After a busy year in the real estate market, Borenius’ Real Estate & Construction team had a record-breaking market share of the Finnish real estate transactions completed in 2015. The total volume of real estate transactions in Finland amounted to EUR 5.2 billion, and is expected to remain substantial in 2016 as well. Borenius was involved in high-profile cases as an advisor to the buyer, seller or the bank, the total value of which exceeded EUR 2 billion. Borenius’ extensive focus on real estate transactions responds to the intense market demand.
Our recent real estate transactions included advising:
- Norwegian Ness, Risan & Partners on its EUR 120 million acquisition of a logistics property portfolio from Posti.
- Partners Group on its EUR 350 million acquisition of a property portfolio consisting of 32 properties in Sweden, Finland, and Estonia (commercial, office, hotel, and public service properties with a leasable area of 250,000 m²) from Sveafastigheter.
- Rakennusosakeyhtiö Hartela on a share transaction concerning the sale of Shopping Centre Ristikko to Mutual Pension Insurance Company Etera. Through the transaction, Etera became an equal shareholder with Hartela owning half of the shopping centre located in Konala, Helsinki.
- Technopolis on a EUR 125 million joint venture transaction with Osuuskunta KPY, in which the Kuopio business of Technopolis consisting of approx. 67,000 m² of modern office premises in Kuopio, Finland, was transferred to the ownership of Technopolis Kuopio Oy, which is owned by Technopolis and KPY on a 60/40 basis.
- SRV Rakennus Oy on the development of a construction complex called Niittykumpu Metro Centre to be built next to the Niittykumpu metro station in Espoo. The commercial centre was sold to OP-Vuokratuotto special investment fund on 31 March 2015. Overall, the project’s value is around EUR 100 million.
- Aberdeen Balanced Lux 1 S.à.r.l. on its acquisition of a real estate company owning and developing a prime shopping centre in Lauttasaari, Helsinki. The seller was publicly listed YIT Corporation.
To further boost its in-depth knowledge in the real estate industry and to better serve its clients, Borenius appointed Saara Paronen as partner and the head of the Real Estate & Construction team.
“We had a very good year. Our clients were active in the market and we were happy to have been able to participate in and give our contribution to so many interesting projects. I’m proud of the trust our clients have shown in our firm and of the possibility to further develop our team and services as a partner,” says Paronen.
Real estate financing transactions require understanding of the real estate business itself as well as the bank’s needs and current trends in the financing market. Depending on the deal size, the financing in real estate transactions is typically carried out by bilateral or syndicated bank facilities. To this end, Niina Nuottimäki was appointed as financing partner to serve clients both on the banking and borrower side.
“We have been very busy with real estate transactions also in the Banking & Finance team. It has been a great pleasure to assist our clients with the biggest portfolios as well as in smaller cases. The crucial issue is to understand the type of the credit and risks involved. I am always eager to find acceptable solutions and leading the project efficiently towards closing the deal”, says Nuottimäki.
Current market trends
The Finnish real estate and construction industry is evolving to meet the needs of property investors and users. The following three trends continue to shape the market:
- Portfolio acquisitions: The average size of real estate transactions is growing rapidly, showing a new trend of major property portfolio acquisitions amounting to over EUR 100 million. This is largely because many real estate funds established during 2004–2008 have reached their maturity. These funds are now in the exit phase and meet the increased investor demand resulting from investment allocations shifting from less profitable investments in other sectors to real estates. Legal advisory in portfolio transactions requires a comprehensive and analytic management process while striving for cost efficiency.
- Joint ventures: Due to increased supply and demand on high-value assets and portfolios on the market, investors are more eager to form joint ventures. A natural need for joint venture also often derives from certain expertise or other abilities that a cooperating partner can provide. In joint venture investments, the advisor must master the target asset and the transaction, and also be able to understand and balance the different roles and interests of co-investor parties.
- Hybrid development projects: New rail station locations, in particular, are often built to form complexes including not only the actual terminals but also housing and premises for retail, office, hotel and public services. These hybrid properties attract residents and companies looking for premises with excellent location and consequently bring in real estate investors. Hybrid projects always involve a web of simultaneous parallel and cross negotiation processes between different operators with different needs, and often the time frame for getting every piece to fit is tight. Being able to keep all matters in order and to find solutions that all the operators can accept requires a capable and experienced legal advisor.
“All these trends, often also combined in the same project, have been present in our work in 2015 and clearly continue to be in 2016 as well”, says Paronen. She personally has a strong interest in real estate development and transactions concerning new developments.
“It’s great to be involved in the process of shaping the contract architecture of commercial real estate development projects. As situations often turn out to be rather complex, you cannot rely on ready-made models, but you often have to create tailored solutions for each particular case. That’s what I like best in development”, she says with enthusiasm.
In the Nordic countries the banks have typically been active in financing real estate transactions. However, the increasing amount of regulation that the banks need to comply with will create restrictions for the banks. The banks are also careful not to over-leverage the properties which could lead to the borrowers seeking other alternatives.
“It is interesting to see whether the banks are able to continue financing real estate transactions or there will be an increase in alternative types of instruments like direct lending or bonds also for non-listed companies,” adds Nuottimäki.
Strength of our Team
We offer market-leading advice across a range of practice areas required in real estate transactions and development. Our Real Estate & Construction team works in close co-operation with Fund Formation, Tax, and Banking & Finance teams, which gives us an excellent understanding in tailoring real estate investments, financing and exits.
The Real Estate & Construction team has excellent resources with its three experienced partners, Saara Paronen, Christian Fogelholm and Ari Kaarakainen. Fogelholm is well known for his work in domestic and international real estate joint ventures. Kaarakainen advises clients both in real estate and energy and infrastructure transactions. Other key members of the team are Specialist Partner Risto Sipilä and Senior Advisor Veli Leinonen with a focus on real estate and construction related dispute resolution. These experienced professionals are backed up by our talented young lawyers with a strong endeavour to become leading individuals in the field of real estate law.
If you have any questions about our services in real estate development, transactions, or financing, please contact the below partners or your regular Borenius contact.