Ladies and gentlemen, welcome to the PSP Swiss Property Q1 2022 conference call. I am Sandra, 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 short presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Giacomo Balzarini, CEO of PSP Swiss Property. Please go ahead. Thank you, and good morning to everybody. More than a short presentation, it will be, as always, a short introduction, and then I would really like to give the floor to the questions in order to have more live interaction. We are glad and happy with the reported results of this morning. With regard to the market, we are confronted with a healthy market in the CBD of Zurich and Geneva. We experience a good business sentiment, which is continuing from what we said in February with the full year results, with sound letting activities. Also, demand for letting activities in the other cities we are active is improving, especially also in Basel, where I would say until end of last year, beginning of this year, we experienced a bit more difficult market. We are seeing signs of recovery. I think this is positive and has been translated also, I guess, as you have seen in our results. We are confronted with a still quite active transaction market. On the one hand, we were active in a few transactions you have seen. Secondly, also we see market transactions at in-place yields as we have seen them in the full year results. Overall, I think we have started well into the year with also vacancy rate of 3.5%, allowing us to confirm the vacancy rate guidance of below 4% by the year end. We improved slightly our EBITDA guidance to above CHF 1,285 million, which is a sign of confidence that we are quite positive on the remainder of the year with regard to the stability of our business and the stability of our earnings base. I think this is the very short introduction, and I think I would like to hand over back to you, participants, for a Q&A. Thank you. We will now begin the question and answer session. Anyone, anyone who has a question may press star and one at this time. The first question comes from Pascal Furger, from Vontobel. Please go ahead. Good morning. The first question is on your guidance. Can you please share with us what made you more confident in order to raise your EBITDA outlook? Also in light of your very low vacancy rate and having like 80% of your maturities already relet, do you see even more potential coming from the vacancy rate side? Then second question on your revaluation gains, can you please remind us what has triggered those? Typically, you update the value of your portfolio only with full year and half year results. Then maybe last question is a bit more general in terms of interest rates. Rates have risen quite meaningfully. What is your view on that and the fact that your yield spread might become tighter? Thank you. Thank you, Pascal, for the question. On the guidance, as you know, we are meanwhile a quite highly tuned machine. Clearly these are narrow movements. I think it's a sign of confidence on the underlying. A combination of, on the one hand, the project in Lugano, where we see that we are on a very good path. Also, the vacancy rate and the closed rental agreements helped on that end. Clearly with the visibility on the overall business made us confident that we can improve our EBITDA guidance. On the revaluation gains, the trigger is, as you know, we have, for instance, the stock exchange, we do two times full-year revaluation of the full portfolio. As we have an official quarterly reporting and disclosure, we would have theoretically to revalue the full portfolios in a quarter. We have since I would say more than a decade, a waiver that we only review and revalue the assets where we have a material sign of change in valuation based on rental contract changes. That's an assessment we are doing in the Q1 and Q3. If we are of the opinion that this could trigger a valuation change of ± CHF 5 million, we have to ask the valuer to review that specific asset. It happened so in the first quarter with an asset in Zurich, CBD Gartenstraße, where we signed a lease agreement on the full building, and happened so in the building Hôtel des Banques, Corraterie Cité, Confédération, the asset we bought almost two years ago, where we had some letting successes. Those triggered the CHF 5 million hurdle slightly. That contributed then to the revaluation gain of plus CHF 11.1 million. On the third point, I think here, clearly we have seen since the beginning of the year, this quite strong interest rate movement on the long end. I think this will have potential several implications. One is on the refinancing side. I think whatever we refinance now on the short term has a limited impact. We have a larger refinancing for us in September 2023, with overall CHF 300 million of maturities. Until then, I think we are still operating on the short-term refinancings. On the valuation side, I think here the valuer looks predominantly at transactional evidence. I mentioned at the beginning, the signs we have, especially for assets in the CBD, that the transactional