Monitoring. Indirect Property Investments Switzerland 2014/1. Schroder Investment Management (Switzerland) AG

Transcription

1 Monitoring Indirect Property Investments Switzerland 2014/1 Schroder Investment Management (Switzerland) AG

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3 Table of content Executive summery 4 1. Profitability analysis Sharpe ratio (SR) Performance Return on investment (ROI) Return on equity (ROE) Return on invested capital (ROIC) Earnings before interest and taxes (EBIT) Payout return Payout ratio Financing ratios Loan-to-value ratio (LTV) Total liabilities to total assets Costs of debt Financial market ratios Premium/discount Price-earnings ratio (P/E ratio) Price-cashflow ratio (P/CF ratio) Market capitalisation Market turnover (liquidity) Portfolio key figures Market value Mixture of uses Maintenance costs / Total income Vacancy rate Net return of completed properties Vacancy rate / Net return of completed properties Total expense ratio (TER REF ) 20 Additional information 21 Your contacts 21 ImmoPLUS Monitoring Schroder 3

4 Foreword The bi-annual Immobilien Monitoring provides readers with an overview of the most important figures for listed real estate investments in Switzerland. It is limited to investments invested exclusively in the domestic real estate market. As previously, the current edition of Immobilien Monitoring includes eight listed real estate companies. Zug Estates AG will be included as the ninth listed real estate company in the next monitoring edition, following the publication of their second annual report since listing. Within the real estate funds category, two new funds the Green Property fund and Hospitality fund, both from Credit Suisse have been included for the first time. The Green Property fund, has a portfolio value of over CHF 565 million invested in new development projects, whilst the Hospitality fund with a value of CHF million is focused on hotels, residential properties with hotel-like services as well as healthcare properties. Together, the total property value of the eight listed real estate companies and the twenty-five funds has increased to a new record of CHF 58.2 billion. It can be argued that last year s stock price corrections mean that listed Swiss real estate investments have to some extent already anticipated possible price adjustments in the overall property market. In 2013 both property funds and real estate companies reported significant price falls, resulting in negative total returns in both segments. The total return (including dividends) for real estate funds fell by -2.8 percent, whilst for real estate companies to adjustment was -6.9 percent. Despite this short-term adjustment, over a 5-year period, the average total return was a very encouraging 7 per cent for real estate funds and 13 percent for real estate companies. Following the above-mentioned price corrections fund premiums have, in general, reduced significantly. At current price levels, indirect investments appear once again to be attractively valued. In particular commercial real estate portfolios currently show historically low premium levels. At 7.3 percent, premiums for commercial real estate funds are nearly identical to the average premium of the real estate limited companies (excluding and BFW) at 7.2 percent. In contrast, premiums for residential property funds are more than twice as high, averaging 17.3 percent. Despite the challenging marketing environment for commercial space, the higher real estate returns of commercial portfolios in combination with the aforementioned premium gap mean that this segment offers several interesting entry opportunities for investors. The analysis shows that the fundamental property ratios have remained very stable. The year-on-year change in the average investment returns as well as rental default rates have remained virtually unchanged. In general, it can be assumed that the underlying market conditions for investment-grade properties in Switzerland will remain positive over the medium term. Interest rates continue at low levels and the investment pressure from investors remains considerable. In addition, forecasts for economic development for the current and next year also remain upbeat. It will be interesting to observe how current regulatory changes will impact the Swiss real estate market. In 2014 and 2015, we expect little or no negative consequences from the recent approval of the immigration initiative. Nevertheless, from 2016 onwards a reduction in demand is to be expected, however an accurate estimate is currently difficult as so much remains unclear. The next regulatory hurdle for the Swiss real estate market concerns the Lex Koller regulation controlling foreign property ownership. Two pending parliamentary motions aim to repeal the existing exceptions to the Lex Koller regulation. These motions include restoring the authorisation requirement for the purchase of commercial-use property and the abolition of privileges for the acquisition of shares in real estate funds and listed real estate companies. The current Lex Koller regulation, with its opportunities for foreign investors to invest in Switzerland, has clearly helped to strengthen the Swiss economy in recent years. Any repeal of these exemptions would reverse a meaningful liberalisation of the market. Furthermore, such short-sighted, movement towards isolation would have an immediately negative impact and result in an economic slowdown. It is therefore hoped that the Senate, after the adoption of immigration initiative, will aim to avert any potential further damage to the Swiss economy and reject the two motions in the summer session. The various regulatory changes, both completed and planned, represent a clear risk of over-regulation of the Swiss property market, which in turn would have a significant and negative impact on the overall Swiss economy. This English version of Immobilien Monitoring represents a summary of the original publication. Additional detailed analysis and commentary can be found in the German version of the report. Should you have any questions or queries please don t hesitate to contact us directly. 4 Monitoring

5 1. Profitability analysis 1.1 Sharpe ratio (SR) Total 5 years Name price per high low Return annual volatility sharpe last 12 last 12 1 year return ratio Real Estate Funds months months ( ) % % 7.32% % 9.06% % 7.62% % % % 7.16% 6.57% 1.07 UBS Sima % 7.99% % % % % % 6.68% 7.98% % % % 6.57% % % % 6.59% % % % 6.81% % 5.18% 7.97% % 6.43% % 5.28% 9.12% % % n/a n/a n/a n/a n/a n/a CS Hospitality % n/a n/a n/a % n/a n/a n/a % n/a n/a n/a UBS Direct l n/a n/a n/a average 2.77% 6.93% Real Estate Companies % % % 15.01% % % 16.22% 12.18% % % 15.98% 16.46% % 7.93% n/a n/a n/a average 1.76% 13.07% 10.41% 1.25 ImmoPLUS Monitoring Schroder 5

