Swiss Prime Site increases FFO in 1st half-year

Swiss Prime Site increased its rental income on a comparable basis (EPRA like-for-like) by 2.2% in the first half of 2025. According to the largest Swiss real estate company, around 1.4% points of this is attributable to higher rental income in real terms - i.e. excluding indexation and vacancy reduction. In absolute terms, rental income fell by CHF 2.8% to CHF 225.5 million in the first half of the year, due to new construction projects, the closure of the Jelmoli department store and sales. According to the company, the vast majority of the CHF 17 million in lost target rents was compensated for. The vacancy rate has risen from 3.8 to 4.0% since the end of the year and should be back below 3.8% by the end of the year.

The revaluation result increased from CHF 33.0 million in the same period of the previous year to CHF 102.0 million, which corresponds to an increase in the value of the portfolio of CHF 0.8%. It reached a value of CHF 13.3 billion by the middle of the year. According to the information provided, the discount rate used in the valuation was slightly lower, and the positive valuation result of over 60% is attributable to higher new contracts and further rental effects. Six properties were sold for a total of CHF 70 million, three of which were sold after the reporting date. As CEO René Zahnd explained at the annual results media conference, the sales prices were on average 4% above the last fair value, which he interpreted as proof that the book values were correct.

Consolidated operating income (EBITDA) before revaluations and disposals remained almost constant at CHF 199.5 million (previous year: CHF 201.3 million) despite the loss of Jelmoli rental income. Direct real estate expenses fell by 8% - according to the information provided, "due to the optimized portfolio and stringent cost management".

For the first time since the interest rate turnaround in 2022, total interest expenses fell by almost CHF 17% to CHF 27.5 million. This favored an increase in funds from operations excluding disposals, which rose by 3.4% to CHF 2.10 per share, although the number of shares increased slightly due to the CHF 300 million capital increase in February.

Jelmoli conversion roughly more expensive

Zahnd also announced some updates on current projects. At Jelmoli, for example, the planned investment has been increased from CHF 130 million to CHF 150 million. The reason for this is primarily a new status of the building fabric and necessary structural upgrades, particularly with regard to earthquake safety requirements. And a pre-letting level of 50% has been reached for the Yond project. Zahnd also made a statement on the major Zurich "Maaglive" project in the immediate vicinity of the company's headquarters (read more here).

"Globus remains a tenant"

Chief Portfolio Officer Karin Voigt said at the event that it is not currently foreseeable that expiring rental agreements will lead to vacancies in the existing portfolio. When asked about the Müllerstrasse property, which was extensively refurbished for Google and has not yet been occupied, she said: "Google pays rent and does not want to give the property back". There is also important news on the subject of Globus department stores: according to Zahnd, the operators clearly intend to continue operating all locations. The details of the rental agreements have not yet been finalized, he said. "However, it is already clear to me that the fair value of the properties will remain unchanged," he said. It was particularly important to him that the rental agreements would expire at different times in future. In Geneva, this will be the case in ten years, in Lausanne in eight and in Lucerne in seven.

"Portfolio restructuring nearing completion"

The restructuring of the portfolio, with sales in peripheral locations in favor of capital upcycling for projects in better locations, is almost complete. Zahnd stated that around 1% of the portfolio is still to be sold in the medium term. This is to take place over the next two years. Following the CHF 300 million capital increase, two acquisitions - in Geneva and Lausanne  - CHF 200 million including borrowed capital.

"Capital increases as a sign of confidence"

Including the asset management division, SPS has raised CHF 840 million in fresh capital. "This is a sign of the confidence the market has in this company," emphasized Zahnd. Incidentally, the third-party business of the Solutions subsidiary recorded a jump in sales of 41% to CHF 38 million. EBITDA rose by 64% to CHF 23.9 million in the first half of 2025 "thanks to economies of scale resulting from the full integration of Fundamenta with synergies of around CHF 4 million".

FFO growth "materially above guidance"

SPS management confirms the targets for the company as a whole for the full year. The vacancy rate should fall to below 3.8% and assets under management in the third-party business should increase to over CHF 14 to 14.5 billion. FFO I per share will be "realized at the upper end of the forecast range of CHF 4.10 and CHF 4.15", it said. This is only a formal confirmation of the guidance, Zahnd said. In view of the higher number of shares - a decision on a capital increase had not yet been made when the forecast was announced - it was therefore "materially" an increase. (aw)