evidence still shows a confirmation of in-place yields. I think here one has to monitor the situation as on the one hand, interest rates develop, and secondly, how investment appetite of investor changes. Our observation is that this is still quite stable. The next question comes from Ken Kagerer from ZKB. Please go ahead. Yes. Thank you very much for taking my call, and good morning, everyone. I have some questions on the inflation links in the contract. Have you been in touch with your tenants on those inflation links and on this topic? Do you think this is going to go through easily? Do you think that once those rents have been increased following increased inflation assumptions in the future, that you can keep those levels once the contracts are renegotiated? That's one part. The other one is also going a bit into the valuation topic of the external valuer. Two things there. Firstly, the inflation assumption is going to change in the future. Does this have an impact on values, and if not, why? You've also seen that the Adler Group has had issues with their external auditor, KPMG, and valuation was a big topic there. It came up in the press again that with rising rates, the valuations are at risk. You have just touched it briefly, that currently the transactional evidence is still confirming those valuations. Could you just give a bit of your view on the long-term development there? The third question is on the split of the net gains between Grand-Pré and Lugano Paradiso, please pre and post-tax. Thank you very much. Thank you, Ken. One point on the inflation links. It's pretty standard. We have an inflation-linked set up in the contract, which means that we take the November CPI, apply that in full on the rental income starting January first. Having said that, we have roughly 90% of our rental income linked to inflation. That means that this is a mechanical issue, as we have done it in the last years. There's not much to discuss, I would say, with the tenants. Practically, the head property management takes the CPI, puts the number into the system, which in our case is REM, and the letters are printed January first. On your second question, with regard to the inflation assumptions from the values. You're right, the valuer indicates that they will increase their assumptions from 0.5% to 1%. This will have basically no impact on our case based on the first rundown of the valuer, predominantly because our top line is fully indexed to inflation. Thirdly, I will not comment on the Adler case, although I followed it. I think what I can say is that in our case, our auditor and the valuation team of the auditor does always a selected analysis of the portfolio. They do pick always a few assets and do a full independent valuation. Over the last, I would say, quarters and half years, there have been never a major discrepancy on those valuations. I think here, independently on how this, valuation, evolves, it's the valuer's responsibility to do the external valuation. The auditors checks, the assumptions and makes their own assumptions. I think here, what I have to say as a management, where I see a bit our protection is first of all in the stability of the portfolio, the centrality of the portfolio, the visibility of the cash flows, still the demand for those assets, but then first and foremost, for the strength of the balance sheet. I think then that's a bit, at the end, also the market, and we will see how this develops. On this, last point on asset gate- Maybe just very fast to interrupt you, but maybe your view on the midterm valuations. I mean, you have commented that currently the transactional evidence is confirming those values. What's your take? I mean, that's also important when you take acquisition decisions and so on the future development of those values, if you may. No, no. I think we have seen it when we did the acquisition of Hôtel des Banques. I think at that time, yields were basically at those levels. If you look at an asset where there is a certain vacancy or an upcoming large vacancy, we talk a bit about other yields. Clearly then with a view on letting activity and letting success, you know, we get some extra value extraction we can generate. If you look at the recent transaction we did in Place de la Synagogue, we did it at, I would say, a reasonably low yield, but we sold an asset at a much lower in-place yield. I think here we try piece by piece to try to generate an additional value in a very difficult market with regard to transactions. If that's okay, I would go to your fourth question. If I recall correctly, it's the split Grand-Pré Parco Lago. Grand-Pré was, I think as disclosed in the annex, roughly CHF 16.1-2 million. Parco Lago, CHF 2.3 million. The tax rate in Lugano is roughly 10%-12%. On the Grand-Pré it was pretty ordinary tax rate, I think around our 18%. Perfect. Thank you very much. Thank you. The next question comes from Andreas von Arx from Baader Helvea. Please go ahead, sir. Yeah, good morning. I would like to start discussing four properties. First, I might have missed