Helvetica Swiss Living Fund – Increasing demand for living space shows effect

Press release August 18, 2023

Press release (PDF)

Zurich, August 18, 2023 – The Helvetica Swiss Living Fund (HSL Fund) benefited from strong demand for residential space in the first half of 2023. The occupancy rate was increased to a record 97.0 percent, testifying to first-class property management.

• Rising reference interest rate and housing shortage have positive impact on rental income
• Record high occupancy rate of 97 percent
• Increase in annualized rental income by 0.6 million Swiss francs from 28.9 million Swiss francs
  to 29.5 million Swiss francs.
• Market values down slightly by around 1 percent to CHF 810.2 million Swiss francs
• Debt financing to be reduced to approx. 39 percent by the end of the year by means of property sales
• Commitment to sustainability as an important pillar of business activity
• Stock exchange listing by the end of 2024 remains strategic goal

Record high occupancy rate in a weak transaction market
The Helvetica Swiss Living Fund has established itself as one of the leading unlisted funds in Switzerland with a focus on residential real estate. The fund exhibited constancy despite uncertainties on the market. There was a market-induced correction of 0.9 percent to the market value of the portfolio, which declined from around 818 million Swiss francs to around 810 million Swiss francs. The fund has a solid portfolio of 62 residential properties and comprises 1,838 apartments in the low rent quantile of 40 percent in easily accessible regional and national economic centers with strong population growth. The long-term value creation potential is therefore considerable. The portfolio was not expanded further during the reporting period due to the challenging market environment.

The rising demand for residential space is having a noticeable impact on the fund, with 155 apartments successfully re-let since the beginning of the year. A total of 42 apartments are thus still vacant as of mid-year. The occupancy rate increased from 95.2 to 97.0 percent, which is the highest occupancy rate since the fund was launched. This increase is evidence of Asset Management's active efforts to maintain first-class tenant relationships and continued commitment to outstanding property management. This positive development is reflected in annualized rental income, which increased from 28.9 million Swiss francs to 29.5 million Swiss francs- an increase of 0.6 million Swiss francs. These figures illustrate the robust performance of Helvetica Swiss Living Fund in a challenging market environment.

Income statement - increase in rental income
The portfolio generated higher rental income of 14.5 million Swiss francs by June 2023, an increase of 3.6 million Swiss francs compared to the first half of 2022. This shows the full earnings potential of the properties acquired in the previous year. Expenses increased by 5.1 million Swiss francs to 9.6 million Swiss francs due to higher expenses for the properties acquired in the previous year and increased interest costs. The financing costs were subject to an average interest rate of 1.62 percent, which is due to the interest rate increases of the Swiss National Bank SNB. The portfolio recorded a devaluation of 7.7 million Swiss francs under the position "unrealized capital losses". 

Asset statement - market values down slightly
As of the balance sheet date, the market values of the properties decreased by 1 percent to 810.2 million Swiss francs, while the total fund assets amounted to 819.7 million Swiss francs. Cash and cash equivalents decreased by 2.2 million Swiss francs to 1.2 million Swiss francs, while other assets increased by 0.1 million Swiss francs to 6.7 million Swiss francs. Shares in other real estate funds were held in the amount of approximately 1.5 million Swiss francs. After deduction of liabilities and liquidation taxes, net fund assets were 15.1 million Swiss francs lower at 431.6 million Swiss francs. The debt ratio was 45.85 percent, below the limit of 50 percent stipulated in the fund contract.

Performance - market-related pressure on returns
In the first half of the year, the HSL Fund saw its share price decline by 5.3 percent from 113.00 Swiss francs to 107.00 Swiss francs per unit. This corresponds to a net performance of minus 2.3 percent, taking into account the distribution of 3.45 Swiss francs paid out in the first half of the year for the 2022 financial year. In the first half of the year, the net asset value decreased by 3.94 Swiss francs from 116.37 Swiss francs to 112.43 Swiss francs per unit, resulting in an investment return of -0.43 percent, 3.28 percentage points lower than in the first half of 2022. The return on equity decreased by 3.10 percentage points to -0.42 percent compared to the half year 2022. The discount on the net asset value is 4.8 percent.

