SF Retail Properties Fund – Very successful annual result as at 31 December 2019

SF Retail Properties Fund ended the 2019 financial year on a high note. It concluded new leases in 15 locations and extended 14 existing ones by five years during the period. The weighted average unexpired lease term (WAULT) remains at a high of 6.4 years. At the same time, the market value of the properties increased to CHF 762.2 million as at 31 December 2019 (31.12.2018: CHF 706.8 million). Annual target rental income went up to CHF 43.8 million. Net income stood at CHF 28.35 million, equivalent to net income of CHF 4.67 per share for the 2019 financial year.

Real estate portfolio

On the reporting date, the portfolio comprised 88 properties in 20 cantons. The market value of the portfolio improved by 7.83% in 2019 on a year-on-year basis. Compared to 31 December 2018, the WAULT stabilised at a high level with 6.4 years. It was possible to achieve this value thanks to contract extensions and new business. In Bioggio, the renovation work was completed and the new tenants opened their doors to customers in August 2019. The property was completely refurbished, improved to the Minergie-standard and fitted with a photovoltaic unit. Marketing of the available space is in full swing.

In La Chaux-de-Fonds, one building was completely refurbished. In addition to the technical renewal of installations, the façade, windows and roof were brought up to the latest energy standard and additional space was created for the single tenant by altering the layout. A new 15-year fixed-term lease was signed with the tenant.

Financial result as at 31 December 2019

The increase in target rental income year on year was CHF 2.9 million, equivalent to a 7.09% rise. This was achieved through purchases, lease extensions and re-lettings. Net fund assets rose in the reporting period by CHF 52.85 million, from CHF 568.08 million to CHF 620.93 million. This is explained by the net inflow of funds of CHF 49.91 million from the capital increase, the total income earned in the 2019 financial year of CHF 27.16 million and the distribution of CHF 24.22 million in April 2019 for the 2018 financial year.

On account of these good results, SF Retail Properties Fund is to pay a dividend of CHF 4.35 for the 2019 financial year, equivalent to a payout ratio of 93.21%. The investment yield as at end December 2019 was 4.66%.

Outlook
The letting of vacant rental spaces and the optimisation of the existing rental agreements also remain the focal points for 2020. The fund management regularly reconciles this with the most important tenants while involving local partners in the process. The start of new build projects in Reinach, an extension in Flums and the refurbishment of properties in Thayngen, Aigle and Marly will be at the forefront of building projects. A new build project was registered in December 2019 and will be included in the portfolio in summer 2020. The building offers rental space for retail, a community doctor's surgery and 13 apartments. It has already been fully let prior to completion. The anchor tenant is Migros for the retail space. The lease is a 15-year fixed-term contract.

Impact of the emergency measures due to COVID-19

The portfolio's anchor tenants are the major food retailers Coop, Aldi, Lidl and Denner as well as various drug stores, pharmacies, bakers and newsagents with a percentage of rental income of over 60%. The sales outlets of these tenants remain open in order to guarantee basic provisions. An additional 15% of rental income is not affected by the government's closure measures (office and commercial premises, car parks and apartments). The current national and international provisions of enforced shop closures continue to generate some turnover through online sales points or delivery services, such as Coop specialist stores and Media Markt. Our tenants have excellent creditworthiness and we believe that they are not at serious financial risk due to the current market situation. We are in constant contact with tenants and are seeking partnership-based solutions so that the difficult circumstances can be overcome. The main focus at the moment is on all organisational matters and implementation of measures for controlled procedures in and around the properties.