Covid-19 hits Credit Suisse funds to varying degrees

In general, the impact of Covid-19 on the real estate fund business is becoming increasingly clear, Credit Suisse Asset Management wrote in a statement on the funds' half-year results. However, it is still too early to draw final conclusions regarding the impact on rental income and market values for properties. In particular, the duration of the economic slowdown and the political measures taken are of great importance.

The valuation experts reviewed the recoverability of the market values on the occasion of the semi-annual reports. Accordingly, no major changes in value have occurred at CS REF Green Property and CS REF Livingplus. At CS REF Hospitality, all properties in the portfolio were revalued as of June 30, 2020, and the fair value of the properties decreased by approximately 2.5 % compared to the financial statements as of December 31, 2019.

In the first six months of the current financial year, CS REF Green Property completed the residential development "Le Clos des Vergers" in Martigny and started the construction project "Tivoli Garten" in Spreitenbach. Excluding revaluation effects, CS puts the investment return for the first six months of the financial year at 1.37 % (PY: 1.85 %). Rental rebates granted due to the lockdown for the first six months of 2020 reportedly account for a total of around 4.23 % of rental income.

High rent reductions at CS REF Hospitality

In contrast, the income and asset performance of CS REF Hospitality is strongly affected by the pandemic, because the fund's rental income comes in particular from the hotel/restaurant and campus/school sectors. In addition to the lower market value of the properties, waivers were granted in the first half of the year, accounting for a total of approximately 21.37% of rental income. The investment return including revaluation effect for the first six months of fiscal 2020 is -3.14 % (previous year: +2.19 %).

In the first half of the year, the Hotel Intercontinental in Davos and a commercial property in Montreux were sold. Five further properties were sold shortly after the end of the reporting period. From the proceeds of the sale of the properties, a partial repayment to the investors in the amount of CHF 10.00 per unit was made as of the end of July 2020.

CS REF Livingplus optimizes the portfolio

CS REF Livingplus generated an investment return of 1.46 % excluding revaluation effects in the first half of the year (previous year: 1.65 %). During the reporting period, one new construction project each for a retirement and nursing home was acquired in Kollbrunn (ZH) and Seftigen (BE). Eight smaller, older properties were sold. The performance of the fund during the reporting period was 8.5%. Rent reductions account for a total of around 5.36% of rental income.

CS REF Global and CS REF International: Investment return declines

According to Credit Suisse, the two internationally investing real estate funds have come through the pandemic quite well so far. However, the strong franc has depressed investment returns despite extensive hedging of currency risks. For CS REF International, it was 0.06% (previous year: 1.63 %), for CS REF Global 0.76% (previous year: 1.41 %).

CS REF International bought a property in Krakow and sold a property in Dublin in the first half of the year - according to the fund, with a large profit. As of June 30, 2020, the fund granted rent relief in the amount of 0.1 million due to the pandemic, which corresponds to 0.05% of rental income.

The Fund's net income increased from 56.6 to 60.2 million, partly due to the reduction of the rent default rate to 4.93% (PY: 9.42 %). As of June 30, 2020, the portfolio's market values, excluding the impact of currency, were slightly lower than those as of the year-end December 31, 2019, at 0.37%.

CS REF Global also reduced its rent default rate in the first half of the year: from 7.19% in the previous year to 4.82%. As of June 30, 2020, no rent abatements were required in the portfolio. The market values of the portfolio, excluding the impact of foreign exchange, were 0.24% lower at the reporting date than at the year-end December 31, 2019. (ah)