Solid Half-year Result Despite a Challenging Interest Rate Environment

• Net income for first half of 2023 of CHF 13.4 million or CHF 2.21 per unit
• Vacancy rate reduced to 5.32% as at 30 June 2023
• Distribution of CHF 4.35 per unit for 2022 (of which CHF 3.15 was paid out exempt of withholding tax)

The rental income for the first half of 2023 was CHF 21.6 million. Net income for the first half of 2023 decreased to CHF 13.4 million, equivalent to net income of CHF 2.21 per unit. The weighted average unexpired lease term (WAULT) of the SF Retail Properties Fund portfolio remained constant at a high level of 6.35 years as at 30 June 2023.

Real estate portfolio

The portfolio's strategic focus on ‘everyday consumer goods’ once again proved itself in the first half of 2023, a period that was overshadowed by persistent inflation and a further tightening of monetary policy. Given the ongoing consolidation of market prices, no transactions were executed in the first half of 2023. Instead, the fund management company focused on making progress with the different construction projects and on marketing. A total of CHF 9.9 million was invested in 13 locations, of which CHF 0.6 million was used to further expand the photovoltaic projects.  With regard to marketing, new contracts and contract renewals for 12 830 m², generating an annual rental income of CHF 3.2 million, were signed during the first six months.

The market value of the 84 properties of the SF Retail Properties Fund totalled CHF 880.1 million as at 30 June 2023. The portfolio's gross yield was 5.51% as at 30 June 2023. The vacancy rate of 5.32% as at 30 June 2023 decreased by 0.63 percentage points from 31 December 2022.

Financial result

Total income for the reporting period amounted to CHF 21.8 million (30 June 2022: CHF 21.9 million). The decrease in income caused by the sale of ten properties on 10 February 2022 was already compensated in the first half of 2023. This was mainly due to the indexation adjustment to existing rental contracts and the higher sales-based rents paid by food retailers.

Expenses totalled CHF 8.4 million (31 December 2022: CHF 7.5 million). The cost increase of CHF 0.9 million is primarily explained by the increase in mortgage interest rates. Net income amounted to CHF 13.4 million (30 June 2022: CHF 14.4 million) equivalent to CHF 2.21 per unit for 6 075 000 units (30 June 2022: CHF 2.37 per unit for 6 075 000 units).

Net fund assets decreased by CHF 23.9 million in the reporting period to CHF 610.4 million (31 December 2022: CHF 634.4 million). This change derives from total income of CHF 2.5 million, minus the distribution of CHF 26.4 million paid out for the 2022 financial year.

Development, renovations and new build projects

The groundbreaking ceremony for the first phase of the innovative project for the modernisation of ‘Clarahuus’ in Rebgasse in Basel took place in June 2023. On the third and fourth floors, the old offices will be converted by the tenant into modern business apartments during a 12-month construction phase. The plans for the business apartments are very well designed and are geared towards creating comfortable living spaces and functional places to work. The ideal location in the lively centre of Basel makes the business apartments attractive for business travellers.

During a second phase, the shopping arcade will be completely remodelled and modernised. The application for a building permit has been submitted and construction is expected to begin in 2024. The renovation project will take into account requirements of tenants as well as the optimal exploitation of the available space. The existing rental contracts can also be renewed further.

Outlook

The implementation of the dedicated long-term strategy to optimise and expand the portfolio is ongoing. The focus will be on the letting of the available space in order to increase operating income. Opportunities for acquisitions suitable for improving the quality and expanding the portfolio in line with the strategy are constantly being investigated.