Earnings call transcript: PSP Swiss Property Q2 2025 sees strong EBITDA margin

PSP Swiss Property, with a market capitalization of $7.59 billion, reported its Q2 2025 earnings on August 19, highlighting solid operational results and a strong EBITDA margin above 85%. The company confirmed its full-year guidance around CHF 300 million. Despite a valuation gain of approximately CHF 100 million from its Zurich CBD portfolio, the stock experienced a significant drop of 91.62% in its latest trading session. According to InvestingPro analysis, the company appears overvalued at current levels, with a defensive beta of 0.42 indicating lower volatility compared to the market.

Key Takeaways

• EBITDA margin exceeded 85%, indicating strong operational efficiency.
• Valuation gain of CHF 100 million primarily from Zurich CBD assets.
• Vacancy rate target reduction from 4% to 3.5% by year-end.
• Conservative balance sheet with low loan-to-value ratio.
• Stock price fell sharply, with a 91.62% decrease in recent trading.

Company Performance

PSP Swiss Property demonstrated robust performance in Q2 2025, with EBITDA reaching $340.78 million and an impressive gross profit margin of 93.23%. The company’s strategy includes focusing on high-quality, prime location assets and maintaining a conservative balance sheet. While like-for-like rental growth was impacted by lower indexation and turnover, the company maintains a healthy dividend yield of 2.84% and an overall FAIR financial health score according to InvestingPro’s comprehensive analysis, which offers detailed insights through its Pro Research Report covering 1,400+ top stocks.

Financial Highlights

• Revenue: Not specified in the earnings call.
• Earnings per share: Not specified in the earnings call.
• EBITDA margin: Above 85%.
• Valuation gain: Approximately CHF 100 million.

Outlook & Guidance

PSP Swiss Property confirmed its full-year guidance around CHF 300 million. The company is optimistic about potential rental growth through asset-specific improvements and is taking a cautious approach to acquisitions. The focus remains on reducing the vacancy rate to 3.5% by the end of the year and maintaining a low average cost of debt around 1%.

Executive Commentary

CEO Giacomo Balzarini emphasized the company’s strategic focus, stating, "We are not under pressure that we need to buy," highlighting a selective approach to acquisitions. He also noted the company’s historical growth, "We grew top line by almost $77.00 in the last six years," and stressed the importance of resilience, "We need to be able to work through cycles."

Risks and Challenges

• Lower indexation and turnover impacting rental growth.
• Potential market saturation in non-CBD locations.
• Macroeconomic pressures affecting tenant demand.
• Interest rate fluctuations impacting debt costs.
• Regulatory changes in property zoning and development.

PSP Swiss Property’s Q2 2025 earnings call highlighted strong financial performance, with revenue of $397.14 million and a P/E ratio of 17.43, and strategic focus on core assets, despite challenges in rental growth and a significant stock price decline. The company’s conservative financial strategy and focus on prime locations position it well for future growth. For deeper insights into PSP Swiss Property’s valuation and growth prospects, InvestingPro subscribers can access exclusive financial metrics, ProTips, and comprehensive analysis tools.

Full transcript - PSP Swiss Property AG (PSPN) Q2 2025:

Matilda, Conference Operator: Ladies and gentlemen, welcome to the TSP Swift Property Half Year twenty twenty five Results Conference Call. I’m Matilda, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by Q and A session. The conference must not be recorded for publication or broadcast.

At this time, it’s my pleasure to hand over to Giacomo Balzarini, CEO of PSP Swiss Property. Please go ahead, sir.

Giacomo Balzarini, CEO, PSP Swiss Property: Thank you, Matilda. Good morning, everybody, and thanks for dialing in. As usual, with the half year results and the quarter results, I will do a rather quick introduction then go directly into the q and a. As we report this morning, we are satisfied with the very solid operating results. We are seeing it.

It’s a bit lower in the previous year’s comparison. But as mentioned, this is due to two specific one off effects we had in the ’24. We have seen a valuation gain of about 100,000,000, which is predominantly driven by the Zurich CBD portfolio. And thanks to the continuous cost discipline, we operate at an EBITDA margin of above 85%. We are on track with the various development sites.