6 1.2 Performance 1 year (Total Return) Real Estate Funds Real Estate Companies 1 8% 6% 2% -2% - -6% -8% UBS Direct l CS ProperyPlus CS Hospitality Bonhôte Swisscanto ifca 5 years (Total Return) 18% 17% 16% % 12% 11% 1 9% 8% 7% 6% 3% 2% 1% CS ProperyPlus Swisscanto ifca Bonhôte CS Hospitality UBS Direct l 6 Monitoring

7 1.3 Return on investment (ROI) Actual 12% 11% 1 9% 8% 7% 6% 3% 2% 1% UBS Direct l CS Hospitality Development 1 9% 8% 7% 6% 3% 2% 1% Average Real Estate Funds Average Real Estate Companies ImmoPLUS Monitoring Schroder 7

8 1.4 Return on equity (ROE) Actual 11% 1 9% 8% 7% 6% 3% 2% 1% UBS Direct l Development 9% 8% 7% 6% 3% 2% 1% Average Real Estate Funds Average Real Estate Companies Return 10y Benchmark Eidgn. 1.5 Return on invested capital (ROIC) 7% 6% 3% 2% 1% UBS Direct l 8 Monitoring

9 1.6 Earnings before interest and taxes (EBIT) UBS Direct l 1.7 Payout return 6% 3% 2% 1% * UBS Direct l CS Hospitality *Partial distribution ImmoPLUS Monitoring Schroder 9

10 1.8 Payout ratio % 152% 141% UBS Direct l * *Partial distribution 10 Monitoring

11 2. Financing ratios 2.1 LTV (loan-to-value ratio) UBS Direct l 2.2 Total liabilities to total assets UBS Direct l ImmoPLUS Monitoring Schroder 11

12 2.3 Costs of debt UBS Direct l 12 Monitoring

13 3. Financial market ratios 3.1 Premium/discount Actual Swisscanto ifca UBS Sima UBS Direct l Bonhote Immobilier CS Hospitaltity PSP BFW Liegensch. Development 36% 32% 28% % 12% 8% % -12% -16% -2-2 Average Real Estate Funds Average Real Estate Companies (without BFW) Average Real Estate Companies ImmoPLUS Monitoring Schroder 13

14 3.2 Price-earnings ratio (P/E ratio) CS Hospitality UBS Direct l 3.3 Price-cashflow ratio (P/CF ratio) CS Hospitality UBS Direct l 14 Monitoring

15 3.4 Market capitalisation / 3.5 Market turnover (liquidity) Market capitalisation in Million CHF CS Hospitality UBS Direct l Liquidity in Million CHF (average turnover over the last 6 months) CS Hospitality UBS Direct l ImmoPLUS Monitoring Schroder 15

16 4. Portfolio key figures 4.1 Market value Actual in Million CHF UBS Direct l Development in Million CHF ' Average Real Estate Funds Average Real Estate Companies 16 Monitoring

17 4.2 Mixture of uses UBS Direct l l office / retail other commercial property mixed-used property development projects 4.3 Maintenance costs / Total income * * * * *UBS Direct l * * Maintanance / construction Running costs Facility management Total operating costs average *Costs for facility management are paid from the contractual remuneration of the fund management company ImmoPLUS Monitoring Schroder 17

18 4.4 Vacancy rate 1 13% 12% Actual 11% 1 9% 8% 7% 6% 3% 2% 1% UBS Direct l Development 11% 1 9% 8% 7% 6% 3% 2% 1% Average Real Estate Funds Average Real Estate Companies 18 Monitoring

19 4.5 Net return of completed properties UBS Direct l UBS Direct l 4.6 Vacany rate / Net return of completed properties 1 13% 12% 11% 1 9% 8% 7% 6% 3% 2% 1% vacancy rate net return average net return ImmoPLUS Monitoring Schroder 19

20 4.7 Total expense ratio (TER REF ) 1.8% 1.6% % % 0.6% % 0. UBS Direct l 20 Monitoring

21 Your contacts Fund Management: Roger Hennig Direct call: Fax: Daniel Marty Direct call: Fax: Controlling/Monitoring: Marco Schibli Direct call: Fax: Marketing / PR: Béatrice Hirzel Corte Direct call: Fax: beatrice.hirzel@schroders.com ImmoPLUS Monitoring Schroder 21

22 Schroder Investment Management (Switzerland) AG Central 2 CH-8001 Zurich Phone +41 (0) contact@schroders.ch Important Information This document has been produced for the benefit of the recipients only. The purpose of this document is to communicate certain information concerning the monitoring of indirect real estate investments by Schroder Investment Management (Switzerland) AG. It may not be copied, published or otherwise communicated to third parties and may only be considered in conjunction with the verbal explanations and instructions given by Schroder Investment Management (Switzerland) AG, without which the document is incomplete. Neither this document nor its content may be used for any other purpose without the written permission of Schroder Investment Management (Switzerland) AG. It does not constitute an offer. The information contained in it may be subject to change. In producing this document we have made use of all information we have been able to obtain from public sources or which was made available to us by the clients or on their behalf with a view to it being used in this document. Schroder Investment Management (Switzerland) AG believes that the provided information is accurate as at the date of publication but no warranty of accuracy is given and no liability in respect of any error or omission by a third party is accepted by Schroder Investment Management (Switzerland) AG. Investors must be aware that units in real estate funds and real estate companies entail investment risks, in particular the potential loss of the capital invested. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get the amount originally invested.