Helvetica, one of the leading real estate fund and asset management companies, is implementing organisational measures to optimise its future-oriented processes. Following an intense growth phase – and in the context of a new market dynamic – Helvetica is reinforcing its focus on consolidation. Hans R. Holdener explains to us what his strategic priorities are in making the company fit for the future.
Interview: Stefan Mathys
You like to compare investing in the Swiss real estate market to sailing on Lake Zurich. How should we interpret this metaphor?
Laughs. Yes, the risks of the Swiss real estate market really are like sailing on Lake Zurich: calm, boring, scarcely a breeze, predictable and almost entirely risk-free. The international markets, on the other hand, are like the Atlantic Ocean: huge, unpredictable, full of risks, but also full of opportunities and undeniably exciting.
At the same time, you believe that the Swiss real estate market is undervalued. What do you base this assertion on?
In my opinion, the Switzerland’s entire real estate market is undervalued. The yield spread in the residential and commercial segment is currently between 3 and 5 percent, which, compared to 10-year Swiss government bonds, is very high. We have historically low unemployment, ongoing migration, growing construction costs and a level of construction activity that has been in decline for decades. Compared to other countries, Switzerland has had one of the lowest growth rates in residential property over a period of 25 years. Then there are also the changes in rental prices, which have been showing deflationary tendencies for nearly 20 years now. In the fundamentally robust Swiss market, real estate funds offer a very good buying opportunity with many advantages over direct investments.
But you’re currently selling properties from your portfolio. Isn't that a contradiction?
Not at all. Following an intense growth phase – and in the context of a new market dynamic – we are reinforcing our focus on strategic portfolio management. As such, portfolio returns are being further optimised and funds adapted in light of new market conditions.
How is the property sale going in the current market climate?
Very well. Our plan to sell non-strategic properties began in spring 2023 and is being pursued on a consistent basis. The Helvetica Swiss Commercial Fund successfully sold one of its portfolio properties at the end of August. The sale was completed at around 30 percent above the property’s market value, which is a sign that the HSC Fund’s real estate portfolio is fairly valued. Negotiations for a further sale are at an advanced stage and are expected to be concluded in the near future.
After seven booming years in the real estate market, are we now facing seven lean years?
I don't think so. The fundamentals of the Swiss real estate market are too robust, with this being characterised by low supply and high demand. Rising interest rates will be offset by higher rents in the medium term. The markets are also already forecasting that interest rates will fall again next year. Then the cards will be dealt again. We are therefore happy with Swiss National Bank’s decision on interest rates.
Do you think that we will avoid a recession?
I don't see it happening. A downturn in the economy in the medium term strikes me as rather unlikely. The Swiss economy can cope with inflation and much higher interest rates without drifting into an extended recession.
What challenges and opportunities do you see in today's market?
The Swiss real estate market is in a transitional phase. Investors are becoming somewhat more cautious, but should also recognise the opportunities that are presenting themselves. Current market dynamics may present short-term challenges, but also offer attractive opportunities for various different investor groups.
Some real estate funds listed on the Swiss stock exchange, including your own Helvetica Swiss Commercial Fund, are trading at a significant discount.
That is true. However, this starting position also offers opportunities. The current price does not reflect the properties’ intrinsic market value, as evidenced by the recent portfolio sales. In addition, new leases are being signed at substantially higher rent prices and investors are benefiting from the fact that almost all leases are indexed. The HSC Fund remains a strong performer.
Do you expect to see further devaluations in the real estate market?
I wouldn’t rule it out, despite rising rents, which would actually be illogical. In mid-2023, we saw devaluations of about one percent in our portfolios. Due to the interest rate increases, we are not ruling out further small devaluations, but these would likely be in the residential sector, as this has experienced more robust growth than the commercial sector.
What about indirect real estate investments?
Following the 2022 downturn, I think real estate funds are extremely attractive. The SXI Real Estate Funds Broad Index fell by almost 20 percent in 2022 and barely recovered in 2023, which represents a rare buying opportunity.
Helvetica real estate funds perform well, but also have a higher debt financing ratio than their peers. How do you deal with this risk?
In a conservative market like Switzerland, having a higher debt financing ratio makes perfect sense. However, we are aware that we are slightly above average compared to other providers and their products. By selling non-strategic properties, Helvetica is consistently pursuing its announced strategy to reduce the individual funds’ level of debt financing and move towards a rather conservative target range of around 25-28 percent in the medium term.
Why do you opt for short-term financing for your funds?
Historically, short-term interest rates have been more favourable over a longer period of time. However, in the current market environment, we are rethinking this strategy, as investors are looking for stability, even if this comes at a higher cost and has an impact on distribution.
Are you still planning to list the Helvetica Swiss Living Fund as well?
We still plan to list the Helvetica Swiss Living Fund by the end of 2024 at the latest and are preparing to merge the Helvetica Swiss Opportunity Fund and the listed Helvetica Swiss Commercial Fund to create more liquidity for our investors. This is subject to FINMA approval.
Some personnel changes were recently announced. Is this also part of the company’s strategic realignment?
Yes. Our consistent orientation towards new market conditions goes hand in hand with personnel changes, giving us the chance to develop Helvetica further with renewed strength and fresh ideas. The Executive Board is becoming more streamlined with certain roles being refilled, whilst the company’s portfolio is being optimised and its value creation chain expanded through the integration of property management. Our team, which is made up of over 30 professionals, is very well positioned to achieve our strategic goals.
Are you planning further growth in the current market climate?
One of our strategic priorities in the currently challenging market environment is the consistent realisation of the properties’ potential. In addition to examining utilisation reserves, potential is unlocked by increasing the occupancy rate through new leases and contract extensions. At the same time, we are expanding the breadth of our offering by integrating property management and thus deepening the value chain. As previously mentioned, our current areas of focus are consolidation, portfolio optimisation and risk management. This allows us to step into the future on a stronger footing and with fresh ideas and to consolidate our position as a leading real estate fund and asset management companies.
About the person
Hans R. Holdener (56)
Founder of Helvetica, an independent Real Estate Fund and Asset Management Firm regulated by the Swiss Financial Market Authority FINMA.
Read also
Let’s create a Swiss Housing Boom
Swiss Financial Visionary: Bold Dreams