Also, and there might take a bit longer, but we can go through that in the q and a. But, generally, we are pretty satisfied with the developments and the demand. And on the position side, we have nothing we acquired or disposed. But, clearly, we are looking at the transactions in the market. But as for now, we have not seen anything which would suit our portfolio.

The successful news came out from Valenzuela that we got the permission and the new rezoning code. So we are working there on the next strategic steps, and we have the reclassification of the full site. And on the funding side, we were able to launch the first CHF3 floating rate note a couple of weeks back, which we reported as a subsequent event, and we were able to secure extremely interesting margin conditions on clearly on a rather shorter issue, but which keeps us and allows us to keep the average cost of debt around the 1%. With that, we can confirm our guidances for the year end as we did in the press release this morning. And as I mentioned, I prefer rather going directly into the q and a and go through your questions.

Thank you.

Matilda, Conference Operator: We will now begin the question and answer session. The first question comes from the line of Mathieu Lindauer from Fontobel. Please go ahead.

Mathieu Lindauer, Analyst, Fontobel: Yes. Good morning, everyone. Thank you for taking my questions. I have two questions. First, how is the progress on renewing rental agreements which are expiring 2026?

And the second one is on Liventroy. Are you already in advanced talks with an operator for service department? Thank you.

Giacomo Balzarini, CEO, PSP Swiss Property: Thank you, Mateo. On the 2026 renewals, clearly, we are working on those. So, with the majority of those, you start six to nine months before we have one larger maturity, which comes up in Geneva. So it is at the end of the q one, where we have the tenant moving out. We were very close in signing the lease agreement, which didn’t mature then or materialize a few a few days back.

So here, this is the the biggest one which will mature, which makes up roughly 1% of the rental, but we are very positive that we can tackle it. And the others, I think that’s the usual ongoing business we have. With regarding to the Livenbroy, I think there are two passes. We are on the building provision models, and, clearly, we talk with with complexion operators. I think that’s that’s on the way as well.

Mathieu Lindauer, Analyst, Fontobel: Thank you very much.

Matilda, Conference Operator: The next question comes from the line of Mac Forster from Finance and Faircraft. Please go ahead.

Giacomo Balzarini, CEO, PSP Swiss Property: Hello. Good morning. Can you hear me? Absolutely. Oh, good.

Thank you very much for the for answering questions. You said that the demand was selected from increasingly price sensitive even in the central locations. So what does this imply for PSP? Because your portfolio of profit is from substantial reevaluation gains and coming from three central locations. So is the price sensitive behavior of tenants more an issue for the market in general?

Or does the PSP feel some implications too? I think generally, if we look at the market you mentioned, we are letting well and we are, especially in the office, reaching our our rental expectations and selectively also exceeding. Also, the highest retail, we are reaching our rental expectation and we see a solid demand. It’s clearly you see a bifurcation between CBD and non CBD. And then as you get closer, if you take specifically 50 slots, perhaps there, we have to adjust a bit our rent expectation because it’s not super super prime.

But, generally, we see that we can translate our rent expectation that materialized also in the evaluation of late of the first half of the year. Thank you very much.

Matilda, Conference Operator: We now have a question from the line of Steven Buma from Otobeha s. Please go ahead.

Giacomo Balzarini, CEO, PSP Swiss Property: Hi. Good morning. Thanks for taking my questions. I have two sets of questions. The first one relating to the pre leppings in Geneva’s Cartier de Bank.

What is your opinion on the strength of the Geneva leasing market compared to one year ago? And second, maybe provide some color on the discussions that you have today, including on where rental levels are likely to fall and expected occupancy for the moment of delivery? That’s the first one. I would say I would say on the on the Geneva CBD, Cartier de Bonds, the the fact that we were able to buy the headquarter last year and a half, the hospitality concept is very positive. We have also had an immediate relisting of a full building on after this, we are going into a multi tenant strategy, and we are in negotiation, and we have rental contracts out there.

I think the the positive, we will deliver a complete new product to the fact what we have beforehand. And we see a solid demand on all those. On on on one of the Petitore Buildings, have to go first to the building permission. Sometimes those take a bit longer, and then also the letting start, obviously, bit later. But compared to one year ago, I would say we had we didn’t have this product.

