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  • Collateral in the construction and property sector – What to look out for?

    Collateral in the construction and property sector – What to look out for?

    The usual means of security
    Collateral is ubiquitous in the construction and property sector. For the financing of land or residential property, mortgages (liens on real property) are in the foreground. Step-by-step transactions (e.g. the purchase of a plot of land or a flat) are usually secured with so-called promises to pay from banks. Abstract guarantees or sureties are then frequently used to ensure that construction work is carried out in accordance with the contract. Finally, it is also conceivable to hand over movable property as a pledge or to transfer (future) claims of one’s own company against third parties to a lender.

    Guarantees and sureties in particular
    With a guarantee, a bank or insurance company undertakes to pay the guarantee recipient an amount if certain conditions (e.g. a breach of contract) are met. If the bank/insurance company waives all defences and objections arising from the basic relationship, this is an abstract guarantee in accordance with Art. 111 CO. Such guarantees can be called with a mere notification, which is why they are often also called “guarantee on first demand”. In practice, such guarantees are used as performance, advance payment and warranty guarantees.

    In contrast, a surety is always dependent on the underlying transaction. The bank/insurance company is entitled to the same defences and objections as the principal debtor. The main case of application in practice is the joint and several guarantee, which is also specified in the widely used SIA-118 standard as standard security for liability for defects.

    The recipient of an abstract guarantee is in a better position and usually receives his money immediately. Guarantees are therefore expensive and the guarantor always requires security in the event of a claim. The need for security must be examined on a case-by-case basis and the form of the security must be weighed up.

    Guarantees – a world of formality
    Guarantees on first demand sound tempting because they are supposedly easy to handle. This can be deceptive: Firstly, the guarantee text must be checked, because not every guarantee is abstract. Then you need to keep an eye on the period of validity. When making a claim under a guarantee, the formal requirements in the guarantee document must be meticulously observed, otherwise payment may be refused (so-called guarantee rigour). Another decisive factor is the way in which the claim must be submitted to the bank/insurance company and with which declaration (directly, via a correspondent bank, etc.). It is worth checking this in advance.

    A guarantee is utilised – what needs to be done?
    When the guarantee is issued, it is important to ensure that the bank/insurance company undertakes to provide notification in the event of a claim. This gives the party against whom the guarantee has been issued the opportunity to have the bank/insurance company prohibited from making the payment by court order. However, it should be borne in mind that the courts will only prohibit a payout if the claim is clearly an abuse of rights. The hurdles are so high that payouts are very rarely prohibited.

  • First Swiss company to abolish management fees for managing pension fund assets

    First Swiss company to abolish management fees for managing pension fund assets

    The management fees will be abolished and replaced by a new management fee that is more advantageous for LOB policyholders. The entrepreneur Serge Aerne, found it disturbing that the management fees for managed assets of LOB investment foundations increase linearly to the managed pension deposits, but the effort for management remains the same or increases only marginally. This fee policy, which has been common in Switzerland up to now, has been at the expense of the LOB insured. They indirectly pay high fees for management services which, according to Aerne, can be offered significantly cheaper. The pension assets under management of the insured are reduced as a result, which in turn means lower pensions.

    The flood of fees in the pension market will be stopped
    Aerne, Chairman of the Board of Directors of Admicasa, convinced the company’s Board of Directors to introduce a new fee model (“fee model 23”) that is more advantageous for the insured. In this model, the flat-rate management fee, which increases linearly with the growing deposits (economies of scale), is abolished and replaced by a management fee that is more advantageous for the insured. The new fee only covers the asset manager’s effective costs. In future, the economic incentive for the specialised pension asset manager Admicasa will be the performance of the investments. This saves the insured parties high costs and the resulting reduction in the assets of the pension funds. Aerne clearly defines his objective: “My goal is to stem the flood of fees in the pension market. Up to now, a lot of money has been earned with the management fee while the performance of the pension deposits has been insufficient. We want to change this and thus make a direct contribution to safeguarding pensions”.

