over to the tenants in Q2 2023. The two projects “Hôtel de Banque” in Geneva and “Bahnhofplatz” in Zurich (both comprehensive renovations and modernisations) were completed in Q3 2023. Furthermore, the new “B2Binz” building and the extensive renovation of the “Zürcherhof”, both in Zurich, were finalised in Q4 2023.

Further significant improvements were made at property and portfolio level in the reporting period. For example, we were able to reduce the specific CO2 emissions of our portfolio per square meter of rental space by further 13.3% compared to the previous year. In the annual report, we are reporting for the first time in accordance with the requirements of the TCFD (Taskforce on Climate-Related Financial Disclosures) and communicate more detailed information on our assessment of the physical risks associated with climate change. Furthermore, our analysis (based on the assumptions of the Carbon Risk Real Estate Monitor CRREM) has shown that, from today's perspective, we are well on track with our portfolio to make our contribution to the climate target of a maximum warming of 1.5°C ("1.5°C target aligned"). We are committed to achieve the net zero target by 2050.

In addition, an ESG factor was added to the variable, performance-related remuneration of the Executive Board as of 1 January 2024, which is intended to additionally align the performance-related remuneration with the sustainability goals of the business strategy in the long term based on the green asset portfolio.

Rental income increased by CHF 15.7 million or 5.0% to CHF 331.9 million (2022: CHF 316.2 million). The operating result, i.e. net income excluding gains/losses on real estate investments, was up by CHF 103.5 million or 43.9% to CHF 339.2 million (2022: CHF 235.7 million). The release of deferred taxes of CHF 106.9 million had a positive impact on earnings (thereof, CHF 30.6 million were released in the first half of 2023; 2022: no release of deferred taxes). On the other hand, lower profits from the sale of development projects and condominiums had a negative impact (CHF -11.2 million compared to 2022). Operating expenses fell by CHF 1.3 million or 2.3% to CHF 56.4 million (2022: CHF 57.7 million). Financing costs increased by CHF 11.3 million or 98.0% to CHF 22.9 million (2022: CHF 11.6 million). Earnings per share excluding gains/losses on real estate investments, which form the basis for the dividend distribution, amounted to CHF 7.40 resp. CHF 5.07 excluding the release of deferred taxes (2022: CHF 5.14). Net profit reached CHF 207.6 million (2022: CHF 330.0 million). The decline by CHF 122.4 million or 37.1% was due in particular to the portfolio devaluation of CHF -161.3 million (2022: appreciation by CHF 124.9 million). Earnings per share amounted to CHF 4.53 (2022: CHF 7.19).

Equity per share (net asset value; NAV) amounted to CHF 113.82 at the end of 2023 (end of 2022: CHF 113.33). NAV before deduction of deferred taxes was CHF 134.48 (end of 2022: CHF 136.62).

With total equity of CHF 5.2 billion at the end of 2023 – corresponding to an equity ratio of 53.3% – the equity base remained solid (end of 2022: CHF 5.2 billion or 54.8%). LTV (without considering a short-term fixed-term deposit) was 34.7% (end of 2022: 32.6%). The average passing cost of debt was at 0.91% (end of 2022: 0.47%). The average fixed-interest period was 3.9 years (end of 2022: 4.1 years). Currently, unused credit lines amount to CHF 1.1 billion (thereof CHF 0.8 billion committed).

PSP Swiss Property has an Issuer Rating A3 and a Senior Unsecured Rating A3 (outlook stable) from Moody’s.

The main proposals will include:

• Distribution of a gross dividend of CHF 3.85 per share (previous year: CHF 3.80).
• Re-election of the current Chairman of the Board of Directors and of all current members of the Board of Directors and Compensation Committee; new election of Ms. Katharina Lichtner to the Board of Directors (Ms. Lichtner's CV is available at www.psp.info/en/company/governance/board-of-directors-executive-board).
• Total amount of remuneration for the Board of Directors until the Annual General Meeting 2025 of CHF 0.9 million (previous year: CHF 0.8 million) and for the Executive Board for the 2025 financial year of CHF 4.250 million (previous year: CHF 4.150 million).
• Re-election of Ernst & Young, Zurich, as auditors and of Proxy Voting Services GmbH, Zurich, as independent shareholder representative.

The composition and chairmanship of the committees are to remain unchanged. It is foreseen that Ms. Lichtner will sit on the Audit Committee.

We expect higher rental income in 2024 than in 2023. The indexation of rental agreements will contribute to this. In addition, there is income from successful lettings in the development projects. The “Hochstrasse” project in Basel is already fully let, as is the “The12” project in Zurich. Additional income will come from the acquired “Westpark” in Zurich West, where the vacancy rate has also been reduced recently. Income from the sale of development projects and condominiums is expected to decrease, while operating costs will remain stable. We also expect a release of deferred taxes in 2024, but this will amount to only around CHF 10 million. Financial expenses will increase again due to higher interest rates.

Valuations will to a large degree depend on the development of the transaction market. We will continue to be selective in this market and take advantage of opportunities if they offer the prospect of added value.

We expect Ebitda excluding gains/losses on real estate investments of above CHF 295 million for the 2024 financial year (2023: CHF 297.7 million). We expect a vacancy rate of below 4% at the end of 2024 (end of 2023: 3.6%).