So I would say the demand is stronger and we are talking to tenants. We wouldn’t have talked a year ago because it was a complete different product. So we are we are positive on the Traffier de Bong, but, you know, never mind. You have to first develop those products. You have to go to the building permits.

You have to build them, but you win the dealer, deliver very nice offices and also reasonable sizes. These are not really super large floor plates. So I think we will absorb, but the market will absorb this product. Okay. And you expect them to at delivery to be almost fully free left?

I I would say that we have a very high late peak status. Yes. Okay. Yeah. Second question, what is the expected timing of the risk department residential disposals?

And second, do you see more residential redevelopment potential in your portfolio? Yes. Thank you. Well, on the risky part, we just came out of the rezoning. So I think now the the our priorities on the one hand really work on on the project of having and being able to deliver a project which includes all the requirements.

On parallel, we are we have been approached on on on potential assets swaps which we are going through. I think that’s the parallel move we have, and that was also the reason why we have to reclassify it for sale. I would say here, it’s a bit premature to talk about timing because you can imagine it’s a it’s a larger project which involves also various tenants, but clearly, it’s on the highest priority of us. And and clearly, we are very positive to be able now to deliver to deliver a nice product for the region if at the end it’s really that delivery to somebody else. I think that’s something we will have to we will go through in the next couple of quarters.

Okay. Clear. And and the second one, do you expect some other residential redevelopment potential in your portfolio? Well, if if you look historically, we have always the approach of the highest and best use. So we have two assets which we are working on, which is the sea lounge start and the fluoro start.

We are clearly glancing through the portfolio also when we see that perhaps an office being is rather up for resi, but that this will not be the substantial driver of our strategy. This is a continuous asset management approach throughout the organization. And for sure, there will be some redevelopment in the resi, but as I said, it will not be the dominant part. Very clear. Thank you so much.

Thank you.

Matilda, Conference Operator: The next question comes from the line of Ken Quirire from Zerbyshe Cantonal Bank. The

Ken Quirire, Analyst, Zerbyshe Cantonal Bank: first one is on the vacancy rate. Could you just give us some granularity how you want to get that down from the currently 4% to the intended 3.5 by year end?

Giacomo Balzarini, CEO, PSP Swiss Property: It will this will go through electing of the retail sales basis on the future process by year end through a temporary letting of that phase and parallel letting activity for the long term. This will be the main driver of the reduction.

Ken Quirire, Analyst, Zerbyshe Cantonal Bank: What is the average rent per scan to put temporary letting, please?

Giacomo Balzarini, CEO, PSP Swiss Property: This is I would say it’s not a substantial driver. The important is that we want to show show cases. Clearly, we are working on a fixed land rent for the first part of the third phase, but we are foreseeing to have a full letting of the overall third phase if we are not able to have a letting agreement by the year end.

Ken Quirire, Analyst, Zerbyshe Cantonal Bank: Thank you then. I’ve seen that the average duration of your debt has come down over time. What is your strategic plan for the average duration currently? It’s a three point six years, if I see that correctly. Where would you want to see that in the midterm?

Giacomo Balzarini, CEO, PSP Swiss Property: Yes. That’s correct. If you look very historically, we were even shorter. We were even at three or below. Then with the negative rates, we try to go as long as possible.

I think the way we see, first of all, we have basically full inflation hedge on top line. So we have the ability to go a bit short to plus. We have a relative low loan to value. So I would say whatever is around is three and a half, four and a half is is an area where we feel comfortable. And within that area, we try to act opportunistically on diversification of funding sources and to having attractive spreads.

Ken Quirire, Analyst, Zerbyshe Cantonal Bank: Excellent. And another one on Zurich. As I understand it, you have had a very significant uplift in valuations there. What do you expect in terms of the UBS properties coming to the market in the prime office space and and and and in terms of the impact on the market in terms of rents and absorption of of of of of vacant buildings.

Giacomo Balzarini, CEO, PSP Swiss Property: Do you talk about disposals or about lettings? No. Lettings. More on lettings. Yes.

I think that the thing we see is that perhaps in 2627, there there there will be some office space coming to the market, but the the way we see it and the strength of the market, this will be absorbed. It could lead to temporary vacancies in in in buildings, but I think it’s not a huge amount of service which comes. The demand in the CBD for modern offices is is solid. That’s what we observe in our buildings. So I think that’s not in in how we really have substantial influence.