it, but on Parco Lago, could you provide an update where you are with levels of selling and reservations? First of all. Then, on the Biel project, with regards to letting, also on the Bahnhofplatz. And then could you give an update on that property in Biel, which is your new leader in terms of vacancy? That's the first part. Shall I continue or shall we go by one by one, no? You can continue. Yeah. On the development, here also with the inflation environment. I mean, on the projects that you have, do you have everywhere a general contractor contract where already everything is fixed or are there risks with regards to higher construction costs? Also, if you look at the ongoing developments, have there already been issues where, you know, contractors have not showed up, or there are delays or contractors that seem a bit unwilling to fulfill the contract, which all could lead to higher costs? That's the second question. Third one, coming back also to that inflation. Maybe on the other side of the medal. I mean, your cost side, I assume that's all basically hedged. I mean, let's say your energy costs and so on for the next year are then also based on that CPI index from November. Basically, there's not really, you know, any delay risk here. I mean, whatever CPI then is in November, you increase the contract and you're already hedged for the energy or are there any potential timing issues? Thank you very much. I come with the last point. We are not a energy trader if you talk about hedge. I misunderstand the question. You know, whenever we have consumption costs increasing for the tenants, they are passed over to the tenants. There's nothing to hedge. For the three buildings where we have our floors in, there's nothing to hedge. In Wollishofen, in Geneva, and in Basel. I think we are quite immune on the ancillary expenses, as I would call it, because they're borne by the tenant. To your Lugano question, we are left, I think, roughly with two little commercial spaces when you enter the building, where we are in discussions for disposal, and we are left with roughly 10 apartments, where we have on the one hand a bit interest, some have yet no interest, but we are in a, I would say, very positive. That will sell those apartments. As we continue to say, we have no urgency. We have since the beginning, not giving discounts, and we will continue to do that. On the Bahnhofplatz, we have signed the last lease agreement on the newest development just a few days ago. Also Bahnhofplatz 2 is now fully leased. On your Biel, that's the right observation. There's always a leader, also in the low levels. Biel is the surface where Swisscom gave back space and moved out of Biel. We are there in I would say, not advanced, but in positive discussions with the tenant to take up some space. The buildings are very central, and here we are, through our local team, in discussions for leasing up this Biel surface. It's interesting, it's still a quite active market, and I think also here we are quite positive also considering now the magnitude of the overall vacancy. On the development portfolio and the two questions I would say linked to it on the one hand, if I recall your question correctly, the total construction costs on the one hand, and then secondly, the no-shows of potential parties which should do the work. I think here the positive note of having a smaller development pipeline is that your exposure is smaller. Clearly there, on the other hand, I apologize, the financing sometimes is missing, but on the other hand, if you go through, we have a selective relationship with the local contractor. In certain cases, we do it on our own, but in no instance we have a material impact from building material inflation. In some instances, there's sometimes a bit of delay in the material procurement, a bit of cost inflation, but there's no way material for our pipeline. I would answer it in that way, that we are confident that we can deliver on those costs and incomes. Is that okay for you, Andreas? Yeah. There's also no update on the Biel. That's the one. On the what? On the beans? B to beans. Yeah. We are, you know, working on a variety of discussions with potential tenants. There's this interesting element that we need a little bit of light industry on the ground floor. We have interested tenants on certain parts, but we don't want to forgo a full concept. I think here, the quality of the building and the centrality of the building makes us confident that there's no hurry to put in place and that we can continue developing this project. May I add a quick follow-on question? Yes. I mean, you know, you paint a very positive picture on your developments, and rightly so, looking at the numbers. If I look at the market, you know, let's say SMB, we have some partner figures. I can see office space rents being down slightly, not much, flat-ish to slightly negative. I can see retail rents being down quite significantly, 3% in the first quarter, having been down 3% last year. I mean, isn't this just you're enjoying, let's say, a more favorable exposure? Or would