International diversification of real estate investments was continued
Varma’s real estate investment portfolio amounted to EUR 3.9 (3.8) billion at the end of 2015, and the total return stood at 3.3% (3.8%).
Direct real estate investments, %
Varma continued to increase the international diversification of its real estate investments in 2015. New investment commitments in international real-estate funds totalled EUR 363 million. The biggest single investment was the acquisition of a holding in the Skärholmen Centrum shopping centre in Stockholm, Sweden. At year-end, the value of Varma’s international and Finnish real estate fund investments amounted to EUR 593 (466) million and the return was 9.9% (8.0%).
The weighting of domestic, directly-owned real estate investments was decreased. In 2015, Varma divested a total of EUR 28 million in direct real estate investments. The weighting of equity-type domestic real-estate investments was reduced over the year as Varma divested half of its holding in Certeum Oy and its entire holding in SATO Corporation for a grand total of EUR 328 million.
In 2015, the value of transactions in the Finnish real estate market increased by more than 30% from 2014, but the challenges in the rental market were reflected in the vacancy rates, returns and values of the direct real estate portfolio. At year-end, the vacancy rate for the business premises owned directly by Varma stood at 7.2%.
New rental flats in the Helsinki Metropolitan Area and growth centres
Investments in 2015 totalled EUR 73 million, and they were focussed on development, maintenance construction and renovations of existing properties, and housing construction. At the end of 2015, Varma had a total of 130 new rental flats under construction in the Helsinki Metropolitan area. Several other housing construction and development projects were also under planning. In Finland, investments are focussed on the Helsinki Metropolitan area and the largest growth centres.
In 2015, the impact of fair valuation of real estate under Varma’s direct ownership totalled EUR -88 million. The market value of the real estate owned directly by Varma stood at EUR 3.3 (3.4) billion at the end of the year. The return on capital employed in direct real estate investments was 2.3% (3.2%). The value of and total return on the portfolio were influenced by fair valuations, the divestment of properties and investments carried out.