    Terra Helvetica Real Estate Investment Foundation as launch client in the new fee model
    The Terra Helvetica Real Estate Investment Foundation, which is strategically focused on “affordable living”, has signed new contracts for the more favourable fee model 23 of Admicasa HoldingAG as launch client.AndréSchlatter,ChairmanoftheFoundationCouncilofthe TerraHelvetica Real Estate Investment Foundation expressly welcomes the new model: “We have had to wait a long time for such a fee model. From 1 June 2023, we will have the opportunity to credit more to the insured at the end of the year thanks to lower costs for managing our pension assets. This initiative is an important and hopefully groundbreaking step towards permanently reducing the management costs incurred. The current contributors and all future pensioners will benefit.

    Politicians and administration are challenged
    For pension fund expert André Schlatter, the signal effect on the financial sector is in the foreground: “It is not surprising that such a long overdue initiative is launched by a private provider such as Admicasa. Until now, the financial industry has simply earned an obscene amount from management fees from pension funds. This step can lead to a paradigm shift in the entire industry”. The president of the board of trustees of the Terra Helvetica real estate investment foundation also sees politicians and the administration as having a duty. “The pension discussion has been going round in circles for decades. The financial industry must also make a contribution to the insured.

  • Milestone of transparency on greenhouse gas emissions of the real estate industry

    Milestone of transparency on greenhouse gas emissions of the real estate industry

    With a share of 23.9%, real estate is the third largest source of greenhouse gas emissions in Switzerland after transport and industry. There is therefore no way around sustainable real estate to achieve the net-zero climate targets. However, you can’t tell by looking at real estate whether it is environmentally friendly or not. Labels and ratings were therefore created early on to provide information about the sustainability of real estate.

    Comparability is central
    What initially contributed a lot to the promotion and better understanding of the sustainability of real estate has meanwhile become a problem itself. The variety of labels and initiatives in the sustainability field overwhelms many market participants. Moreover, the individual ratings can hardly be compared with each other. Some ratings include several dozen indicators, so that in the end it is no longer clear what they are trying to express at all. Moreover, many investment vehicles in the real estate sector are now labelled as sustainable and apply ESG criteria, but there is no clarity as to how sustainable the respective properties are.

    The trend is towards disclosure of environmental indicators
    However, investors are demanding increasingly precise information and want to be able to compare different investment products not only in terms of returns or risks, but also in terms of sustainability. The trend today is therefore towards direct disclosure of environmental indicators, such as energy consumption or greenhouse gas emissions. Last year, the AMAS and KGAST associations obliged or requested their members to publish the most important key figures in the annual reports of real estate funds and real estate investment foundations with a closing date from the end of 2023.

    Why do we need a standard?
    However, calculating these key figures is anything but simple. Different values can result for the same properties, depending on the calculation method. Standardisation is therefore necessary. REIDA has taken on this task and developed a standard for determining the most important environmentally relevant key figures in the real estate sector. According to this REIDA standard, a benchmarking was carried out in 2022 with 3984 existing properties or 36 property portfolios, which have a total of almost 23 million m2 of energy reference area.

    What was measured?
    Only consumption values measured in real terms were recorded and balanced. This is a big difference to other surveys, where in many cases no consumption data is available and which therefore mostly operate with calculated values (estimates based on benchmarks). For each of the real estate portfolios, the degree of coverage is also shown together with the results. This describes the proportion of properties in the portfolio for which measured energy consumption data are available. On average, the coverage rate for all 36 portfolios is 83.1%. The disclosure of the degree of coverage also serves transparency, but is still not widespread. An analysis of the annual reports of listed real estate funds by pom+Consulting in 2022, for example, showed that only 25% of them contained quantitative information on the degree of coverage.

