Not afraid to fail
We are proud to present you that Not Just a Newsletter is coming out for the first time in English. This brings us to our special announcement, drum rolls…. Reagle has taken a significant step forward and is now a multinational company! Our first office outside Finland has now opened its’ doors and can be found from Stockholm, Sweden.
Recruitment process was long, but as said, good things come to those who wait. In the end, we found the best possible candidate who represents Reagle’s DNA. Our new Director of Sweden operations, Peder Lund, is an entrepreneurial and driven problem solver for clients. Keep reading and get to know Peder.
We embark on our international journey humbly and, in the beginning, we aim to grow organically. However, based on our experience from the Finnish real estate market, we are convinced our services will be in high demand also in the Swedish market. For a while now we have studied the market in Sweden and noticed a lot of similar inefficiencies similar to Finnish in the commercial real estate advisory services.
Obviously, there are many more advisories compared to Finland, however also the transaction market is considerably larger in Sweden. The advisors’ focus areas seem very similar to those in Finland and we believe that a market niche exists. We have succeeded in challenging the commercial real estate market in Finland, and even changed it for the better. Now, as an international organization we will be able to fulfill our mission even better and push the industry to a higher standard.
Despite the similarities between these two markets, the current market turmoil is more noticeable in Sweden due to the presence of many listed real estate investment companies. In Finland the extent of the current market crisis has not yet been properly recognised, whereas in Sweden the declining share prices have already had time to affect the market for some time.
This is one of the first steps on our new journey. No journey is just a smooth ride – risks are inherent in riding a new trail. Yet, nothing great can come out of just playing safe and doing things the same way they’ve always been done. And that’s what we are doing here: we dare to do things differently and better, and we are not afraid to fail trying.
– Henri Hakala
Let’s keep in touch!
Henri Hakala
henri.hakala@reagle.fi
+358 41 506 3101
About the Market
Love thy neighbour
The year changed to 2023 and unfortunately market turmoil did not clear overnight. The increased costs of financing has and will surpass the record low prime real estate yields in many countries. The transaction market has slowed down and the banks are becoming very picky about what to finance in these market conditions.
European office take-up numbers were positive in Autumn but for instance office transactions were record low measured by the volume in Finland. On the other side, we are seeing positive signals with inflation slowing down, but we are still far away from the safe side. The market sentiment is changing, no doubt. Change always brings opportunities and now is the time to look for them.
Trends are global, but the real estate markets are local. Nordics are seen as one market, but we have many differences starting from currencies and financing. One of the biggest differences between Finland and Sweden is that around 30 real estate investment companies are listed in Sweden and in Finland there are only 4 companies. Current crisis has had a strong effect on the Swedish stock market. This has affected Real estate companies that have on average seen a sharper decrease than benchmark index. The real estate industry on aggregate has lost around 30 % of value in the last 12 months in the stock market with some companies losing 50 % or even 70 %. Markets forecast to have declining earnings by 28 % annually.
With increasing volatility in the stock market together with record level high property value, mispricing is more likely. This can be seen as an opportunity especially for cash strong investors. Another way to find opportunities might come from ownership structures. There are interesting cross-ownership structures between real estate companies, that may create more investment opportunities if there are problems with refinancing. There is much higher change for public buyouts in Sweden. Record level low yields and fast expansion drove Swedish investors to use more bond market funding to acquisitions. As the market conditions have changed, the bond market does not offer profitable financing for real estate any more, which puts pressure for the yields to move upward.
There is also another side: a quick recovery when financing markets start working. Historically, the Swedish real estate market reacts a lot quicker than Finnish.
Above is a map showing Finnish investors´ investment to other countries between 2015 – 2022. The investments to Sweden, illustrated with the Blue line, account approx. 30% of the total amount.
There are differences in asset classes between the two countries. In Finland the residential investments have been driving force together with public properties. Residential investments counted 29 % of total volume in Finland. As opposed to Sweden the investors are moving away from the residential segment. The withdrawal comes from the lease structures; the lease agreements are not usually inflation adjusted and costs are increasing. At the same time the rents are decreasing because of the economic turbulence, and new regulation has also put a cap on the rental growth of the new developments.
Both countries also have similarities. In Finland and Sweden retail yields especially in larger retail properties have increased and logistics sector is still very much in demand.
Finnish real estate investors have had an appetite for Nordics. Since 2015 around 30 % of cross-country direct transactions were made to Sweden and 56 % to Nordics. In reverse on average 42 % of the total investment volume to Finland comes from the Nordic real estate investors. Many Nordic investment companies, such as Hemsö and Cibus have established their own organizations in neighboring countries. It is no wonder, then, why the Nordic is seen as a one market area from an outside perspective.