you paint that on a more optimistic picture, really, for the overall Swiss market? Thank you very much. I think generally I'm not painting. I'm trying to tell what we see. In Hôtel des Banques, which is a repositioning asset, basically a development, we are leasing above underwriting rents. In Bahnhofplatz, we are developing restaurant, office, and I think in our view, we have signed a very, very attractive office rent. If you look at those projects, also the Zürcherhof, Limmatquai, we signed very attractive office leases. During COVID, beginning of 2021, if I recall correctly. This triggered also valuation gain in Q1 2021. We renewed Heuwaage retail, I think 6%-7% above in-place rents. I'm not saying, you know. I'm not talking it up, but we see, especially Zurich CBD, Geneva CBD, a healthy office market for renovated assets, modern surfaces. Perhaps here we have a double effect. We have, on the one hand, the centrality, and we renovate the building. Rue du Mont-Blanc, we did a complete renovation, and we're basically full with state-of-the-art tenants. I think it is a bit perhaps the combination where our view perhaps deviates slightly from a general assessment. That's a bit the snapshot view for what I see when I go through the rental agreements. Gartenstraße, we signed above in-place rent at very attractive terms, and this triggered a valuation change by the valuer because it puts the contract into the DCF model. I think that's a bit our observation. The next question comes from Holger Frisch from Zürcher Kantonalbank. Please go ahead, sir. Yes, good morning, and thank you for taking my question. I have a question on the WALT and a clarification because there seems to be a different information in the press release and in the presentation. My question is the WALT for the top 10 tenants down to three point four years like it is said in the presentation or is it up to 4.6four point six years like it is said in the press release? I can't answer that. Because I was wondering. No. Just now a cappella. I thought that's more for the presentation. Perhaps it's a typo in the press release. We will come back on that. Apologize. This is something I cannot. Could you just? I have to check. Yeah. Could you just then maybe say something in general about the rent extensions. Were there any concessions from your side for the extensions, or are the conditions so far unchanged? Yeah. No, I think what we observe in general, perhaps also on the whole, we don't observe a shortening of the rental agreements. We observed a continuation of five-year contracts plus two five-year extensions. In certain cases, like for instance, Gartenstraße, we have also 10-year contracts with options. We see here and there requests for early breaks with clearly then potential penalties to be paid. In general, we don't see a change in the duration of the contract. Secondly, with regard to the conditions, especially in the CBD areas, we see the normal requests for fit-out contribution or rent increase, rather a bit more, in certain cases, in favor of the landlord. There also depends very much on the single asset. Okay, great. Thank you. Thank you. The next question comes from Alexander Totomanov from Green Street. Please go ahead. Good morning, and thank you very much for taking my question. It's two questions, really. First you mentioned that 90% of your leases are indexed, and you use a November index level, and everything is indexed on January first. There is no indexation as leases mature. It is your entire portfolio indexed once a year. Just wanted to confirm that. Second question, given that 80% of the leases expiring this year have been secured, could you please comment on reversionary any reversion captures on those? Are there any regions or cities outperforming in relation to others? Yes. On your first question, that's correct. I think when we renew contracts, we review the rent, but the indexation happens in November. Also, if you renew a contract during the summer, you might then individually decide that you say, "Okay, this new rent includes the first indexation," but generally, it's once a year where we capture the CPI adjustment for the following January first. On the reversionary, yes, if you look, that's a bit difficult to do a read across, but if I look at the largest renewals we did now in the first quarter, we are above in-place rents. We are also 4%-5% above. There are clearly some specific outliers which drive that element. We have to see on how this falls down on the overall portfolio. Especially, and if you ask me for regions, it's the two which I mentioned, the CBD Zurich and the CBD Geneva. In one case, also a bit Basel. Thank you very much. Thank you. As a reminder, if you wish to register for a question, please press star and one. Star followed by one. Mr. Balzarini, so far there are no more questions. Well, thank you very much. If okay, we'll go bilateral back on this WALT question, to the experts from the ZKB. Thank you, everybody, and I wish you a successful day. Bye-bye. 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.