Swiss Prime Site Solutions, which has been approved as a fund manager by the Swiss Financial Market Supervisory Authority (FINMA), launched its first real estate fund on 1 November 2021. Maximilian Hoffmann, CIO Swiss Prime Site Solutions Investment Fund Commercial, explains the key aspects and goals of the new area of business.
Mr Hoffmann, you recently received FINMA approval for a new real estate investment vehicle. Was it a rocky road leading up to this?
Maximilian Hoffman: I wouldn’t say rocky, but it definitely called for perseverance. A FINMA application essentially consists of two parts: applying for authorisation as a fund management company, and applying for product approval for the real estate fund. When assessing applications for a licence, FINMA checks whether the organisation and people meet the legal and regulatory requirements, and whether the capital requirements and appropriate corporate management are in place. In particular, the company must be sufficiently robust and the employees must have the necessary skills and experience. There are also strict requirements in terms of risk management, compliance and investor protection.
What were some of the main project milestones?
MH: Important milestones included strategic preparations for the product, discussions with FINMA, the preliminary review and the approval review itself. Other major steps included the submission of the final «Fund Management & Fund Product» licence application and the subsequent decision in September, plus the launch of the first fund at the start of November 2021.
Which segments are you focusing on with this first product?
MH: The investment strategy of the Swiss Prime Site Solutions Investment Fund Commercial aims to invest 40 – 60% in the office and commercial sector, 20–40% in retail and a maximum of 10–20% in specialised real estate such as logistics and industry. It could also include building land. The plan is to diversify across Switzerland. Properties will be directly held.
«Environmental aspects are considered in all phases of the investment process.»
MH: With a secured seed portfolio of about CHF 140 million and an additional pipeline of about CHF 180 million, we have already achieved our first goal. We are now aiming to meet the medium-term target volume of CHF 1 billion through growth of about CHF 300 million per year in line with our strategy. The intention is to list the fund on the SIX Swiss Exchange within three to five years.
MH: We are pursuing what’s called an «AB-BA» strategy, which means our investments are focused on A towns with B locations and on B towns with A locations. Through an active management approach, we aim to generate stable cash flows while keeping vacancy rates low.
MH: The seed portfolio has an excellent gross yield of 5.1%, a very low vacancy rate of 1.3% and an average unexpired lease term of 6.1 years. These are very good figures. Our main focus is on achieving growth in line with the strategy. Acquisitions are continuously assessed in terms of their effect on the fund’s overall performance, which helps us stay within the dividend yield target range at all times.
MH: The dividend yield on the seed portfolio is approximately 3.9%, assuming external financing at the typical market level of about 25%. The medium-term target range for investment returns is between 4.5% and 5.5%.
«We are pursuing what’s called an «AB-BA» strategy, which means our investments are focused on A towns with B locations and on B towns with A locations.»
MH: With our fund, investors benefit from an entry opportunity with no premium at the net asset value. Furthermore, the secured seed portfolio gives investors access to a highly stable, balanced real estate portfolio with an attractive risk-return profile and high product stability right from the start. They also benefit considerably from our dynamic and volume-based fee model. Another advantage is that as the subscription volume increases, the issue commission decreases.
MH: Environmental aspects are considered in all phases of the investment process. The fund generally adheres to the same standards as the Swiss Prime Site Group and applies the same criteria. The long-term goals include aligning the fund with national and international sustainability programmes.
MH: We’ve put together a responsive team just for investors and interested parties. A personal discussion provides opportunities to exchange information and align expectations and goals. Units are subscribed using a custodian bank. After the initial issue, units can be traded over the counter daily. They are also held on a secondary market.