Credit Suisse cuts property fund payouts as withdrawals mount
CREDIT Suisse Group cut payouts on a 3.25 billion Swiss franc (S$4.7 billion) real estate fund, as clients sought to pull their cash after valuations were hit by rising interest rates.
The Credit Suisse Real Estate Fund (CS REF) International’s net asset value is expected to drop as much as 10 per cent, according to a statement on Friday (Feb 24). That will likely limit distributions to investors to as low as 35 francs a share, down from 40 francs a share, it said. Investors holding about 13.3 per cent of the fund’s shares have asked for their money back.
Rising interest rates are hitting real estate values globally, as the cheap money era in which real asset values soared comes to an end. While publicly traded landlords saw their share prices rapidly adjust to rising borrowing costs, private market valuations have been slower to update, and some investors in real estate funds have sought to redeem their cash before writedowns feed through.
“Global valuations were negatively impacted by rising interest rates for CS REF International in its key markets of the United States, the United Kingdom, and Germany,” Credit Suisse said in the statement. “Despite healthy rental results at attractive conditions, these were insufficient to offset the negative effects of rising interest rates.”
The fund’s top holdings include properties in Vancouver, Austin and Boston, according to a fact sheet.
Credit Suisse isn’t the only firm seeing its property holdings suffer in a down market. In January, BlackRock suspended withdrawal requests on a £3.5 billion UK property fund, and Blackstone Inc’s US$69 billion real estate trust hit a monthly redemption limit.
Yet Credit Suisse’s fund has been struggling for a while and has underperformed all of its peers over the past five years and is down almost 5 per cent in that period, according to data compiled by Bloomberg. BLOOMBERG
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