Immobilien Europa Direkt: effects of Covid-19

Due to the extraordinary situation in connection with the coronavirus, Zurich Invest AG / Zurich Investment Foundation and Schroder Investment Management (Switzerland) AG would like to provide an update about the investment group Immobilien Europa Direkt (IED).

25/03/2020
Buildings
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IED’s market position remains strong. The approximately EUR 1.1 billion property portfolio with 39 assets is spread across the most important European economic centres in nine countries. Office properties at central locations make up the most important usage category with 54 percent, followed by retail properties with 23 percent. The remaining third of the portfolio is divided between the logistics, hotel and parking segments and is broadly diversified.

The IED investment group is managed with a great deal of foresight. The quality of the properties is high standing. As such, the properties meet the latest sustainability requirements and are also in excellent condition. The leases are secured with a long-term contract term of 7.8 years on average. The current vacancy rate is less than 5 percent. At 21 percent, debt is moderate and offers sufficient flexibility for the fund.

In order to test the possible effects of the current pandemic on IED, several stress test scenarios have been undertaken. The stress test scenarios were based on the assumption that individual tenants could experience temporary financial difficulties, in particular tenants in the retail trade and in the hotel sector. IED currently has gross rental income of around EUR 56 million per year. The stress tests have shown that, even in the very unlikely scenario of losing 50% of the annual rental income, the investment group's net cash flow would remain positive.

In general, we see a possible risk of loss of rent for smaller retailers and hotels. For IED, the majority of retail rental income is generated from large international players such as Aldi, Hornbach, Marks & ​​Spencer, REWE and Tesco. In part, these provide the basic services (food, etc.), and are therefore either not affected by the current shop closures as a result of the coronavirus, or maintain operation with online trade or for corporate customers. Importantly, these retail assets are located at first-class locations for their respective use. Rental income from the hotel industry accounts for around 10% per year, and is largely secured by long rental guarantees in addition to long-term, fixed lease agreements and good locations.

Schroders manages the IED investment group very actively and we are in regular contact with all of the fund's stakeholders.

Please be assured that we will continue to keep you updated with the latest developments of the fund.

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For professional investors and advisers only. This material is not suitable for retail clients.

 

This document is intended to be for information purposes only and for the sole and the exclusive use of the recipient. The views and opinions contained herein are those of Schroder Investment Management (Switzerland) AG, which may change without notice and which may not necessarily represent views expressed or reflected in other Schroders communications or strategies. The document is not intended as an offer or solicitation for the purchase or sale of any financial instrument and should therefore not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Information herein is believed to be reliable but Schroder Investment Management (Switzerland) AG does not warrant its completeness or accuracy. Some information quoted may have been obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. Third party data is owned or licensed by the data provider and may not be reproduced or extracted and used for any other purpose without the data provider's consent. Third party data is provided without any warranties of any kind. The data provider and issuer of the document shall have no liability in connection with the third party data.

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Issued by Schroder Investment Management (Switzerland) AG, Central 2, CH-8001 Zurich which is authorised and regulated by the Swiss Financial Market Supervisory Authority FINMA.

 

Further Information:

https://www.schroders.com/en/ch/asset-management/about-schroders2/press-releases/

 

Roger Hennig, Head Real Estate Switzerland,

roger.hennig@schroders.com

Tel. +41 (0) 44 250 12 91

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