The Finnish Property Market 2012 - KTI

Finnish pension institutions interested in
increasing their allocation to property
The total Finnish institutional investment universe
amounts to ca. €180 billion. Pension funds and other
pension schemes account for ca. 74% of the total
investment universe. In the INREV Investor Universe
Study carried out by KTI in 2011, the property investment
strategies of the Finnish institutions were studied. The
institutions’ property investments amount to ca. €20
billion, representing some 11% of their total investment
portfolios.
The majority, €15.9 billion, of institutions’ current
property investments are domestic direct investments.
Non-listed property funds currently account for ca. 18% of
all property investments, and, of these, ca. two-thirds are
non-domestic. The small remaining proportion is invested
in listed property shares or other property vehicles.
In the study, the institutions reported a target property
allocation of ca. 12%. Pension insurance companies
and other pension schemes reported current allocations
below the targets, whereas life insurance and other
insurance companies are currently slightly overexposed
to their targets.
Finnish institutions are likely to increase their total
exposure to real estate by some 20% – both by increasing
their target allocation and due to the increase in their
total investment portfolios. If realised, these changes
would lead to an overall increase of almost €4 billion
in the total institutional real estate investments. Some
40% of this growth would result from increases in target
allocations, and the rest from the increase in total
investment volume. Of the total growth, some €1 billion
is reported to be targeted to non-listed investments.
Indirect investments are expected to grow both in
Finland and abroad.
Finnish institutions’ strong emphasis in direct property
investments is mostly motivated by the long tradition of
property investments and in-depth knowleddge of the
domestic market. The primary motivation for non-listed
fund investment is international diversification, access
to new markets, management expertise and leveraged
investments.
The Finnish institutional real estate investment universe
Non-listed real
estate (including
funds of funds)
3.7
Listed real
estate 0.3
Other real
estate 0.2
Non-domestic 2.4
Domestic 17.7
Direct real estate
(incl. joint ventures)
15.9
Source: INREV Investor Universe Finland Survey 2011
26
The Finnish Property Market 2012
Listed sector
The Finnish listed property sector remains small, with only
three recognised property companies listed on the main list
of the OMX Nordic Exchange in Helsinki: Citycon, Sponda
and Technopolis. At the end of 2011, the combined market
value of these three companies stood at ca. €1.7 billion.
In 2011, the share prices of listed property companies
suffered from the turmoil in the global financial markets.
Compared to the overall share performance illustrated by the
OMX Index, the OMX Property Investment Sector Index
showed, however, overperformance, resulting as a change of
-21% during 2011, with the overall index decreasing by 30%.
Sponda is the biggest of the Finnish listed property
companies with a portfolio of €3.2 billion (€2.9 billion at
the end of 2010) consisting of office, retail and logistics
properties. In Finland, Sponda’s investments are concentrated
in Helsinki metropolitan area and in other main cities. During
the past few years, Sponda has expanded its business into
Russia, where it operates in the Moscow and St Petersburg
regions. At the end of 2011, the fair value of Sponda’s Russian
investments amounted to €224.6 billion. Sponda has also a
separate fund management business unit, which currently is a
co-investor and/or manager of funds with a total GAV of some
€594 million. In 2011, Sponda launched, together with some
Finnish institutional investors and development company
SRV, a new investing company investing in Moscow and St
Petersburg. In total, the new company’s investment capacity
will reach €300 million. The company has not published any
investments so far.
“All Finnish listed
companies increased
their portfolios in 2011”