Some Finnish shopping malls could be facing sale

A number of foreign real estate investors acquired Finnish shopping centres with large bank loans, but now banks may force them to sell their properties

Timo Ritakallio

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By Heikki Arola
     
      This year, many Finnish shopping malls may be facing compulsory sale, reckon specialists in the real estate market.
      It is not a question of bankruptcies, but about the rearrangement of loans. If the banks do not want to renew the outstanding loans, they might demand that the centres be put on the market.
     
The underlying factor behind this is the fact that a few years ago, the ownership of many Finnish shopping centres and office premises fell into the hands of foreign investors.
      Helsinki’s Itäkeskus, Kamppi Center, and Kämp Galleria shopping centres, as well as Espoo’s Iso Omena (”Big Apple”) mall and numerous other large shoppers' paradises across the country are mainly owned by foreigners.
      The great wave of foreign real estate investors came to Finland in 2006 and 2007, just before the onset of the big financial crunch.
      Behind the invasion was easy loan capital. The economic boom led to the accumulation of financial assets while the interests were low.
      The real estate investors financed by large international banks eventually found Finland, after having ransacked the other Nordic countries first.
     
The investments were financed through business loans with a term of 5 to 10 years, which is why in 2012 and 2013, new loans will be required, as the old ones are becoming due.
      The global financial markets are now different from those slightly more than five years ago.
      The banks have tightened their lending policies, and it is possible that funds cannot be found in the same way and under the same terms as before.
      From the investors’ perspective, the only good point is that owing to the debt crisis, the European Central Bank will continue to maintain a low interest rate. This will keep a check on financing costs and may help the investors to avoid the compulsory sale of their properties.
     
Investment Director Timo Ritakallio of the Ilmarinen Mutual Pension Insurance Company, one of the largest real estate investors in Finland, regards it as possible that forced sales initiated by banks will be witnessed even in Finland in the same way as was seen in Sweden already last year.
      In such cases, those investors who have financed their acquisitions mainly through loans end up divesting their properties.
      Ritakallio does not begin to name any properties whose financing is on flimsy grounds. He notes that some real estate portfolios, containing stakes in shopping malls and other business premises, have recently been for sale.
     
The largest owner of shopping centres in Finland is Citycon, a company listed on the Helsink Stock Exchange.
      Even though Citycon is a Finnish company, most of its owners are of foreign origin.
      The largest owner is the American-Israeli company Gazit-Globem, which is listed on the Stock Exchanges of both New York and Tel Aviv.
      Citycon owns 23 per cent of the Finnish shopping centres - or one in four malls in Finland.
      The most significant property owned by Citycon is the Iso Omena shopping mall in Espoo, in which Citycon plans to start a major expansion on the site of the upcoming Matinkylä Metro station.
      Citycon acquired Iso Omena in 2007. The next year, it reduced its risk in the property by selling 40 per cent of the mall to the investment company GIC, owned by the government of Singapore.
     
Citycon is not one of those mall owners who operate under a high debt burden.
      According to the latest financial statements, the company’s indebtedness is under control.
      Familiar with the trends in the market, Eero Sihvonen, CFO of Citycon, does not expect any major wave in the sales of shopping malls, predicting a larger activity in the sales of other business and office premises.
      Changes in ownership occur constantly, even without bankruptcies.
      From the customers’ perspective, it seldom makes any difference.
     
     
Helsingin Sanomat / First published in print 20.1.2012


Previously in HS International Edition:
  Slump puts damper on surge in shopping mall construction (22.1.2009)
  No shopping centres currently for sale in Helsinki area (5.10.2010)

See also:
  Major Helsinki region shopping centres into British hands (7.5.2004)
  British investors buying Helsinki´s new downtown Kamppi Center (13.4.2006)

Links:
  Citycon
  Itäkeskus shopping mall, the largest in the nordic countries

HEIKKI AROLA / Helsingin Sanomat
heikki.arola@hs.fi