Disclaimer - risks

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General risk advertences

This website receives statements regarding future financial and operational developments and results, as well as other forecasts, all of which are forward-looking or subjective. All such statements are made based on estimates, assumptions, and suppositions that the company considers to be reasonable at the time. Before deciding to invest in property based on the available documentation, we recommend that you familiarise yourself with the risks associated with property investments. Property investments tend to be long-term investments. Investment performance depends on several economic, legal and tax factors that may change during the investment period. Forecasts of future performance cannot fully capture all economic, fiscal and legal developments, even in conservative calculations. Real estate, just like all other forms of investment, can be subject to considerable fluctuations in value and pose unpredictable risks. In extreme cases, even a total loss is not excluded. Property investment should always be seen as part of a holistic investment strategy that fully and equitably considers the overarching individual investment objectives, such as retirement, long-term wealth accumulation, realisation of ongoing income, security, liquidity and return, and can be optimised only in conjunction with other forms of investment (diversification). If necessary, seek advice from a trusted financial or legal expert.

Among other things, the following risk factors must be carefully weighed up:

  1. Dependence on rates of economic growth: Investment in property, in whatever form, just like any other investment is subject to general economic conditions such as economic growth, inflation, changes in interest rates and location attractiveness in national and international comparison. There is the chance that the demand for residential property and rental space may decline at any time, due to a downturn in economic conditions. This could reduce rental income and sales proceeds.
  2. Valuation risk: Property valuation take place in relation to the closing date and involves the risk that the values determined during a sale cannot be realised. The future growth of the relevant valuation factors is subject to uncertainty. Although the valuation is carried out according to professional guidelines, it involves the risk that the values determined in a sale cannot be realised, since the price depends on the market conditions at the time of realisation. This is influenced by the economy, interest rates, the concurrent availability of empty property and, more generally, by supply and demand. Furthermore, any tax consequences in the event of a later sale of the property are not considered in the valuation. Taxes incurred on sale may reduce the proceeds of a property sale, however. In addition, it cannot be ruled out that a subsequent valuation will result in a lower value than previously determined.
  3. Fluctuations in the Swiss property market: The property market is sometimes subject to cyclical fluctuations in supply and demand. For example, the execution of new construction projects can greatly increase the supply of rental space in certain locations, and there can be an oversupply of rental space or marketable property. Excessive supply of residential and commercial properties can lead to a reduction in rental income and house prices or valuations and an increase in the vacancy rate. In the event of a possible collapse of the entire property market and the related depreciation of the property in question, it may be necessary for investors to inject fresh equity immediately. A higher level of outside financing can make a property more exposed to risk than property backed by more equity.
  4. Market risk relating to rental income: The recurring revenue is largely made up of the rental income of the respective property. It is possible that rental income cannot be adjusted to interest rates, or at least not entirely so. This can have a negative effect on the liquidity of a property investment. There is also the risk that the vacancy rate will increase and that leases can no longer be continued under the same conditions in the event of a change of tenant. The rental income can also be reduced by the changed creditworthiness of the tenants. As a result, there is a risk that yield distributions will be lower than planned. However, when selecting investment properties, SwissLending strives to select properties that offer very good rentability and attractive rental rates. However, no guarantee can be given that the rental income will perform and develop according to a specific pattern. Rental income is directly affected by changes in the Swiss property market.
  5. Force majeure: The effect of elements of force majeure (for example, natural phenomena such as earthquakes, storms, war or terrorist acts, acts of sabotage, etc.) can have a negative impact on the value of the investment property and thus on the business, financial and earnings situation of the property, despite corresponding insurance policies.
  6. Contaminated sites: Locations subject to environmental protection legislation can have a negative impact on the execution of a construction project as well as existing buildings at a technical, operational and financial level. The possibility of contaminated sites that are unknown at the time of purchase and valuation and that become apparent at a later date can never be entirely ruled out. It can therefore not be ruled out that rehabilitation will be necessary and that under certain circumstances new equity capital has to be injected.
  7. Tax risks: If tax laws, case law, tax practice or agreements with tax authorities (tax rulings) were to change in the future or existing practice revoked, this would perhaps have adverse effects on the business, financial and earnings position of the property investment. This may affect previous fiscal years that have not yet been definitively assessed.
