Helvetia (CH) Swiss Property Fund delivers solid results for 2022/23
For its fourth financial year, Helvetia (CH) Swiss Property Fund is again able to report an encouraging set of results, in a challenging market environment. With solid net income of CHF 22.59 million as well as the strategic focus on residential usage accounting for 78% of rental income, a stable development produced total income of CHF 0.16 million. This represents an investment yield of 0.41%.
Active management of the investments increased rental income to CHF 36.93 million (2021/22:CHF 27.36 million), while the rent default rate declined to 2.48% (2021/22: 2.53%). This had a positive impact on earnings capacity, with the EBIT margin increasing to 66.19%, versus 65.05% in the previous year.
Higher net income per unitThe net income available for distribution registered a substantial year-on-year increase, rising from CHF 17.94 million to CHF 22.59 million. This represents net income per unit of CHF 2.78 (2022: CHF 2.76). The previous year’s distribution of CHF 2.75 per unit was maintained for the year under review, despite higher financing costs. Accordingly, a total of 94.53% of the income available for distribution is being distributed to investors, which corresponds to a payout ratio of 98.90%. Based on the OTC price of CHF 104.00 as at 30 September 2023, the dividend yield is a gratifying 2.64%.
The slight, market-related drop in property portfolio value is offset in part by the positive operating result. Unrealized capital losses amount to CHF 22.02 million (2021/22: unrealized capital gains of CHF 8.45 million). This value adjustment is attributable to higher interest rates over past months and the resultant rise in the discount rates applied by independent appraisers. This led to a decline in market values in the portfolio.
Successful capital increaseIn the fourth financial year (1 October 2022 to 30 September 2023), attention was focused on the capital increase that took place in spring 2023 for a gross amount of CHF 172 million. Subsequent to the capital increase, eight high-quality properties were acquired from the portfolio of Helvetia Insurance, with an approximate market value of CHF 229.5 million. At CHF 1,078 million, the portfolio’s market value has thus topped the one-billion mark, and offers our investors ideal diversification in terms of macro- and microlocations, economic year of construction and tenant structure.
Successful first-time participation in GRESBThe financial year under review marked the first-ever participation in the Global Real Estate Sustainability Benchmark (GRESB), which was rewarded with a Green Star distinction. The Helvetia (CH) Swiss Property Fund also won three stars in the relative peer comparison. Alongside incorporation into the fund agreement in September 2023, they also serve to underpin the relevance of ESG considerations in the investment process. Responsible investment is one of the four focal points of Helvetia’s sustainability strategy. By 2050, the company intends to gradually shift its investment portfolio to net-zero emissions, fulfilling the requirements of the Paris Climate Agreement.
Outlook for financial year 2023/24Given the rise in the reference interest rate on 1 June 2023 and the adjustment of indexed rental agreements for apartments, additional rental income of CHF 1.12 million is expected for the current financial year. This corresponds to an increase of 2.95% versus target rental income. Similarly, the rise in the reference interest rate with effect from 1 December 2023 is likely to have a further positive impact on rental income.
With a market value in excess of one billion Swiss Francs, the Helvetia (CH) Swiss Property Fund is one of the largest non-listed real estate funds in Switzerland. In favourable market constellations, it thus meets the requirements for listing on SIX Swiss Exchange. This is planned for the first half of 2024.
Helvetia Swiss Property Fund delivers another successful set of results for 2021/22
The Helvetia (CH) Swiss Property Fund was once again able to demonstrate its strong earnings capacity in the past financial year. Underpinned by solid net income of CHF 17.9 million and unrealized capital gains after liquidation taxes of CHF 4.9 million, total income came to CHF 22.9 million. This represents an investment yield of 4.11%.
The predominant residential share of around 82% of the target rental income once again contributed to the very stable income and value performance. Rental income amounted to CHF 27.4 million (2020/21: CHF 22.2 million). The rent default rate over the twelve months is a low 2.5% and therefore on a par with the previous year (2020/21: 2.5%).