    Benchmarking results and their classification
    The average energy consumption in the REIDA benchmarking portfolio is 97.4 kWh per m² of energy reference area. The range is between 59 and 146 kWh/m². Special situations are probably responsible for portfolios at the lower end of the values – e.g. that single tenants purchase a lot of energy themselves, which according to the current methodology is not yet taken into account in the energy indicator. In an online survey by the University of Lausanne, which analysed 66 portfolios of institutional investors with a good 31 million m² of building space, a somewhat higher value of 105.5 kWh/m² of energy reference area was reported for the reference year 2020 – but without using a uniform calculation methodology.

    The share of renewable energy in the REIDA CO2 benchmarking is 25.8% on average, with a range of 13% to 54%. On average, the greenhouse gas emissions of the portfolios that participated in the REIDA benchmarking amount to 13.1 kg CO2 equivalents per m² energy reference area. In addition to carbon dioxide, the benchmarking also takes into account all other greenhouse gases, such as methane or nitrous oxide, and calculates CO2 equivalents (CO2e) from them. The REIDA portfolio 2022 thus achieves a very good value – with a range between 4.1 and 22.4 kg CO2e/m². The sample surveyed by the University of Lausanne achieved an average value of 19.6 kg CO2e/m². Again, due to the lack of a uniform calculation method, a direct comparison is only possible with reservations.

    Specification of uncertainty ranges
    Another achievement of the REIDA benchmarking is the specification of uncertainty ranges. This is because the consumption and emission values used as well as the calculations are always subject to uncertainties (e.g. inaccurate measurement sensors, small conversion uncertainties from lettable area to energy reference area). These uncertainties are aggregated for each portfolio and shown at the level of the key figures in the form of an uncertainty range, which indicates how reliable the key figure is. The uncertainty range is given as twice the standard deviation, which means that the actual value lies within the specified uncertainty range with a probability of 95%. For the indicator of CO2e emission intensity, the individual portfolios show uncertainty ranges from 0.3 to 5.8 kg CO2e/m².

    New standard for ESG reporting in Switzerland
    With the CO2 benchmarking, REIDA sets a new standard and thereby achieves a milestone in the ESG reporting of real estate in Switzerland. The standard will not only be continuously improved in terms of methodology and data quality, but will also cover aspects of environmental sustainability that have so far been excluded. One of the most important tasks will be to cover not only the operating phase of real estate, but also its entire life cycle, and in particular to incorporate the issue of grey energy. The addition of ratings and certificates – which have limits in terms of transparency and comparability – as well as the transition to direct reporting of the actual key performance indicators are thus in full swing.

  • MV Invest intensifies sustainability advice

    MV Invest intensifies sustainability advice

    MV Invest AG has bundled all activities related to the Swiss Sustainable Real Estate Index (SSREI) in a separate company, SSREI AG, based in Zurich. The SSREI was developed to assess the sustainability of the Swiss real estate portfolio and supports owners in aligning their real estate with the increasingly stringent sustainability requirements and in securing their long-term value.


    Elvira Bieri, who already played a leading role in the conception and introduction of the SSREI, was won as managing director of the SSREI AG and has been taking care of all matters of the SSREI together with Geraldine Hug since January 1st, 2022. Elvira Bieri also acts as Chief Sustainability Officer (CSO) of MV Invest AG.

    In addition, Ulrich Kaluscha complements the advisory team of MV Invest AG. As Senior Advisor, he will contribute his many years of experience in product and investment management of direct and indirect real estate. He will place a special focus on the integration of sustainability issues in the structuring and selection of indirect real estate portfolios.
    MV Invest Managing Director Roland Vögele continues to see an increasing need for sustainability advice in the real estate industry. With the clear positioning of SSREI AG as a provider of a Swiss real estate sustainability index and the expansion of the MV Invest team by three employees who focus on sustainability issues, MV Invest is now ideally positioned in the market.

    Source MVInvest www.mvinvest.ch