The Swisscanto (CH) Real Estate Fund Swiss Commercial (ISIN: CH0111959190) achieved a solid performance in the first half of 2020 given the challenging market environment. The overall result for H1 2020 of CHF 7.9 million was up compared with the previous year (CHF 6.5 million), leading to an increase in the (half-year) return on investments from 1.5% to 1.9%. Based on the extraordinary half-year valuation, there was a net upward valuation of CHF 0.5 million in the existing portfolio. Net income fell from CHF 8.8 million in the previous year to CHF 8.2 million. This reduction was due to provisions and lower income as a result of measures to combat the COVID-19 pandemic. As at 30 June 2020, the net asset value (NAV) per unit was CHF 101.3 (previous year: CHF 100.8). Return on equity rose to 1.8% (previous year: 1.5%).
COVID-19: stable performance, moderate rental losses
Due to COVID-19, the fund management company decided to carry out an extraordinary mid-year valuation of the investment properties for the 2020 half-year results. At 0.3%, the overall performance from the beginning of the year was positive. On 30 June 2020, the fund’s portfolio comprised 23 properties with a market value of CHF 603.4 million (end of 2019: CHF 601.7 million). On the income side, numerous tenants affected by the lockdown applied for rent reductions. Current expectations for the entire financial year 2020 are for reduced income due to rent reductions of around CHF 0.8 million or 2.6% of annual rental income. Such reductions are granted individually to avoid higher opportunity costs and to stabilise the tenant base. This drop in anticipated income as a result of COVID-19 was taken into account in the half-year results for 2020. Around 15% of the effect (0.4% of annual rental income) is already reflected in the reported rent default rate for the first half of the year. Appropriate provisions have been made for the remaining 85% (2.2% of annual rental income).
Outlook: stable distribution guaranteed
The fund is maintaining its proven investment strategy based on its conviction in the sustainable strength of Switzerland as a business location. The commercial space market is showing momentum even in the current phase of uncertainty. Hence, in July, after the half-year results, the fund was able to agree a ten-year lease extension with the rail vehicle manufacturer Stadler Rail for around 32,000 m² of commercial space on the “Werkplatz Altenrhein” site for a further ten years. Overall, the fund aims to maintain the attractive distribution of CHF 3.70 for the 2020 financial year. The broad regional and sectoral diversification as well as the stable tenant base will help it to achieve this.