Anyone who wants to invest in Swiss real estate is confronted with a dilemma. Although residential and commercial properties is still coming onto the market, they are usually in the wrong place. There has been a marked decline in demand for rented property in the peripheral locations where developers and construction companies have built a lot in recent years. Vacancy rates have increased dramatically and, according to current studies, are higher than they have been in 20 years. However, in urban locations, where demand for rented property remains buoyant, only few projects can be launched, with the result that local demand cannot be satisfied.
This situation is difficult for investors and for pension funds in particular. These days, they sometimes have negative interest on bonds and are forced to find new investments that are comparatively safe, yet offer a high return at the same time. Properties in Swiss cities are an attractive, but rare opportunity. "In this difficult market situation, we are initially offering qualified investors the unique opportunity to invest in properties with a total value of more than CHF 1 billion in Switzerland's most attractive locations such as the Seefeld district of Zurich," says Martin Gubler, CEO of Zurich Invest Ltd. The subscription period for the first tranche of around CHF 400 million of the ZIF Real Estate Direct Switzerland from Zurich Invest Ltd runs until the end of November.
More properties in top locations
In the market of non-listed Swiss real estate funds, with a total worth of around CHF 9 billion, ZIF Real Estate Direct Switzerland stands out. Given a planned total volume of more than 1 billion, it is one of the biggest real estate funds. And while, on average, only half of Swiss real estate funds are invested in properties in the most attractive regions of Zurich and Lake Geneva, first-class properties like this account for more than 75 percent of the fund launched by Zurich Invest Ltd.
The reason for this high proportion of first-class properties is that for decades Zurich, as a global insurer, has been one of Switzerland's most important owners of real estate and has been able to build up a portfolio of buildings in attractive locations over a long period. With the decline in guarantee products being offered by life insurance companies, Zurich, however, is now altering the allocation of its assets. Less collateral in the form of real estate is needed to guarantee its obligations. Zurich is therefore in a position to sell properties in the most sought-after locations.
In addition to having a high proportion of its properties in top locations, the fund is distinguished through further attributes: It consists entirely of existing properties that have all generated stable cash flows in recent years. It does not include any development or new-build projects with the usual uncertainty over costs and the risks associated with first rentals. The proportion of income from residential properties is high, standing at 80 percent. The properties that are not situated in the area of Zurich and Lake Geneva are widely dispersed throughout the regions.
Real estate management remains in the hands of the real estate team of Zurich Invest Ltd, which, with more than 130 years of experience, currently manages properties worth more than CHF 9 billion. Early investors will be granted preferential rights to further ZIF tranches. In order to make the fund accessible to further investors, the fund management is planning a stock exchange listing on the Swiss Exchange soon. Zurich Invest Ltd is a fund management subject to supervision by FINMA. It is a wholly owned subsidiary of the Zurich Group and manages investments worth more than CHF 35 billion.