SF Sustainable Property Fund – Successful financial year 2022 in a changed market environment
The SF Sustainable Property Fund can look back on a successful financial year in an extremely challenging market environment. Eight properties were acquired for a purchase price of around CHF 104.4 million and two properties were sold for CHF 6.4 million. This increased the portfolio value to CHF 1.54 billion as at 31 December 2022. Rental income increased by 13.3% to CHF 52.5 million in the reporting period. The like-for-like increase was CHF 640 000 (+1.4%). The vacancy rate as at the reporting date declined by as much as 0.7 percentage points and stood at 5.2% at the end of 2022.
- Portfolio value increased by 9.95% to CHF 1.54 billion and 114 properties
- Vacancy rate at reporting date decreased further year-on-year to 5.2%
- Rental income grew by CHF 6.2 million (+13.3%)
- Attractive distribution yield of 2.78% at CHF 3.50 per unit
- Sustainability strategy reviewed and integrated into fund contract
Real estate portfolio
The SF Sustainable Property Fund further expanded its portfolio in the 2022 financial year by buying eight properties in the German-speaking regions of Switzerland for a purchase price of CHF 104.4 million. This improved the portfolio's quality without diluting the high share of residential property. The portfolio was adjusted in the fourth quarter by selling two properties that did not fit the strategy.
As at the balance-sheet date, the SF Sustainably Property Fund held 114 properties with a market value of CHF 1.54 billion (+9.95%). The vacancy rate as at the reporting date was reduced by another 0.7 percentage points to 5.2% in 2022. The vacancy rate over the period declined from 6.9% to 5.9%.
The renovation projects proceeded as planned, and the total refurbishment in Pregassona (Via Roncobello 12) was completed in the fourth quarter 2022, while the project in Olten (Neuhardstrasse 9/11) is scheduled for completion in spring 2023. Both projects boast encouraging letting rates, and Olten has already been fully let even though the construction work is not yet finished. An extensive refurbishment project is also planned for the property in Locarno (Via Giuseppe Cattori 5). Construction work is expected to start in summer 2023.
Financial result
Total income amounted to CHF 52.6 million (previous year: CHF 49.6 million) in the 2022 financial year. Rental income increased by around CHF 6.2 million to CHF 52.5 million (previous year: CHF 46.3 million). The increase of 13.32% is due to both properties purchased the previous year, which for the first time contributed rental income for twelve months, and to the properties purchased during the reporting period.
Expenses totalled CHF 23.9 million (previous year: CHF 20.2 million) The Fund’s total expense ratio (TERREF [GAV]), an indicator of the operating expenses charge, was 0.78% (previous year: 0.79%). Net income amounted to CHF 28.7 million (previous year: CHF 29.4 million), equivalent to CHF 3.41 per unit for 8 416 494 units (previous year: CHF 3.49 per unit for 8 416 494 units).
Net fund assets increased by CHF 12.7 million to CHF 1 050.3 million (previous year: CHF 1 037.6 million) over the reporting period. This change follows from the fact that total net income amounted to CHF 42.1 million and the distribution for the 2021 financial year was CHF 29.4 million.
The investment yield as at year-end was 4.18% (previous year: 5.64%) on a net asset value per unit of CHF 124.79 (previous year: CHF 123.28 per unit) and the same distribution of CHF 3.50. Due to the stock market price performance, the distribution yield increased to 2.78% (previous year: 2.33%).
Sustainability
In order to keep pace with the momentum of trend towards sustainability, the Fund's sustainability strategy was reviewed, confirmed in essence and expanded in spring 2022. The strategy is based on the ESG approaches of impact investing, ESG integration and exclusion criteria, and has been integrated in this form into the fund contract. Clearly defined KPIs such as a CO2 reduction path increase transparency for investors and introduce binding obligations with regard to the net-zero target for 2050.
Outlook
As part of the implementation of the SF Sustainable Property Fund's sustainability strategy, more properties will be renovated in 2023. The heating systems of selected properties will also be replaced, which will increase the share of renewable energies and further reduce the CO2 emissions in line with the reduction path. Comprehensive tenant surveys will be carried out and processes will be optimised. The SF Sustainable Property Fund is also planning to participate in the real estate assessment programme of the GRESB (Global Real Estate Sustainability Benchmarking).
In addition, management will focus on continuing the encouraging reduction in vacancy rates in 2023. Together with consistent cost management, this is essential for maintaining the profitability of the SF Sustainable Property Fund as interest rates change direction.