Swiss Prime Site Solutions develops tailored services and investment products for clients who invest in the real estate sector. The company has FINMA approval as a fund manager. Asset management for third parties is an important pillar of the Swiss Prime Site Group, the parent company of Swiss Prime Site Solutions. In this interview, Fabian Linke, Head Business Development & Fundraising, explains why real estate funds are an attractive investment.
In December 2021, you launched the Swiss Prime Site Solutions Investment Fund Commercial («SPSS IFC»). What is the target group for this vehicle?
SPSS IFC is only accessible to a limited investor base. In concrete terms, this means pension funds, insurance companies, asset managers, banks, family offices and qualifying private individuals. The fund pursues an anti-cyclical investment strategy with a focus on commercial real estate in good to very good locations throughout Switzerland. The investment focus is on broad diversification, high cash flow stability and economically established locations.
Why did you decide to enlarge the scope of the service portfolio?
To maintain the sustainability of our customers’ portfolios, we constantly assess new investment vehicles and launch new products as opportunities arise. We follow the market carefully and are in close contact with investors. For example, we created and launched the first real estate investment fund in 2021. Diversifying the range of products with a commercial vehicle that is open not just to pension funds but also other investors – this was one of the reasons for launching the SPSS IFC. And further expansion of third-party business is a strategic decision of the Swiss Prime Site Board of Directors.
Can you describe the funds on offer at Swiss Prime Site Solutions?
Our service portfolio in the funds space consists of our own two funds: the Swiss Prime Site Investment Fund Commercial («SPSS IFC») and the Akara Swiss Diversity Property Fund PK («Akara Diversity»).
What is the investment strategy of the SPSS IFC?
We focus on commercial properties. The anti-cyclical orientation and rental contract indexing have proved right and resilient – particularly in this period of rising inflation. We feel strongly that our extensive expertise in the commercial field creates added value for investors.
What does that mean in concrete terms?
The SPSS IFC invests directly in commercial real estate in good, attractive locations throughout Switzerland and pursues an anti-cyclical strategy. The focus of the investment policy lies in asset generation with a long-term outlook that is diversified in terms of type of use and property features. The fund was launched in December 2021 and boasted a portfolio of 16 properties and a market value of CHF 346 million, with a cash yield of 3.55% and a payout ratio of 86.4%, in its first financial year (as at 30 September 2022). For investors who are subject to tax, the SPSS IFC offers the benefit that it doesn’t attract income or wealth tax. The SPSS IFC represents an attractive investment for foreign investors, particularly in the current market environment. This comes from the stability of the real estate market and economic growth, but also from the strong Swiss franc and comparatively low inflation rates. We also have an attractive, broadly diversified and in some cases exclusive acquisition pipeline with Core+ properties to a value of approximately CHF 140 million.
What is the investment strategy of the Akara Diversity fund?
This fund was launched in 2016, and Swiss Prime Site Solutions took it over and integrated it, along with the Akara Group, in early 2022. It currently has fair value of around CHF 2.4 billion. The Akara Diversity fund invests in existing properties (min. 80%) and in development and construction projects (max. 20%) for residential and commercial use throughout Switzerland. Most properties are held directly. It aims to achieve a steady and attractive distribution, long-term value growth and broad diversity for investors.
What else do investors need to know about Akara Diversity?
Akara Diversity is an established property portfolio that boasts 155 properties throughout Switzerland and a fund volume of CHF 2.4 billion, with a current residential proportion of 52.7%. The fund has a cash flow yield of between 3.0% and 3.2%, with an average inflation indexing rate of 83% for commercial rental contracts. The pension fund is NAV based, with no volatility, and functions like a directly held property portfolio.
What is the target group of the Akara Diversity fund?
Akara Diversity is only open to investors in the categories of tax-exempt pillar 2 and pillar 3a investment bodies and tax-exempt social security and compensation funds that are domiciled in Switzerland. The investment strategy aims for a mixed-use portfolio with an even 50/50 split between residential and commercial.
How does Swiss Prime Site Solutions manage its fund business?
Swiss Prime Site Solutions has clearly demarcated management areas. That’s unique in our business. We have established clearly defined Chinese walls in accordance with FINMA rules. As you can imagine, this is particularly important in the case of acquisitions. There are no conflicts of interest between the products whatsoever because we work in silos rather than a matrix structure.
What is the organisational set-up?
The Board of Directors consists of Chairman Jürg Sommer (Head Legal & Compliance, Swiss Prime Site), Marcel Kucher (CFO, Swiss Prime Site) and Philippe Keller (external member). Anastasius Tschopp, CEO Swiss Prime Site Solutions, safeguards the interests of investors in an overall supervisory role. The two CIOs Maximilian Hoffmann (SPSS IFC) and Patrick Mandlehr (Akara Diversity) are responsible for operational implementation of their respective strategies.
Why should an investor invest in your property fund?
We are part of the Swiss Prime Site Group. The group was established in 1999 and is currently the largest listed real estate company in Switzerland. Our parent company is currently number 3 in the whole of Europe. With an overall property portfolio of over CHF 20 billion, our group boasts solid, strong core expertise in property management. Of that overall portfolio, Swiss Prime Site Solutions has around CHF 7.3 billion worth of assets under management and an investment pipeline of more than CHF 800 million. For our clients, we provide key services with added value throughout the entire property life cycle. We offer full-service real estate management from a single source. That is unique in our business.
What sets you apart from the competition?
We are a leading, innovative fund manager and an independent asset manager for property solutions in Switzerland with the kind of individual, value-enhancing solutions that impress customers. We always consider the bigger picture, use innovative technologies and processes, and choose a long and sustainable investment horizon. As a pure property business, our proximity and access to the real estate market is one of our greatest strengths. We have 360° coverage of the property cycle – including scouting, investment, development, execution, asset and portfolio management, and divestment.
How has the fund business developed to date?
The fund business has shown very pleasing development. Swiss Prime Site Solutions already achieves around two-thirds of its turnover in the fund business. We also see opportunities for the future here.
Are you planning further funds?
There’s nothing definite, for now. However, you can rest assured that we will continue to be an innovative presence in the market. We are also one of the only fund managers that have a limited partnership for collective investment (KmGK). In 2023, we plan to launch the next closed, FINMA-regulated private equity vehicle in the field of property investment. We will be focusing on value-add, opportunistic real estate investments in Switzerland, primarily residential usage (freehold property), offices and retail space.
