Contributions in kind
Contributions in kind
Direct property investment can be challenging for property owners. The kind of detailed knowledge of regional markets and specific real estate expertise that Swiss Prime Site Solutions offers is essential. Many different factors need to be considered in an existing portfolio, such areas as sustainability, vacancy reduction, renovation backlogs and utilisation of potential, as well as regulatory and political challenges. Economies of scale are also an important consideration here.
The contribution of real estate to an investment vehicle is defined as a contribution in kind. In return, the owner receives shares in the investment vehicle (investment foundation and/or investment fund). The tax-optimised contribution in kind allows the property owner to transfer their directly held property portfolio to an indirect real estate investment. A contribution in kind also gives small and medium-sized pension funds and institutional investors access to larger real estate investment volumes that are professionally and efficiently managed.
«Our decision to enter into a transaction with the Swiss Prime Investment Foundation was influenced not only by the investment group’s strong portfolio, but also by its professional approach.»
Antonio Sacco
Managing Director of the Ringier Group’s pension fund
Diversification is of central importance in optimising the risk-return profile of a property portfolio. Since direct real estate investment by pension funds has historically grown regionally, contribution-in-kind transactions allow greater geographical and use-specific diversification. Furthermore, the considerations around sustainability are crucially important.
Implementing a contribution in kind is a multi-step process which usually comprises five key milestones. Firstly, the owners need to be willing to sell the properties. The fund management company or investment foundation then checks whether the property is suitable for acquisition, while the custodian bank verifies the eligibility of the investors. The third step involves a thorough inspection of the property, in which the purchase price is determined by a valuation expert, and a purchase price indication is given. The fourth step involves the payment of the purchase price, which is made in the form of share certificates and, if applicable, cash. In the fifth and final step, the previous property owner becomes the new investor with shares.
Swiss Prime Site Solutions has demonstrated its expertise with contributions in kind several times over recent years. We have successfully completed five such transactions with a value of about CHF 400 million. For example, we were able to take over 33 properties for the Swiss Prime Investment Foundation as part of a contribution in kind from the Ringier Group’s pension fund. «Our decision to enter into a transaction with the Swiss Prime Investment Foundation was influenced not only by the investment group’s strong portfolio, but also by its professional approach», says Antonio Sacco, managing director of the Ringier Group’s pension fund.
We support our clients throughout the entire contribution-in-kind process with our extensive experience and through access to our nationwide network of experts. Our innovative process for execution of contributions in kind serves as an exemplar.
Efficient use of capital, potential revaluation gains, tax advantages for investors, asset optimisation
Greater diversification effect, stable cash flow, maximum transparency
Assignment of operational property management, efficiency gains, freeing up of resources, succession planning, expertise of Swiss Prime Site Solutions
Timing of the contribution in kind independent of issuance windows, greater fungibility (possible tradeability of shares), more decision-making freedom