Mr Hoffmann, you recently received FINMA approval for a new real estate investment vehicle. Was it a rocky road leading up to this?

I wouldn’t say rocky, but it definitely called for perseverance. And that’s something we had. 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 fund manager licence, FINMA checks whether the organisation and people meet the legal and regulatory requirements, and also whether the capital and appropriate operational requirements are met. In particular, the organisation 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. With the structure of Swiss Prime Site Solutions and the Investment Fund Commercial, we met the requirements in full and were able to complete the approval and authorisation process successfully.

What were some of the main project milestones?

Important milestones included the strategic preparations for the product, the discussions with FINMA before submitting the application, the preliminary review by the licensing auditors and the approval review itself. Other major steps included the submission of the final «Fund Management & Fund Product» licence application and the subsequent approval decision in September, plus the launch of the first fund at the start of November 2021. In addition to the externally visible steps, there have also been many internal milestones over the past 18 months, which we reached thanks to the unwavering efforts of our team.

Swiss Prime Site Solutions Investment Fund Commercial tells us that the fund invests in commercial properties. Which segments are you focusing on initially?

The fund’s investment strategy is to invest about 40%-60% in the office and commercial sector (including production), 20%-40% in retail and up to 10%-20% in specialist real estate (e.g. logistics, industrial). Building land will certainly be considered as well. Investments will be diversified across the whole of Switzerland. The properties are held in direct ownership.

What goals are you pursuing with the new investment fund?

With a secured seed portfolio of about CHF 80 million and an additional pipeline of about CHF 180 million, we have already achieved the 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 for the fund to be listed on the SIX Swiss Exchange within three to five years.

And how would you describe the investment strategy?

In industry speak, our strategy is referred to as «Core/Core+». Such properties usually have higher yields and more development potential. More specifically, we are pursuing an «AB-BA» strategy, which means our investments are focused on A towns in B locations and on B towns in A locations. Through an active management approach, we aim to generate stable cash flows while keeping vacancy rates low.

How do you intend to develop the portfolio? The initial issue will run from the start of November until 10 December 2021.

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 cash yield target range at all times. In the initial phase, we primarily want to acquire medium-sized properties with a value of between CHF 10 million and CHF 30 million. We are acquiring the seed portfolio of about CHF 80 million from Swiss Prime Site Immobilien AG. We have already obtained the necessary FINMA approval for related party transactions. The independent valuations and market conformity checks have also been carried out. With an average external location rating of «good» to «very good», a gross return of 5.1%, a vacancy rate of 1.3% and a weighted average unexpired lease term (WAULT) of 6.1 years, the investment attributes of the seed portfolio are ideal for the Investment Fund Commercial. We have also built up an attractive pipeline of about CHF 180 million.

Can you give our readers an idea of the target returns?

The seven commercial properties in the seed portfolio generate net rental income of CHF 4.1 million. This corresponds to a total gross yield of 5.1%, which is in line with the fund strategy. The cash 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%.

What makes your fund particularly attractive?

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 portfolio with an attractive risk-return profile right from the start. In addition to the attractive target yield of 4.5% to 5.5%, investors also benefit considerably from our dynamic and volume-dependent fee model, which has a TER of approximately 0.7%. Last but not least, issue commission decreases as subscription volume increases. With this attractive cost structure, we want to create a win-win situation for us and our investors.

Sustainability is becoming more and more important to professional investors. What can be said about real estate funds in this respect?

Environmental aspects are considered in all phases of the investment process: due diligence, project development, real estate management and renovation. The fund generally adheres to the same standards as its parent company and applies the same criteria. The long-term goals include aligning the fund with national and international sustainability programmes, especially the Energy Strategy 2050, the Paris Agreement and the UN Sustainable Development Goals. The fund management is planning to introduce an internal ESG policy and is also considering a rating by the Global Real Estate Sustainability Benchmark (GRESB) in the coming financial years.

And while we’re on the topic, you mentioned some ideas for potential acquisitions, a kind of pipeline after the initial issue.

We have already built up an attractive pipeline. Potential further acquisitions are assessed carefully on a continuous basis by the acquisition team, led by Samuel Bergstein, Head Acquisition Funds. The management is planning to increase the diversity within Core and Core+ with further transactions. CHF 180 million is currently waiting in the pipeline and the transfer of ownership could commence as early as next year. The properties are from within the fund acquisition team’s network. The focus is on commercial properties with good location quality, solid infrastructure and positive demographic and economic conditions. Purchase agreements for some of the properties in the pipeline are currently being finalised or are undergoing an in-depth acquisition analysis by us.

And last but not least, how can fund units be bought?

Anyone interested in buying fund units should get in touch with me or Fabian Linke (Head Business Development & Fundraising) for further information or to discuss their needs. We’ll be very pleased to assist. Investors can also access the fund documentation at any time on our website. Units are subscribed from the custodian bank BCV through the investor’s bank. After the initial issue, units will be traded daily over-the-counter at Banque Cantonale Vaudoise; BCV/PropertyMatch will operate a secondary market.

Investment idea:

The Swiss Prime Site Solutions Investment Fund is a contractual real estate fund under Swiss law for qualified investors residing in Switzerland. The fund primarily invests in commercial properties with a high degree of diversification of tenants with a high credit rating and reputation. The long-term focus of use will be on commercial, office and retail space throughout Switzerland.

ISIN code:      CH11 3909 9068

Initial issue:     from 01.11.2021 to 10.12.2021