A comparative summary of the individual criteria of direct and indirect property investment is presented below:
| Comparison of Direct and Indirect Property Investment | |||
|---|---|---|---|
Object |
Direct Property Investment |
Indirect Property Investment |
|
Property company limited by shares (stock market listed) |
Property funds(contractual investment funds) |
||
Legal Entity Level |
|||
|
Strategy |
|
Buy and manage/sell strategy |
Buy and hold strategy |
|
Investment volume |
> CHF 1bn |
approx. CHF 500m |
|
|
Investment threshold |
low (1 share) |
low (1 share) |
|
|
Equity capital |
Yes |
No equity capital |
|
|
Borrowed capital |
According to the strategy |
Limitation under the Collective Investments Act (KAG) |
|
|
Market liquidity |
Depends on securities volume and usual trading volume |
Market maker entry? |
|
|
Risk diversification |
Possible, based on geography and property |
Geographic: yes Property based: possible to some extent (mainly residential property) |
|
Participation Level |
|||
|
Liquidity of securities |
|
Yes |
Limited (repurchase) |
|
Repurchase price |
No repurchase |
Conditional repurchase (Collective Investments Act) |
|
|
Proprietary interests |
Yes |
Yes, contractual |
|
|
Participation rights |
Yes (limited, based on share votes) |
None |
|
|
Transparency |
Rights to participate in the administration and obtain information and right of verification under company law |
Investor protection under the Collective Investments Act |
|
|
Yield / risk |
Higher yield with higher risk in relation to the direct investment and investment fund |
Lower yield with lower risk in relation to the direct investment and property companies limited by shares (subject to exceptions) |
|
|
Transaction costs |
Minimal |
Minimal |
|
|
Supervision |
General meeting Swiss Financial Market Supervisory Authority (FINMA) Stock Market Supervisory Authority |
Collective Investments Act / investor protection Swiss Financial Market Supervisory Authority (FINMA) |
|
|
Taxation |
“Double taxation” |
Single taxation |
|
Property Level |
|||
|
Investment policy |
individual, called owner strategy by professional investors |
Clear strategy |
Clear strategy |
|
Investment volume |
Financial planning and owner strategy |
As high as possible |
As high as possible |
|
Investment threshold |
CHF 3 – 5m |
min. 1 CHFbn |
min. CHF 600m |
|
Property uses / (risk) |
All types (diversified) |
Chiefly commercial- + office properties |
Residential properties (safer) |
|
Borrowed capital (mortgage) |
Cap: usually 80% |
0 – 80% Customary: 30 -70% Interest rate sensitivity affects rates |
Less than 50% of the market value of all real estate on average [Collective Investments Ordinance (KKV) 96 paragraph 1] |
|
Transaction costs |
High |
High |
High |
|
Taxation |
Only taxation of income /profits and wealth/capital + property taxes |
Property taxes (also see taxation of legal entity above |
Only property taxes (see above) |
|
Source: www.indirect-property.ch |
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