Qualitative growth strategy pays offThe focus of the past financial year was the capital increase completed in spring 2022 for a gross amount of CHF 210 million. In the context of this transaction, ten attractive properties were acquired from the portfolio of Helvetia Insurance, cementing the strategic objectives of growth and diversification for the long term. The market value of the real estate portfolio comprising 39 properties and 1,575 apartments increased by CHF 314.5 million year on year to CHF 862.8 million. The change in market value was driven in part by sustained investor demand for high-quality investment properties with a residential focus, which resulted in a higher valuation from independent property valuer Wüest Partner.
Increase in net asset value and distributionLast year, the net asset value per unit (before distribution) increased from CHF 103.40 to CHF 103.95. For the current financial year, the Executive Board has set a distribution of CHF 2.75 per unit, meaning that a total of 99.65% of net income is being distributed to investors. Based on the over-the-counter price of CHF 114.00 as of 30 September 2022, the dividend yield is a gratifying 2.40%. The distribution per unit was therefore actually increased year on year after deduction of profit carried forward.
High level of value stability despite the volatile market environmentListed real estate investments recorded sharp price losses this year due to the prevailing economic uncertainty in combination with rising interest rates. Between 1 October 2021 and 30 September 2022, the Helvetia (CH) Swiss Property Fund likewise reported a negative performance of -2.92% based on the trend in the over-the-counter price. However, this beat the benchmark SXI® Real Estate Funds Broad TR (relevant for listed Swiss real estate funds), which returned a negative performance of -16.08% in the same period.
Outlook for financial year 2023The fund management company intends to continue expanding the real estate portfolio substantially in the financial year 2023. To this end, a further capital increase is planned for the end of March 2023. The proceeds of the issue will again be used to purchase from Helvetia Insurance’s property holdings a broadly diversified real estate portfolio with a high residential component worth around CHF 200 million. This is likely to be the penultimate capital increase before the Helvetia (CH) Swiss Property Fund’s listing on SIX Swiss Exchange.
Helvetia (CH) Swiss Property Fund posts strong result for the 2021 financial year
The Helvetia (CH) Swiss Property Fund is reporting a very encouraging result for the second financial year. Underpinned by solid net income and an appreciation in the property portfolio, total income in 2021 came to CHF 24.2 million, representing an attractive investment yield of 5.5%.After transaction costs from the purchase of the initial portfolio of 29 properties impacted on the short first financial year (3.6.2020 to 30.9.2020), the 2021 financial year revealed the portfolio’s strong earning power over the twelve-month period. On the strength of the dominant residential component of 83% of the target rental income, the portfolio of the Helvetia (CH) Swiss Property Fund remained largely unscathed by the adverse effects of the COVID-19 pandemic in the second financial year too. Property income solid and rent default rate low
Rental income amounted to CHF 22.2 million, while the rent default rate was reduced to a low 2.5% within the space of a year. The EBIT margin increased to 66.3% and the fund operating expense ratio (TERREF GAV) was down to almost 0.8%. Net income generated in the 2021 financial year amounted to CHF 12.8 million, or CHF 2.84 per unit. Encouraging price trend and strong performance
Low interest rates and stable income on the Swiss property market ensured the continuing appeal of the real estate asset class and strong demand for investment properties in 2021 as well. Real estate investments with a high residential component profited in particular. In the period from 30.9.2020 to 30.9.2021 the Helvetia (CH) Swiss Property Fund reported a performance of 18.9% based on the price trend in over-the-counter trading, beating the benchmark SXI® Real Estate Funds Broad TR (relevant for listed Swiss real estate funds), which achieved a performance of 15.3% in the same period.
Increase in net asset value and high dividend yield
Last year the net asset value per unit increased by 5.5% from CHF 98.03 to CHF 103.40. The market value of the properties rose by around CHF 12.2 million (2.3%). After the decision not to distribute accrued income in the short first financial year, the initial distribution per unit was set at CHF 3.55. Based on the over-the-counter price of CHF 126.00 per unit, this represents a dividend yield of 2.8% as at the end of the 2021 financial year. Further expansion of real estate portfolio planned
The fund management company intends to expand the real estate portfolio substantially in the 2022 financial year. To this end, it is planning a new capital increase of approximately CHF 200 million as at end March 2022. The proceeds of the issue will again be used to purchase a broadly diversified real estate portfolio with a high residential component from Helvetia Group’s portfolio. A listing on SIX Swiss Exchange is planned in one to three years.