Finland's Veritas acquires office development after allocation shift

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FINLAND - Finnish pensions insurer Veritas has acquired an office development as part of an investment strategy to re-weight its allocation to prime domestic office.

The transaction partners agreed not to disclose figures for the acquisition of Sola Business Valley from developer Lujatalo, although Veritas real estate director Peter Karlsson said the price was "in line with other new office properties in the Helsinki area".

The insurer has been underweight in prime Helsinki office since it divested part of its portfolio in 2007.

"The Sola acquisition will correct this with a few years' delay," said Karlsson.
He acknowledged the acquisition of an asset not scheduled for completion until 2013 carried additional development risks.

However, Veritas secured a long-term leasing agreement with Schneider Electric while the acquisition was still being negotiated.

"As the process ends in both lease contract and acquisition, we have a fully leased property," said Karlsson.

"We've also agreed some improvements concerning technical standards and sustainability."

Seller Lujatalo will also move its headquarters to the Sola Business Valley once construction is complete.

The acquisition announced this week takes Veritas's real estate allocation to around 17% of its overall portfolio - all of it invested in its domestic market.

This is a significantly higher allocation than the Finnish institutional average of 10.8%.

A study published last month by INREV found a significant preference among Finnish institutional investors for their - relatively stable - domestic real estate market.

Around 80% of investors' overall property exposure is in domestic direct core investments, compared with 12% invested abroad.

Despite a significant domestic bias, there is some appetite among Finnish institutional investors for overseas exposure.

Some of the 11 institutions to have invested in the Tristan Capital Partners core-plus, pan-European property fund are understood to be Finnish pension funds - which, according to INREV, are more likely than the pensions insurers that dominate the market to seek exposure via overseas non-listed real estate funds.