And retail on the Palazzo? What’s your view on that? I had to give an interview yesterday. The different buildings, you’re close to a dead zone if you want to get there by foot. So I think it’s we do really see.

I think it’s very difficult to see what concept comes. We we heard that there’s retail coming, but we have also heard that’s not so clear what kind of retail. I think the demand for retail generally on Baumann Strauss is very high. But I think also that the the the further away corner of the bound of for the Peralde plot is not so attractive like the Peralde plot surface just from the pure accessibility. Yeah.

But the on the but the underlying demand, what we see from tenants is quite strong. Okay.

Ken Quirire, Analyst, Zerbyshe Cantonal Bank: And maybe last one from my side. We have seen that MobileMore has done an M and A deal. And, obviously, we always ask you what what what are you seeing in the market? Some some do you see some consolidation activity where you could take part of? And if so, how would you finance that?

Giacomo Balzarini, CEO, PSP Swiss Property: With with all respect, I think it was a small m and a deal. You can call it m and a deal. We look at the market. We look at transactions. But we are, as always, we are very sensitive to try to do accretive transactions in the long term.

We are very diligent on capital allocation, and we don’t see really a lot of assets which would fuel as our portfolio. So the funding then, we if we find something really of interest, I think the funding is is least of the of the issues.

Ken Quirire, Analyst, Zerbyshe Cantonal Bank: Okay. Thank you very much.

Giacomo Balzarini, CEO, PSP Swiss Property: Thank you, Ken.

Matilda, Conference Operator: We now have a question from the line of Ilyas Vinci from Kempen. Please go ahead.

Giacomo Balzarini, CEO, PSP Swiss Property: Good morning, Giacomo. Thank you for taking my questions. First one, coming back to your comments on demand being more selective and price sensitive. I understand that there is bifurcation and you own more prime properties, but does this make you more cautious on future lettings, or are you going to continue to chase higher rents? I think this is a, you know, very general question.

I think it’s asset by us specifically. I think we have buildings where we know that we can increase the rent. Generally, we have seen and said in the past that you can increase rents in line with the quality of the product you’re delivering. So, clearly, the ambition is to increase the rent link comment, to increase the like for like. Also, you know, if you have a 150, a 160 assets, there’s always one asset which expires and you need to do some work and then you have a a longer absorption time.

But what I say and see with our position of the assets we have alternative tenants, and we’re getting positive that we can increase the rent. Yes. But it’s very, very asset asset specific. Okay. Clear.

And then on guidance, I would say you typically have the tendency of upgrading guidance in h one. Historically, you’ve been a bit more conservative for the start of the year. This time, you’d only confirmed guidance. So how should I read this? I would read it the way we communicated.

We never we never issued a guidance initial beginning of the year with the aim to upgrade mid e. We issued a guidance we think we can get by the year end. If we issue guidance with the fixed numbers because we have a conviction that we get to those fixed numbers, if you guys that we can get a higher, we issue higher. Here, we said, clearly, around 300, not with an ambition to be stopped. So, clearly, we try to beat it, but it’s not something we hold on the back end.

So I would read it that this is the guidance we give for the full year. Okay. Thanks. And maybe just one last one. Of course, looking at valuations, it does screen that valuations have clearly bottomed out.

If we look beyond the very price segment, there seem to be interesting deals at very attractive yields. Wouldn’t it be a perfect moment to be more on the acquisition side? We look at the variety of the acquisitions, and if we think that something is for us long term accretive, not only from an ETF point of view, but also from an NAD point of view, we clearly look at it and we try to guide. Just the fact that a yield is higher, a bit in a in a less prime location doesn’t intrigue us to say now we have to go and buy it. Also here, we look at at at all the transactions, and we take the decisions asset by asset.

And we don’t feel under pressure that we need to buy. If you look historically, we grew top line by almost $77.00 in the last six years. So we find opportunities. We don’t chase opportunities. Okay.

Thank you very much. That’s all from my side. Thank you.

Matilda, Conference Operator: The next question comes from the line of Eleanor Phiu from Barclays. Please go ahead. Hi. Thanks very much for the q and a. Just one so no question from acquisitions, maybe thinking about disposals.