Outlook - Stock exchange listing remains strategic goal for 2024
In view of the challenging real estate market, HSL Fund's priority is to further increase the occupancy rate, adjust rental income to the rising reference interest rate, consistently realize potential in the properties in order to continue to generate an attractive return for investors. HSL Fund continues to specialize in the affordable housing market segment. This is reflected in the low rent quantile of 40 percent in which the residential rents are located. The fund management expects that this positioning will lead to further growth in rental income and thus have a positive impact on the fund's rental income. The average annual tenant turnover rate in the fund is 15 percent, which provides an additional opportunity to substantially increase rents with minimal investment when tenants change.

In addition, the HSL Fund plans to dispose of properties worth an estimated CHF 100 million. The proceeds will primarily be used to reduce debt and thus further lower financing costs, with the aim of lowering the proportion of debt financing to approximately 39 percent by the end of the year. These risk management measures will have an impact on the Fund's distribution capacity in the current fiscal year. Due to current market conditions, the planned capital increase has been postponed to the next fiscal year. Despite the postponement of the capital increase, the planned listing of the fund on the stock exchange by the end of 2024 remains a strategic goal.

Our commitment to sustainability is an important pillar of our business. In light of the results of the Swiss vote on a climate protection law and expected tightening of sustainability regulations, Helvetica has reviewed its sustainability strategy to reflect the changed starting position. All properties in the HSL Fund receive a GEAK (building energy certificate of the cantons) to determine their energy consumption, create transparency and identify energy potential.

The Half-Year Report 2023 of the HSL Fund is available on the company’s website as well as on Swiss Fund Data.

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About Helvetica
Helvetica Property Investors AG is a leading real estate fund management and asset management company. We offer our clients sustainable value through active, long-term ownership of secure and stable real estate investments. With a fully integrated real estate investment platform, we offer standardized investment products as well as customized investment programs. We are proud of our long-standing reputation for excellent customer service and our commitment to responsible business practices. Our firm is licensed and regulated by the Swiss Financial Market Supervisory Authority FINMA.

About Helvetica Swiss Living Fund
The HSL Fund is a Swiss real estate fund open only to qualified investors. HSL Fund invests in residential real estate throughout Switzerland, primarily where regional and national economic centers are easily accessible. The investment focus of the fund is on older and as-new properties with stable and sustainable income. The investment objective is mainly to maintain the value of the properties over the long term and to distribute appropriate income. The fund units are tradable over-the-counter. The HSL Fund is authorized by the Swiss Financial Market Supervisory Authority, FINMA.

Ticker Symbol HSL; Valor 49 527 566; ISIN CH0495275668

Disclaimer
This media release does not constitute a prospectus within the meaning of Art. 35 et seq. of the Federal Financial Services Act, nor does it constitute a Key Investor Information Document (KIID) within the meaning of the Swiss Collective Investment Schemes Act or a basic information sheet. It does not constitute an offer or a recommendation to subscribe to or redeem fund units but is intended solely for advertising and information purposes. This media release may contain forward-looking statements that are subject to uncertainties and risks and may change. Historical performance is no guarantee of current or future performance. The performance data do not take into account any commissions and costs charged on the subscription and redemption of units. The units of the HSL Fund may not be publicly offered or promoted in Switzerland. The documents that are solely relevant for an investment decision, the prospectus with integrated fund contract, the basic information sheet as well as the current annual report can be obtained free of charge from the fund management company. This media release is not addressed to persons domiciled and/or having their registered office outside Switzerland. In particular, this media release may not be made available or handed over to US persons within the meaning of the US Securities Act or US tax regulations, nor may it be distributed in the USA.