Direct Residential Real Estate Funds in Switzerland

Real Estate
414

So.. now i have two line items on my portfolio.

  • ERRES shares (trading at 165 CHF)
  • ERRES1 shares (trading at 8.15 CHF)

Number of shares for both is exactly the same. So it looks like the value of my position is kind of split into two positions.

Trying to make sense of it. Lets say investor have 10 shares of ERRES for easy math.

  • On Friday ERRES closed at 172 CHF/share.
  • Now investor ends with 10 shares of ERRES1 (8.15 CHF each) & 10 shares of ERRES (165 CHF each)
  • Each ERRES1 can be used to buy 0.2 ERRES at 124.31 CHF per share
  • To me it seems value of ERRES1 is simply (ERRES stock price - 124.31)/5

Market is saying the value per share of ERRES is lower now because of issuance of new shares. But if capital raise is successful, would it mean the ERRES share price would go back up?

And if i choose to not exercise my rights, i can cash out the value of ERRES1 by selling them and thus I do not lose out due to dilution. Right? ERRES1 will lapse in 10 days, so only line item left on my portfolio will be the ERRES line.

415

Question for Anyone who owns Direct Swiss real estate funds at IBKR

I notice that my dividends have WHT applied while there should be no tax on the dividends from these funds like ERRES.

What’s your experience ?
I will write to IB when their system works (account management doesn’t seem to work right now)

416

In my case, no withholding tax was applied by IBKR on dividends received from such funds (3 distributions received, different funds and years).

1 Like
417

Not entirely sure (but those funds have so much variation beyond NAV that makes it hard for me to understand all the movements…)

More like you should, otherwise you’re wasting money if you let them expire.

Note that all the efficient market theory might not apply since those funds are no super liquid and not always fully arbitraged.

418

The price of the shares will not go back up (in theory). That would be free money and it doesn’t exist. The market isn’t supposed to add the same premium on newly raised uninvested cash and mecanically there isn’t more buyers/owners than before

Yes you can sell the rights and cash the negative effect of the dillution

1 Like
419

Thanks.
I saw the dividend accrual for ERRES dividend which is payable tomorrow and there is a Tax on it. I wrote to IBKR to check. Maybe they

Good to know that Tax free RE funds get exempt from this WHT Tax as they should be.

420

I actually think price should not go back up completely for the reason you mentioned. Maybe it would happen over time because new cash will be invested in RE and then whatever premium market pays.

Thanks

421

It is interesting though to see how all this works.
I will most likely exercise my rights.

422

Any idea when they expire? I didn’t exercise all the ones for RSF (had some remainder as I didn’t have a clean multiple) and now I have a bunch of RSF1.OLD that are useless and cluttering my interface.

On the withholding tax: note that a bunch of funds do have a small percentage of dividends subject to withholding & income tax, as well as last year in my activity report IBKR had to issue and retract dividends for RE funds multiple times to get them fully correct.

423

IBKR responded
They said accruals are provisional, the final payment would have correct WHT (none) applied

1 Like
424

iirc it went away for me after a few weeks.

425

Good call. I’ve had DRPF on my to buy list for while and never pulled the trigger. It just kept on getting more and more expensive over time.

1 Like
426

ERRES: We’re above 170 again. After dividend distribution and new shares issued (at 124).

427

Same. But I’m also undecided if I should go for DRPF or SRFCHA SRECHA. Any tips on how to decide?

428

SRFCHA is a mix between REIT and Funds so by the end you might something around 30% Residential

I own SRECHA which is only funds and Residential is about 60% of the porfilolio.

Picking a fund is like stock picking according to me so I decided to invest in RE Funds only through an ETF

2 Likes
429

I actually meant SRECHA but mixed up the tickers.

Going for DRPF is indeed like stock(werkeigentum :wink:) picking, but I somehow believe the best days of commercial RE are behind us…

430

Yeah. I participated in the capital increase and it worked well.

seems market allocate same premium to the new units as the old ones

431

Maybe you can use a mix of DRPF / ERRES/ ZIFIDS.

This can help diversify. I have to say that I find the agio for residential funds particularly scary :slight_smile:

432

Wasn’t ZIF criticized at the time, for Zurich Versicherung’s “hey let’s put our crappiest assets into a traded fund, market will buy” strategy? At least that’s what I remember of my “analysis”.

433

I have no idea about this information. I think they have decent properties in Zurich area but I am also not a real estate PRO. For me everything looks decent :slight_smile: