Helvetica Swiss Living Fund carries out optimizations, laying a new foundation

• Debt financing ratio at the end of August 2024 significantly reduced to 31.5 percent
• Net income in the first half of 2024 of CHF 5.4 million contributes CHF 1.40 to the distribution per unit
• EBIT margin increases from 56 percent to 63 percent
• Occupancy rate at 96 percent stabilized at a high level
• Management fee reduced by a third to 0.45 percent

Net income and dividend contribution

The HSL Fund’s portfolio generates stable income, based on the continuing high demand for housing in suburban locations. Rental income increased by CHF 0.8 million on an annualized basis as of April 2024 due to the further rise in the reference interest rate. The management fees, which have reduced by 25 basis points to 0.45 percent since 2024, also significantly contribute to improving operating profit. The EBIT margin increased from 55 percent at the end of 2023 to 63 percent. Net income in the first half of 2024 was CHF 5.4 million. This results in a dividend contribution of CHF 1.40 per unit.

Portfolio management

In the first half of 2024, eight properties with a total value of around CHF 75 million were successfully sold. However, the net asset value (NAV) as of the balance sheet date takes account of capital losses that are expected on the properties still to be sold. This proactive measure results in a write-down of around CHF 20 million and a one-time return on investment of –5 percent. The value of the remaining portfolio remained unchanged. No new real estate was acquired during the period under review. 

In July and August 2024, an additional five properties with a value of CHF 109 million were sold. In total, 13 properties worth around CHF 184 million were sold between the start of the year and the end of August 2024. The sales served to improve the portfolio quality and sharpen the HSL Fund’s positioning. The Fund Management Company expects an increase in net yield by around 25 basis points to 3.4 percent and a reduction in the vacancy rate to below 4 percent as a result of the transactions in the second half of 2024. 

As of the balance sheet date of June 30, 2024, the Fund comprised 48 well-positioned residential properties in primarily suburban regions with optimal transport connections. 91 percent of the portfolio is in German-speaking Switzerland, with apartments in the lower rent segment, which is in demand from a broad section of the population. Residential use generates 87 percent of the rental income.

Thanks to active efforts by Asset Management and continuing high demand for housing in suburban locations, the occupancy rate was kept at a high level of 96 percent. The rent default rate fell further from 5.30 percent to 4.40 percent as of the balance sheet date. The portfolio’s gross yield [target] was over 4.1 percent as of June 30, 2024, underlining its high profitability.

Financing strategy

In line with the adjusted financing strategy, the proportion of long-term borrowing (term >1 year) was increased from 11 percent at the end of 2023 to 22 percent as of the balance sheet date. The debt financing ratio reduced to 39.8 percent at the end of June 2024 compared with 43.5 percent at the end of 2023 due to the eight property sales. Including the disposals after the balance sheet date, by the end of August 2024 the debt financing ratio was below the regulatory maximum at 31.5 percent.

Sustainability

Helvetica is pursuing the net zero target for greenhouse gas emissions by 2050 and has enshrined this in the fund contract since 2023. Progress is monitored and actively managed on the basis of the CO2 reduction pathway in order to keep the interim targets on track and take targeted measures. 

Currently, the HSL Fund causes 13.5 kg/CO2 per m2 pursuant to the AMAS key figures (based on REIDA). The CO2 energy intensity is based on a coverage rate of 95 percent, which will be continuously increased with further participation in the REIDA benchmarking. The current proportion of fossil-fuel heating of 74 percent will be greatly reduced in the next few years, primarily through heating refurbishments. There are clear business plans for this for each property. 

Outlook for the second half of 2024

As already communicated in the press release of August 20, 2024, 13 properties with a value of around CHF 184 million were sold between the start of 2024 and the end of August 2024 and the debt financing ratio was reduced to below the regulatory maximum, to 31.5 percent.

Between June 30, 2024, and the end of August 2024, five properties with a market value totaling CHF 109 million were sold. The plan is to bring the debt financing ratio within the target range of 25 to 28 percent by means of further property sales in the second half of 2024. Furthermore, the proportion of long-term debt financing (term >1 year) in the second half of 2024 will settle within the target range of 30 to 50 percent. A WAULT of 2 to 2.5 years is targeted.

The real estate portfolio of the HSL Fund is set to comprise 38 properties with a total value of around CHF 500 million and annual rental income [target] of around CHF 21 million following the planned disposals. This portfolio lays the foundation for further growth and value creation in the Fund.

Further details, facts and figures can be found in the HSL Fund's 2024 semi-annual report: Helvetica.com

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