17 properties with a market value of CHF 121.6 million were added to the existing portfolio, resulting in a portfolio value of CHF 1.05 billion as at 31 December 2019. With the additional purchases, expected rental income increased during the reporting period by 16.7% to CHF 43.7 million in comparison with the prior period. The vacancy rate fell by 0.7% points to end 2019 at 7.0%. One property was sold in 2019 for portfolio adjustment purposes. Two properties were refurbished in line with investment and strategy requirements. Building work began on the new build in Lausen.
Property portfolio
As in previous years, the SF Sustainable Property Fund expanded its property portfolio, acquiring 17 good-quality properties. In addition to the cantons already represented in the portfolio, Geneva, Glarus, Graubünden and Appenzell Ausserrhoden were also added through new purchases. The property in Neuenhof was sold on 19 December 2019, having appreciated considerably since it was acquired in 2012. Development of the site, nearby road and rail links plus upcoming maintenance led to the decision to sell. On the reporting date, the SF Sustainable Property Fund therefore recorded a total of 91 properties with a market value of CHF 1.05 billion (+13.7%). The vacancy rate fell in 2019 by 0.7% points from 7.7% to 7.0%. The reduction was due to successful letting in Unterkulm, Dietlikon and southern Switzerland.
Renovation projects and developments
In 2019, the refurbishment work in Oberglatt and Rümlang was completed on schedule, to the right quality and within budget. Building work on two properties (Münchenstein and Zofingen) began in the second half of the year. As with last year's projects, the refurbishment work on both properties is being carried out whilst people are still living there to avoid notice of termination. In Münchenstein and Zofingen, the structural work (string replacement) is being expanded to include energy measures. Changes to the floor plan in Zofingen and balcony extensions in Münchenstein are being carried out to make the properties more marketable. The development project in Dietlikon comprising over 21 000 m2 was fully let at year-end. More than 11 000 m2 of space has been let since the commercial site was acquired.
Financial result
In 2019, target net rent rose by 16.7% to CHF 43.7 million due to the acquisition of properties. The realised result rose by 12.8% to CHF 25.9 million. The dividend per share fell by 10 centimes to CHF 3.50. Net fund assets rose to CHF 786.8 million (+0.8%) and the debt financing ratio increased by 10.1 percentage points to 23.0%. At 31 December 2019, the stock market price for the SF Sustainable Property Fund was CHF 145.90.
Outlook
To generate an attractive return over the long term, the focus of the 2020 financial year will be on targeted purchases and the disposal of properties with limited development potential. Another property will also be refurbished in 2020 in line with investment requirements. The renovation work in Pratteln (BL) is likely to start in the last quarter of this year. Renewal of the energy systems, including replacement of kitchens and bathrooms, is planned in all 62 apartments, with adjustments to various floor plans improving the marketability of the rental properties. The SF Sustainable Property Fund was able to secure a new build project in Aarwangen. Ownership is due to be transferred and occupancy of the three buildings is due to start at the beginning of July 2020.
The current situation in connection with the coronavirus naturally also affects the real estate market. In addition to lower transaction activity, we expect vacancy rates to rise, especially outside the conurbations, if the economic downturn continues. Loss of rent should be rather rare due to the measures adopted by the federal government. For the SF Sustainable Property Fund with a residential component including parking spaces of 91%, the risk can be considered manageable for the time being. Nevertheless, vacancies must be actively managed and a proactive exchange with commercial tenants must be sought.