Helvetica Swiss Opportunity Fund – Occupancy rate at a very high level

Press release August 22, 2023

Press release (PDF)

Zurich, August 22, 2023 – The Helvetica Swiss Opportunity Fund (HSO Fund) was again successful in a challenging market environment in the first half of 2023. The portfolio's market value grew by 3.3 percent to approximately 332.5 million Swiss francs. Annualized rental income increased by 1.4 million Swiss francs to a total of CHF 18.2 million. The portfolio now consists of 18 high-quality properties in good locations.

• Annual rental income increased by 1.4 million Swiss francs to 18.2 million Swiss francs.
• Portfolio growth by a total of 3.3 percent or 10.7 million Swiss francs to 332.5 million Swiss francs.
• Market-related reduction in market values of the existing portfolio (excluding acquisitions), by 0.9 percent.
• The occupancy rate is at a constantly high level of currently 97.4 percent.
• The fund management company is considering a merger of the HSO Fund with the HSC Fund, which would create a more diversified, listed commercial fund of over CHF 1 billion.
• Commitment to sustainability at the heart of business activities.

New acquisition and consistency in challenging market environment

Despite the existing uncertainty in the market, the Helvetica Swiss Opportunity Fund showed consistency in the first half of 2023. In January, a logistics property in Studen in the canton of Berne was acquired with the remaining proceeds from the capital increase carried out in the 2022 financial year. The property with creditworthy tenants, long-term secured rental income of around 1.0 million Swiss francs and a gross actual yield of 6.9 percent ideally complements the portfolio. The fund now has a solid portfolio of 18 properties. Annual rental income grew by 1.4 million Swiss francs from 16.8 million Swiss francs to 18.2 million Swiss francs. During the reporting period, rent adjustments due to increases in the national consumer price index totaled around CHF 0.4 million annually. Overall, the portfolio grew by 3.3 percent from 321.8 million Swiss francs to 332.5 million Swiss francs. The occupancy rate is currently at a consistently high level of 97.4 percent. This high occupancy rate is evidence of Asset Management's active efforts to maintain first-class tenant relationships and continued commitment to outstanding property management and illustrates the robust performance of the Helvetica Swiss Opportunity Fund in a challenging market environment.

Income statement - higher revenues also offset by higher costs 

In the reporting period, rental and building lease income of CHF 8.9 million was generated, which corresponds to an increase of 2.5 million Swiss francs. The increase is attributable to the properties acquired in the previous year and at the beginning of the year. In the first half of 2023, expenses of 3.9 million Swiss francs were incurred, corresponding to an increase of 1.5 million Swiss francs. The increase is due to higher interest costs on interest-bearing liabilities, which bore an average interest rate of 1.89 percent in the reporting period. The increase compared to the previous period is due to the interest rate increases of the Swiss National Bank SNB in 2022 and 2023. In unrealized capital gains, devaluations on the portfolio of 2.9 million Swiss francs were recognized, while in the first half of 2022 revaluations of 1.0 million Swiss francs were recognized.

Statement of assets and liabilities - market values increased thanks to additions to the portfolio

Total fund assets amounted to 340.5 million Swiss francs as of the reporting date. The market values of the properties increased by CHF 10.7 million to 332.5 million Swiss francs due to the purchase of the Studen property (notarization already in 2022, transfer of ownership in 2023), while cash and cash equivalents decreased by 12.0 million Swiss francs to just under 1.9 million Swiss francs due to the purchase and the distributions. Other assets increased by 0.3 million Swiss francs to 2.9 million Swiss francs. After deduction of liabilities of 142.9 million Swiss francs and liquidation taxes of 15.7 million Swiss francs, net fund assets were 7.5 million Swiss francs lower than in the previous year at 181.8 million Swiss francs. The debt financing ratio is 41.05 percent.

Performance – pressure from the market noticeable

The net asset value per unit decreased by CHF 4.77 from CHF 121.15 to CHF 116.38 as of June 30, which, taking into account the 2022 distribution of CHF 6.15, corresponds to an investment return of 1.19 percent, a decrease of 1.75 percentage points compared to the first half of 2022. The return on equity decreased by 1.67 percentage points to 1.13 percent, mainly due to devaluations.

