Swisscanto (CH) Real Estate Fund Responsible Swiss Commercial: Robust performance in 2020

• Total income increased in 2020 to CHF 17.7 million (2019: CHF 16.8 million)
• Payout raised once more from CHF 3.70 to CHF 4.10 per share
• Diversification through successful raising of capital and timely acquisition of two attractive portfolio properties
• Long-term income stability strengthened further through major leasings, temporary adverse COVID impact on income stayed within moderate bounds

Solid performance, payout raised

Swisscanto (CH) Real Estate Fund Responsible Swiss Commercial (ISIN: CH0111959190) achieved a solid performance once again in fiscal year 2020 in a challenging market environment. Factoring in the purchase of current operating income in the context of the capital increase executed in September 2020, the fund increased its total income for 2020 to CHF 17.7 million from CHF 16.8 million in 2019. The total income figure consisted of net income of CHF 19.2 million (2019: CHF 18.5 million) minus unrealized capital losses amounting to CHF –1.5 million (2019: CHF –1.7 million). Based on the good income structure, the fund can raise its payout again for fiscal year 2020 from CHF 3.70 to CHF 4.10 per share, which equates to a payout ratio of 101.1% (2019: 86.1%). The tax-exempt payout will be disbursed to investors on 16 April 2021.

Successful continuation of growth course

As of 31 December 2020, the fund’s portfolio comprised 24 properties (end-2019: 23) with a combined market value of CHF 614.9 million (end-2019: CHF 601.7 million). In September 2020, the fund successfully raised CHF 44.9 million of capital for the objective of strengthening the portfolio’s diversification through acquisitions and increasing share liquidity on the secondary market. The proceeds of the capital increase were used to acquire two commercial properties in the low-tax municipalities of Lachen SZ and Root LU in December. The fully leased office property at Alpenblickstrasse 25 in Lachen SZ is located almost adjacent to the town’s train station and is in good-as-new condition (construction year: 2016). The investment volume amounted to CHF 6.9 million for a gross yield of 4.2%. The fund took ownership of the property on 14 December 2020. The Oberfeld property in Root LU consists of two newly erected commercially utilized buildings featuring a mix of light industrial, office, retailing and warehouse space. The purchase price amounted to CHF 56 million for a gross yield of 4.3%. The transfer of title to the property in Root took place on 4 January 2021, after the balance sheet date.

Long-term income stability strengthened

One item particularly worth highlighting in the management of the fund’s property portfolio is the long-term extension of Stadler Rheintal AG’s lease on approximately 32,000 m² of heavy and light industrial space on the Werkplatz Altenrhein site at Dorfstrasse 1–3 in Altenrhein. The ten-year lease extension covers almost all of the floor space for which the rental contract would have expired in 2021. The overall occupancy rate at the Werkplatz Altenrhein property thus stands at above 90%. A large part of the commercial space at the repurposed property at Mellingerstrasse 18 in Baden was leased in 2020 to a medical services provider for 15 years and to a well-known health insurer for 10 years.

The successful leasings further strengthened the fund’s long-term income stability. The property portfolio’s vacancy rate deceased from 5.12% at end-2019 to 4.32% as of end-2020. The fund’s rent loss rate increased in 2020 from 7.2% to 9.3%, mainly due to the first coronavirus lockdown (from March to May 2020). Altogether, lost rental income due to rent waivers that were granted on a case-by-case basis to avoid higher opportunity costs and to stabilize the tenant base amounted to around CHF 0.6 million, or 2.1% of the fund’s annual rent income. Stripping out the one-time effects caused by the pandemic, the fund’s rent loss rate would have stood at 7.8% for 2020.

Outlook

The fund will continue to adhere to its established, proven investment strategy by operationally concentrating on managing its individual portfolio properties and on continually broadening its income base through responsible growth. The fund constantly examines investment opportunities to this end. Optimizing the leasing performance of portfolio properties stands in the foreground. The fund plans to continue to distribute all of its net income to investors in the coming fiscal years and to reduce its accumulated retained earnings in the medium term through payouts.