Real Estate Stocks: Why the Quiet Winners Are Losing Momentum on the Market

Swiss real estate investments have enjoyed three unusually strong years. By the end of August, the index of listed property funds had delivered a total return of 39 percent. The index of real estate companies, including Swiss Prime Site, Hiag and Allreal, gained 51 percent over three years.

Some individual holdings performed far better. UBS Property Fund - Direct Hospitality led the fund rankings with a 77 percent gain. The fund focuses on specialized forms of housing and “education-related facilities,” according to its prospectus. UBS Residentia, a residential fund, rose 58 percent.

Both funds benefited from UBS’s portfolio restructuring after its takeover of Credit Suisse. They are due to merge with UBS Living Plus at the end of September. In the run-up to the merger, the market prices of the three previously separate funds moved closer together.

The gains among listed companies were even more striking. Züblin shares rose 115 percent, while Hiag Immobilien gained 87 percent. Züblin, however, is a small-cap stock with limited free float and thin trading volumes. Russian investor Viktor Vekselberg, who is under sanctions, holds an absolute majority through Lamesa Holding, making the stock unsuitable for many institutional investors.

Hiag represents the opposite case. The Basel-based Grisard family owns about half the shares. Under CEO Marco Feusi, who has led the company since 2000, Hiag has streamlined its portfolio and focused more heavily on strong locations and high-yielding properties. The market rewarded that strategy with a sharp rise in the share price. Established groups such as Swiss Prime Site, Allreal, PSP Swiss Property and Mobimo have looked more subdued by comparison. Swiss Prime Site stands out somewhat, with a portfolio worth more than 14 billion Swiss francs.