Do you think you could be moving towards a seller at the second half of the year given the transaction market moving in the right direction?

Giacomo Balzarini, CEO, PSP Swiss Property: I would I wouldn’t say on the last day, we have something minor, which we are working on a disposal, but this is more of a cleanup. We don’t we are pretty happy with the portfolio we have. We did I wouldn’t say larger, but we did some disposals last year in the portfolio which were part so I wouldn’t expect now a large disposals to take it off.

Ken Quirire, Analyst, Zerbyshe Cantonal Bank: Thank you.

Giacomo Balzarini, CEO, PSP Swiss Property: Thank you.

Matilda, Conference Operator: We now have a question from the line of Andreas von Ackx from Baader Helvea. Please go ahead.

Giacomo Balzarini, CEO, PSP Swiss Property: Yeah. Good morning. My first question is on taxes, more specific deferred taxes. Could you elaborate a bit on on the moving parts here? Because I think that’s probably the key reason why why you have missed the expectations on the job of net profit.

I’m specifically thinking about the the the minus 6,300,000.0 impact from from pay changes in tax rate. And maybe you could also elaborate on the effects, you know, that long term revaluation of Hetz that that you had in in previous periods, what the effect here was in the first half just to better understand what’s going on in the deferred tax. And then I have the second question. Basically, same questions we we already heard two times, but I’m gonna ask it a bit different. I mean, your competitors all seem to, you know, fully use the balance sheet and put it at work, rather increasing LTVs with acquisitions and projects.

And you stick to your conservative approach of low LTV and then let’s say not not hunting for acquisitions. Why do you think investors are better off with your conservative strategy in the current low rate interest environment? Thank you very Thank you, Andreas. I think on the deferred tax rate, I thought we have disclosed it, but we had a tax rate increase in the Canton Of Geneva, which has an impact on deferred taxes. So this is an alignment of the local taxes which goes on.

On the on the this poll on the acquisition front, I I think here and we try to evidence that over the last year. It’s clearly that the acquisitions with those funding levels are accretive. And we are generally positive on Switzerland, and we are generally positive on the office market, and we are generally positive on our locations. However, we come out of a super cycle, and rates are low. So the sensitivities are very high.

And I think, therefore, we are a bit more selective with our in place portfolio and with development pipeline, although it doesn’t seem large, but we have other developments in the portfolio which will come through the next twelve, eighteen months, we feel that it’s more opportune to wait for the opportunities when there’s place. Like, we bought your Telesubong during COVID. We bought the website when not many were able to buy We try to buy something a bit off the model then coming with a new concept. So we will see and get opportunities, but we need to get the additional extra in our area. And and therefore, we feel also pretty comfortable with a reasonable low loan to value.

I think this is, for us, the credo, and that was also, by the way, the message into the organization today. We need to be able to to work through cycles. We are not aware if they come and when they come. And if we do an acquisition, we need to be convinced that this creates additional value, maybe long term, and this is in our locations. And so we don’t want to dilute those locations by buying something which is a bit east or west.

And and I think that’s that’s a bit our philosophy, but that’s also the way we are incentivized. We’re incentivized for the long term development. And I think every shareholder and and and investor has to figure out which which case he wants to play. But we shouldn’t forget it’s still a secret to business, and sensitivities are high. But that’s not a message of cautious.

I think it’s a message we we give since decades, and we grew. And I think we were the ones which grew most over the last year with single acquisitions, but we are not promising it. Thank you. Thank you. Thank you.

Matilda, Conference Operator: The next question comes from the line of Shital Jalmalani from Deutsche Bank. Please go ahead.

Ken Quirire, Analyst, Zerbyshe Cantonal Bank: Hi. I just have a quick one on rental growth. Mhmm. Where do you see the like for like rental growth at or the year end of FY twenty five? And where do you stand in terms of ERV?

And how do you see it across your different markets?

Giacomo Balzarini, CEO, PSP Swiss Property: Yes. If I if I understood your question on the like for like, you you see that the like for like clearly came down compared to the last year. But last year, we had a much higher indexation, plus we had a substantial turnover component which didn’t materialize in this amount in ’25. So from the 1.2 percentage points, roughly 1% was the like for like flows through the indications. Through the the the the different markets, we will be able now you to continue to go at the larger rents on on super prime retail, but those occur when we have maturities.