Want to talk about data and insights?
Olli-Pekka Mustonen
olli-pekka.mustonen@reagle.fi
044 522 26 39
And that’s how it’s done
Reagle adviced Special Investment Fund eQ Community Properties in the sail of care service property portfolio
Reagle’s thorough understanding of Special Investment Fund eQ Community Properties’ strategic objectives and in-depth market knowledge proved to be one of the key in success advising eQ in the sale of care service property portfolio.
Reagle advised Special Investment Fund eQ Community Properties in the sale of 10 care service properties to Kinland AS. The assets have strong tenant covenants, are located in the capital region and in selected growth centers with steady cash flow. In addition, some provided attractive development potential as well. The purchase price is approx. EUR 76 million.The deal is to be completed in two tranches, by the end of 2022 and the beginning of 2023. The Norwegian Kinland is one of the established social infrastructure owners in the Nordics.
The subject portfolio was merged with another eQ’s sales process during Due Diligence phase as these two portfolios were shared with the same buyer by another commercial advisor. These two processes were finalised with good and well-organised cooperation between the parties working towards a common goal.
“The transaction is a strong indicator of the functionality and activity of the market as well as a good benchmark for the market. The capital and profit gained by this transaction will be invested in new developments and acquisitions. Kinland, as a buyer, is a respected player as an owner of social infrastructure properties. We are very pleased to Reagle’s advisory and work on this and past transactions.”
– Emma Kaksonen, the Transaction Director at eQ Asset Management
Want to hear more about our solutions?
Alexader Doepel
alexander.doepel@reagle.fi
050 305 3409
See our references
Reagle Team
Peder Lund
“I’d describe myself as a curious and puzzle-solving person by nature – I believe those qualities are essential in our field of business. My work, carving out a place for Reagle in a new market, is about the art of people, understanding them and their needs. That’s what’s driven me ever since the early stages of my career. Listening and meeting people with openness and curiosity is really the key – not just in business but in life in general.
As Reagle reached out to me, we connected almost instantly. Having experience as Head of Transactions at a Swedish Real Estate Company, working closely with all advisory players on the field in Sweden, I quickly realized that Reagle’s approach to transactions was significantly different. What stood out was, that while others do the “necessary steps”, Reagle really goes all the way, and that’s what intrigued me to join the team.
The Nordic region is a quite close knitted area business-wise, yet there are differences between the countries and the markets. The real estate market in Sweden is naturally larger than in Finland. However, very similar to Finland, it has been quite stagnant, and business has been done in the same way for years and years. Now, a slow shift is happening, and some actors are seeing the benefit of being able to do more accurate decisions by using more data points and in-depth information. That’s where Reagle can really stand out and bring value – having a new point of view backed up with a solid track record, data and expertise, and thus providing the whole spectrum to our clients and future partners.
The main task on my to-do list is to build a bridge between Reagle and the Swedish market – introduce us, establish our network and bring all the know-how and expertise across the gulf. No workday will look the same, I reckon. However, I believe my quite versatile professional background from different fields of business, will be an asset. I have experience in the Real Estate industry, especially with transactions and real estate development, but if I’d have to pinpoint the nominal factors in my career, those would be the focus on roles in sales, transactions, building teams from scratch and business development. Essentially those are the things I’ll start to do at Reagle as well.
Coming in from the other side of the table – essentially from the buyer’s side – is an advantage as I can thoroughly understand our client’s needs and see the extra value Reagle brings to them. Closing sales here and there is a relatively easy task – even in this current market situation – but for me, and for Reagle, it’s all about doing the journey together with the clients as partners, not just in pursuit of that one-time fairy-tale sale of an asset.
I keep busy in my free time. I have a strong connection to Ukraine due to my previous work setting up a company with production facilities in the country, and as Russia started the war, I felt I had to help. One thing led to another, and today our initiative Svenska Bussarna, founded by me and my friends, has been helping by transporting over 700 Ukrainian women and kids to Sweden, we have donated 15 cars including 3 ambulances and loads of medical stuff and necessities to Ukraine. Otherwise, outside of office hours, you’ll find me outdoors enjoying nature, most likely sailing in the Stockholm archipelago on my sailboat. Maybe someday I’ll sail to Helsinki for a meeting!”
Get in touch with Peder
peder.lund@reagle.se
+46 70 228 50 00
