Income Growth in a Challenging Market Environment
The SF Sustainable Property Fund successfully improved its rental income and reduced vacancy rates in the first half of 2023. Net income of CHF 12.4 million was generated in the first six months.
- Rental income increased by CHF 0.9 million (3.6%)
- Vacancy rate reduced by 0.2 percentage points to 5.0%
- Renovation projects are on schedule and will strengthen the future income base
- NAV per unit decreased from CHF 124.79 to CHF 120.31 following the distribution of CHF 3.50 per unit
The property portfolio experienced a slight, market-related devaluation of 1.1%. The NAV at the end of June 2023 is CHF 120.31 per unit after the distribution.
Real estate portfolio
The market value of the 113 properties in the SF Sustainable Property Fund totalled CHF 1.52 billion as at 30 June 2023. The portfolio property in Bonaduz (GR) was sold. The portfolio's gross yield was 3.79% as at 30 June 2023. The vacancy rate of 5.0% as at 30 June 2023 was down by 0.2 percentage points from 31 December 2022. Like-for-like, the portfolio suffered a slight, market-related devaluation of 1.1%.
Renovation projects and sustainability
The renovation projects for Im First 6/10 in Ehrendingen (AG) and Luzernerring 148 & Rufacherstrasse 8 in Basel (BS) are proceeding within budget and on schedule. The work will be completed by the end of 2023. At Neuhardstrasse 9/11 in Olten (SO), construction work was completed during the second quarter of 2023. The project came in under budget and has been fully let.
Work on the complete refurbishment of Via Giuseppe Cattori 5 in Locarno (TI) will start soon and is expected to be completed in Q3 2024.
In addition to the renovations, the replacement of heating media will improve the portfolio's sustainability. The properties in Spreitenbach (AG) and Ostermundigen (BE) were switched to renewable district heating. Other projects are ongoing and according to our current estimates, the share of renewable energies will increase by approx. 30% by the end of the year (24% at the end of 2022).
Financial result
Total income for the reporting period amounted to CHF 26.8 million (30 June 2022: CHF 25.9 million). Rental income increased by around CHF 0.9 million (+3.6%).
Expenses totalled CHF 14.7 million (30 June 2022: CHF 10.7 million). The cost increase of CHF 3.7 million is primarily explained by the increase in mortgage interest rates. Net income amounted to CHF 12.4 million (30 June 2022: CHF 15.2 million), equivalent to CHF 1.47 per unit for 8 416 494 units (30 June 2022: CHF 1.80 per unit for 8 416 494 units). Cost management, a lower tax burden and the implementation of the reference interest rate adjustment lead us to expect a significantly better result in the second half of the year.
Net fund assets decreased by CHF 37.7 million in the reporting period to CHF 1 012.6 million (31 December 2022: CHF 1 050.3 million). This change derives from total income of CHF - 8.3 million, minus the distribution of CHF 29.4 million paid out for the 2022 financial year.
Outlook
In the second half of the year, the quality of the real estate portfolio of the SF Sustainable Property Fund should be improved further through the sale of the property in Bazenheid (SG) and by other selective divestments and the borrowing ratio should be reduced. The vacancy rate should also be reduced further, the income increased and the planned renovations implemented. And finally, the GRESB report will be published for the first time in the autumn.