We can increase the rents in prime office when we renovate the buildings and bring up a new product. And I think for the majority of the others, it’s clearly stable development with indexation. Think that should be the message across the markets.

Ken Quirire, Analyst, Zerbyshe Cantonal Bank: Okay. Got it. We

Matilda, Conference Operator: have a follow-up question from the line of Mathieu Lindauer from Vontobbe. Please go ahead.

Giacomo Balzarini, CEO, PSP Swiss Property: Yes. I have one

Mathieu Lindauer, Analyst, Fontobel: more question regarding all the operating income. For example, in 02/2024, we have seen it at 11 of 6,000,000, in 2023, 7,000,000. Now we’re standing off the whole year at around 1,000,000. What can we expect going forward from other operating income, or what’s your expectation?

Giacomo Balzarini, CEO, PSP Swiss Property: If you take in the capitalized loan services and the other income with regard to the VAT refunding, I think you could figure out another 2,000,000 by the year end.

Mathieu Lindauer, Analyst, Fontobel: Okay. And going forward in twenty twenty six, twenty twenty seven?

Giacomo Balzarini, CEO, PSP Swiss Property: I think on the overall operating income of 300,000,000 for the half year, testing a one percentage point in 2627. Okay. Let’s see. No. I think it will be this minor element.

Mathieu Lindauer, Analyst, Fontobel: Okay. Perfect. Thank you, Takum.

Giacomo Balzarini, CEO, PSP Swiss Property: Sorry. Yeah. Thank you. Thank you, Takum. Thank you.

Matilda, Conference Operator: The next question comes from the line of Alexander Tomanov from Green Street. Please go ahead.

Giacomo Balzarini, CEO, PSP Swiss Property: Good morning, and thank you for taking my questions. Two questions for me. How are the discussions going on without the cost in Luzan, given the project update in less than six months? The discussion on the other cost are going I have to admit positive. We have an advanced discussion on the retail part.

We have an increased interest on the retail part, and I hope that we can soon report a success for that. Also, there are alternatives. And we have basically on every floor ongoing discussions and negotiations. It’s clear that, I think, that the building is a superb building when it’s finished, it’s delivered. It’s for the stock market, large surfaces.

It’s a large product, and it will take a bit of time to be absorbed. And it’s a bit, I would say, on the price range, it respects the quality of the product. But we have signed leases. We are in discussions. I think the sentiment and the the responses are picking up, But it’s it’s at the end, you know, you have to deliver it, then you have to negotiate, and this takes time.

It’s it’s, you know, thousands of credits. But we are positive on on on San Francois. It’s a it’s a very nice product at the end. Okay. Thank you.

And second question, and I think that’s something that I alluded to as well. Swiss francite announced the purchase of a new build asset in the West last week. You mentioned you have a conservative long term view in terms of acquisitions. Were you in the bidding time for the for the West? It’s a it’s a general asset we were aware of at the very beginning, and we didn’t follow-up.

Thank you very much. That’s all for me. Thank you.

Matilda, Conference Operator: We now have a question from the line of Kai Klose from Berenberg. Please go ahead.

Giacomo Balzarini, CEO, PSP Swiss Property: Yes. Good morning. I just have one question regarding the general and admin expenses. There was a bit of a stronger rise in the first half year on year by 6%. Was there anything specific in the first half or kind of a one off?

And then just to give an indication for the for the full year. Well, the general lightning cost, yes, they increased by 6%, but we are talking about 200,000. So we had a bit more IT cost and project cost. I would say for the role of the year, I think this is in line with the the last years. As I said, the overall operating expenses are very stable.

There might vary depending on delivery of certain projects here and there, But this is all very, very much under control. Got it. Thanks. Many thanks. Thank you.

Matilda, Conference Operator: Once again, to ask a question, please press star and one on your telephone. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dagobobazarini for any closing remarks.

Giacomo Balzarini, CEO, PSP Swiss Property: Yes. Thank you from from our side for for your interest, for the questions. I’m sure we will keep in touch, and I wish you all a successful day. Thank you. Bye bye.

Matilda, Conference Operator: 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.

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