  8. Location-dependent factors: The property market is subject to location-based factors, so that the performance of property can vary greatly depending on the location. Location factors in a region may deteriorate significantly over time, for example due to a crisis in an industry that is heavily concentrated in a region, thus negatively impacting the performance of a property.
  9. Financing and interest rate growth: In some cases, property purchase at SwissLending relies to a very high degree on leverage in comparison with other sectors, in order to optimise the return on equity. The financing costs of the individual property investments therefore depend in part on the interest conditions. It cannot be ruled out that financial institutions will change their credit policies, which could have a negative impact on refinancing. Changes to interest rates, in particular changes to mortgage interest rates, can have a negative impact on the cost structure and on the financial and earnings position. An unsecured increase in the mortgage interest can drastically lower the earnings situation of a property. There is a risk that rental income will no longer cover all expenses and will require further capital in the form of fresh equity. If such a capital increase or capital procurement does not occur or is hindered due to a property crisis or other factors, the investors face the risk of a total loss. The properties shown on SwissLending are generally financed by mortgages with a fixed term of at least five years and a fixed interest rate for the entire term, or through money market mortgages with long-term interest rate risk hedging. This is intended to minimise the interest rate risk as far as possible. An increase in mortgage interest may increase the cost of an investment property, which may result in a change in gross yield. However, according to the current rental law the rental rates are linked to the mortgage growth, or the reference interest rate. An increase in the mortgage rate or reference interest rate fundamentally causes an increase in the rental rate (in residential spaces). However, a change in interest rates may in any case affect the demand for investment properties. In a worst-case scenario, ownership rights may be lost (auctioning the property or an own-name transaction on the part of the financing bank).
  10. Construction, repair and maintenance of property: Despite careful preliminary inspection, unforeseen maintenance and renovation costs may occur. The repair and maintenance of portfolio properties may require substantial investment, which will only generate income after a certain period of time, if at all, and may require further, fresh equity capital. If renovations or repairs are due, in extreme cases there is a risk that no return can be distributed. For higher costs, it may occur that during the entire term of the investment no return can be distributed and even that further fresh equity capital must be injected.
  11. Economic devaluation: Environmental and infrastructure factors as well as regulatory factors in the immediate or wider surroundings of the investment property – such as urban and road construction measures or the establishment of flight routes – can cause the yield of such properties to decline because the properties can no longer be rented, or no longer under the same conditions, or a significant investment must be made to secure the rental.
  12. Property risks: Depending on the age of the properties, the quality of the building and the type of use, there is a risk of sources of danger emanating from the building, which can cause personal injury and property damage. Although such risks are usually covered by insurance, it cannot be ruled out that certain losses can still have financial consequences for investors.
  13. Cluster risk: When investing in individual properties, there is a risk of clustering if one or more of the risks described can adversely affect the earnings and financial position of the property in question. Thus an injection of new equity may be required and the distribution of returns may be lower, or even be rendered impossible. It is thus advisable to optimise the risk by investing in several properties.
  14. Property market with limited liquidity: The Swiss property market is characterised by limited liquidity, especially for the acquisition and sale of property or shares in property, particularly for properties located in certain regions. This can have a negative impact on property prices. Depending on the market situation, the short-term purchase or sale of property or property shares may be impossible or only possible with substantial price concessions and, in extreme cases, lead to a total loss for the investors.
  15. Dependence on developments in legislation: Future changes to municipal, cantonal, national and international laws and regulations may have an impact on property prices, costs and revenues, and thus on the performance and value of the property in question. In Switzerland, property investment depends in particular on federal, cantonal and municipal legal rulings and regulations in the fields of fiscal, rental, planning, construction and environmental protection laws as well as property acquisition by persons abroad. It cannot be ruled out that changes in the regulatory environment may adversely affect the growth of a property investment. There is a risk that investors will not be allowed to acquire the investment property or that the approval process will require more time. This can occur in particular if insufficient detailed information is provided to demonstrate that no persons abroad are participating in a property, in accordance with Federal Law BeWG, SR 211.412.41 and Ordinance BewV, SR 211.412.411. Although SwissLending always endeavours to disclose in detail to the competent authorities all documents necessary for the acquisition of the property, there is nevertheless no guarantee for the smooth running of the application and/or a contingent approval. In such case, it would not be possible to purchase the property and the investors would be repaid all the capital they had deposited in the escrow account.

This list is not exhaustive.