Starting point: The pension fund’s initial situation

The pension fund manages a real estate portfolio with direct holdings in a dozen properties. Predominantly, the focus is on residential properties located in the pension fund’s regional catchment area. The properties are managed and developed by the pension fund itself.

Concentrating on one area results in cluster risks, for instance in terms of vacancies or regional economic cycles. On top of that, regulations such as tenancy laws and building standards are getting stricter. These factors significantly increase the required manpower and organisational workload for the pension fund.

Measures: Implementation of the non-cash contribution

The pension fund decides to contribute its properties to the Avadis Investment Foundation in the form of a non-cash contribution. Based on their specific attributes, the properties are allocated to the three real estate investment groups managed by the Investment Foundation. In return, the pension fund receives shares in the respective investment groups.

Each investment group differs in terms of its type of use and strategy, allowing for precise allocation:

• Residential real estate Switzerland: Focus on investments in residential properties located in major Swiss cities and their conurbations.

• Residential real estate Switzerland, medium-sized towns: Focus on investments in residential properties located in medium-sized Swiss towns and their conurbations.

• Commercial real estate Switzerland: Focus on investments in commercial properties in central locations.

Benefits: Advantages for the pension fund

The non-cash contribution results in a substantial diversification of the pension fund’s real estate portfolio: instead of a dozen properties, it now has access to several hundred. A few dozen apartments have become several thousand.

In the context of the non-cash contribution, the pension fund is not required to part with its real estate. Instead, it contributes the properties to collective investment vehicles while keeping its investments intact. This also improves the pension fund’s flexibility and liquidity.

Both the operational management and the property development is handed over to the Avadis Investment Foundation, reducing property management costs at the pension fund and increasing efficiency.

In the future, the pension fund will participate in the performance of the collective investment vehicles. It will also have a say in matters, playing a role in shaping strategy at the annual investors’ meetings.