The Finnish Property Market 2009 - KTI

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Real estate investments’ proportion of the total investment portfolios varies markedly between funds, and is currently ca. 12.5% on average for all Finnish pension institutions. During the past year, their proportion has increased markedly – from 7.9% at the end of 2007 – mainly because of the rapid decrease of the values of the equity portfolios, but also because of the increase of property portfolios. Pension insurance companies, which are the biggest players in the market, have an average proportion of property investments of 9.2% of the total portfolio (7.7% in the end of 2007). Finnish pension institutions’ equities and bond portfolios tend to be internationally well diversified, whereas diversification of property investments has just started in the past few years. Therefore, the weight of property is substantial – up to one third - in their domestic investment portfolios. Up until very recently, the property portfolios of pension insurance companies consisted solely of domestic investments in direct property. At the end of 2008, the value of their foreign real estate investments was €1.7 billion, representing some 2.5% of their foreign investment portfolios. Foreign investments are made totally through indirect vehicles, mainly to European non-listed property funds. Varma and Ilmarinen are the two biggest pension insurance companies in Finland, with total investment portfolios of ca. €28 and €25 billion, respectively. As of the second quarter of 2008, real estate investments account for 12% of Varma’s total portfolio, whereas the proportion for Ilmarinen is 9.4%. Ilmarinen, in particular, has emphasised indirect investment both in domestic and foreign property portfolios during the past few years. Varma has been active in increasing its portfolio through new development. During the past few years, many Finnish institutions have increased their indirect property holdings both in their domestic and foreign portfolios. Domestic pension institutions are major investors in all major Finnish non-listed property funds. Access to debt capital and third-party management have been their major motivations for indirect holdings. However, the tightening of the financial market might increase the relative attractiveness of direct investments again from the pension funds’ point of view. “Pension funds are major investors in all Finnish non-listed property funds” In terms of the management of the institutions’ property portfolios, there have been major changes in recent years. In the early years of the decade, many institutions outsourced their traditionally large in-house management units to service providers. Since that, some of them have taken back and/or tightened control on some of these functions, especially those closest to their client interface, such as in tenant relationships and property management. Some of the asset and property management service deals have also been re-negotiated with changes in service focus and/or service providers. Portfolio management functions have always been kept in-house, as Finnish legislation requires the investment decisions to be made by institutions themselves. Some Finnish institutions, for instance, Pohjola and Tapiola, have founded separate fund and asset management companies to manage their property investment portfolios. These companies are wholly-owned subsidiaries of these institutions. They also offer management services to other clients, and have launched unlisted funds. 22 Portfolio allocations of major pension insurance companies, 30.6.2008 The Finnish Property Market 2009 % 100 80 60 40 20 0 ■ Loans receivables ■ Bonds ■ Other money market instruments and deposits ■ Shares ■ Real estate investments ■ Other investments 5 908 7 757 25 183 28 575 1 848 22 879 5 676 M Pension Fennia Pension Tapiola Ilmarinen Varma Pension Veritas Local Government Pension Institution Etera Source: The Finnish Pension Alliance TELA
Listed sector There are currently four recognised property companies listed on the main list of the OMX Nordic Exchange in Helsinki: Citycon, Julius Tallberg Kiinteistöt, Sponda and Technopolis. At the end of 2008, their combined market value stood at only €900 million, which represents a decrease of some 54% compared with the end of 2007. As everywhere else, the share performance of the Finnish listed property companies in 2008 was very poor. The OMX Property Investment Sector Index fell by some 60% during 2008, while the overall OMX Helsinki Index decreased slightly less, by 53%. From its peak in early 2007, the OMX Property Index has decreased by more than 70%. The shares of listed companies are currently trading at a clear discount compared to their net asset value. Measured by the size of property portfolio, Sponda is the biggest of the Finnish listed property companies with a portfolio of €2.9 billion (€2.5 bn at the end of 2007) in office, retail and logistics properties. During the past few years, Sponda has expanded its business in the Russian market, and its portfolio there currently comprises some €260 million worth of properties in Moscow and St Petersburg regions. In Finland, Sponda’s portfolio has recently increased through completion of development of some major investments, such as in the new Vuosaari harbour area, as well as by some new acquisitions. Sponda’s current development activities include a shopping centre and office property in the centre of Helsinki. Sponda is also a co-investor and/or manager of four unlisted property funds. “Market capitalisation of the listed property companies decreased dramatically in 2008” OMX Helsinki CAP –index, OMX Helsinki Real Estate -index (index, 6/2000=100) Market capitalisations of the Finnish listed property companies 23 500 400 OMX Helsinki Real Estate -index 300 200 100 OMX Helsinki CAP -index 0 01-2000 07-2000 01-2001 07-2001 01-2002 07-2002 01-2003 07-2003 01-2004 07-2004 01-2005 07-2005 01-2006 07-2006 01-2007 07-2007 01-2008 07-2008 01-2009 Source: OMX Helsinki EUR million 1000 800 600 400 200 0 Sponda Citycon Technopolis Julius Interavanti Tallberg ■ 2005 ■ 2006 ■ 2007 ■ 2008 Kiinteistöt Source: OMX Exchanges The Finnish Property Market 2009
Page 1: The Finnish Property Market 2009 1
Page 5: Contents Preface 7 1. Basic facts a
Page 8 and 9: 1. Basic facts about Finland 2. The
Page 10 and 11: subordinated loans or state guarant
Page 12 and 13: Key Figures - Finnish Economy 2001
Page 14 and 15: 14 The Finnish Property Market 2009
Page 16 and 17: The indefinite leases often last lo
Page 26 and 27: The Finnish fund managers concentra
Page 32 and 33: 5. Property sectors - market struct
Page 34 and 35: The office market in 2009 The deman
Page 36 and 37: Prime office yields in Finnish citi
Page 38 and 39: Rental practices Rental practices i
Page 42 and 43: 5.4 Logistics market - a developing
Page 44 and 45: The Helsinki Central Business Distr
Page 46 and 47: Preferred office locations in Helsi
Page 48 and 49: 6.2 Other growth centres: Tampere,
Page 50 and 51: Throughout the recent years, the va
Page 54 and 55: Key terminology Property Kiinteist
Page 56: 56 The Finnish Property Market 2009

The Finnish Property Market 2009 - KTI

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