In the first half of the year, the price of the fund's units declined by 9.6 percent gross from 114.00 Swiss francs to 103.00 Swiss francs, corresponding to a net performance of minus 4.4 percent. The discount on the net asset value is 11.5 percent.

Outlook - Merger of HSO Fund and HSC Fund as a strategic option

The HSO Fund was able to benefit from rising rents for commercial rental space in the first half of 2023. Due to inflation, rent adjustments of 0.4 million Swiss francs were implemented in the reporting period. The continued positive economic development in Switzerland and a very high indexation rate of over 98 percent lead us to expect further growth in rental income, which will have a positive impact on the fund's earnings. With regard to future interest rate developments, the fund management shares the prevailing view that there will be at most one more interest rate step in 2023, after which the yield curve will flatten out. Therefore, stabilization on the transaction market and increased activity in 2024 compared with the current year are assumed.

One focus in the coming months will be on maintaining the very high occupancy rate. Negotiations are currently underway with various tenants to extend leases, some of which have been in place for many years. Despite various measures to increase long-term earnings and value, however, a further market-related reduction in market values is to be expected in the coming months.

The commitment to sustainability is an important pillar of the business. In view of the results of the Swiss vote on a climate protection law and expected tightening of sustainability regulations, Helvetica has reviewed its sustainability strategy to reflect the changed starting position. All properties in the HSO Fund receive a GEAK (building energy certificate of the cantons) to determine their energy consumption, create transparency and highlight energy potential.

In view of the prevailing market conditions, the fund management company has decided not to carry out any further capital increase for the time being. As part of its ongoing efforts to optimize the portfolio, the Company is considering, subject to FINMA approval, the merger of the HSC Fund with the HSO Fund. This merger could create a larger, more diversified business and commercial real estate fund with a portfolio of over CHF 1 billion. Helvetica is currently conducting a feasibility study to assess the benefits of this strategy.

In addition, the Fund Management is considering further risk management measures, such as portfolio optimizations and the reduction of debt financing through property sales, which could have an impact on the distribution of the fund in the current financial year.

In the second half of the year, we will continue to focus on increasing the occupancy rate through new leases and contract extensions, adjusting rental income to inflation, and consistently realizing potential in our properties. Our goal is to secure further attractive returns for our investors.

The Half-Year Report 2023 of the HSO Fund is available on the company’s website as well as on Swiss Fund Data.

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About Helvetica
Helvetica Property Investors AG is a leading real estate fund management and asset management company. We offer our clients sustainable value through active, long-term ownership of secure and stable real estate investments. With a fully integrated real estate investment platform, we offer standardized investment products as well as customized investment programs. We are proud of our long-standing reputation for excellent customer service and our commitment to responsible business practices. Our firm is licensed and regulated by the Swiss Financial Market Supervisory Authority FINMA.

About Helvetica Swiss Opportunity Fund
The HSO Fund is a Swiss real estate fund open exclusively to qualified investors. The HSO Fund invests in special purpose properties in the Swiss economic centers. The focus is on fully let properties with long-term leases and few tenants generating stable income. The investment objective is mainly the long-term preservation of value and the distri-bution of reasonable profits. The fund share units can be traded over-the-counter. The HSO Fund is approved by the Swiss Financial Market Supervisory Authority, FINMA.

Ticker Symbol HSO; security 43 472 505; ISIN CH0434725054

Disclaimer
This media release does not constitute a prospectus within the meaning of Art. 35 et seq. of the Federal Financial Services Act, nor does it constitute a Key Investor Information Document (KIID) within the meaning of the Swiss Collective Investment Schemes Act or a basic information sheet. It does not constitute an offer or a recommendation to subscribe to or redeem fund units but is intended solely for advertising and information purposes. This media release may contain forward-looking statements that are subject to uncertainties and risks and may change. Historical performance is no guarantee of current or future performance. The performance data do not take into account any commissions and costs charged on the subscription and redemption of units. The units of the HSO Fund may not be publicly offered or promoted in Switzerland. The documents that are solely relevant for an investment decision, the prospectus with integrated fund contract, the basic information sheet as well as the current annual report can be obtained free of charge from the fund management company. This media release is not addressed to persons domiciled and/or having their registered office outside Switzerland. In particular, this media release may not be made available or handed over to US persons within the meaning of the US Securities Act or US tax regulations, nor may it be distributed in the USA.