The Church Pension Fund owned a very challenging property located in Espoon keskus – the development, leasing and sales project was still a success

In March 2021, Hemsö, a company that invests in properties for public use, bought a 5,000-square-meter commercial property in the Espoon keskus area from the Church Pension Fund. Ecorum advised the Church Pension Fund on the development, leasing and sale of the property.

The size of the church’s pension fund’s investment portfolio is just under 2 billion euros, of which real estate accounts for just under 15 percent, with an emphasis on indirect real estate investments. One of the direct investments was a property located in Espoon keskus at Kamreerintie 6. The City of Espoo had been the main occupier for a long time, but the lease was coming to an end.

Lots of empty space and poor demand for the premises – what to do?

The first contact with Ecorum had already taken place in 2012, and this was the right moment to assign the expert team to develop the property and to explore opportunities to sell or lease it. A combination of market knowledge as well as strategic and practical experience in real estate development were needed to solve the problem.

In the new situation, the development options for the property and the possibility to sell the property profitably were studied side by side. It soon became apparent that selling the property without proper development project, would most likely fail.

The many ways and means of real estate development

As investor demand was low, the development options for the property had to be considered with open eyes. Even zoning and possibilities for housing conversion were studied. After all, there were a couple of shopping centers in the Espoon keskus area as well as good public transportation connections and more than 14,000 inhabitants. With the fastest train connection, you could reach Helsinki city center in just 20 minutes.

Espoon keskus is obviously an undervalued area not only in the housing market but also as a workplace area, which is why the demand for business premises was weak. However, the leasing effort benefited from the opportunity to remodel the property and to refurbish its premises for the new tenants.

New use for the property – family service center

Ecorum also kept close contact with the City of Espoo. The effort and patience was rewarded as the city was planning to open a new service center for families with children in Espoon keskus. The idea of this new type of center is that both the child and the family get all the help they need in one stop, and at the earliest possible stage.

Understanding the new concept required some homework and extra effort also from the real estate experts. Together with the architects and other project partners, the Ecorum team studied the space design and special needs of a modern family service center, and also did a study tour to an existing pilot project.

The lease contract is finalized

The planning of the renovation and negotiations with the city resulted in a new 10-year lease agreement in the summer of 2020. The owner agreed to fully renovate and modernize the property for Espoo’s new family center, Campus.

”The Ecorum team worked systematically to develop the property and our cooperation was smooth. Ecorum's experts provided us with strong market knowledge, negotiation skills and real estate development expertise including zoning know-how. As the focus of our own portfolio is mainly on fund investments, the planning, budgeting and permitting processes necessary for developing a single property, are not a routine procedure for us”, says Minna Jokinen, Real Estate Investment Manager at the Church Pension Fund.

Minna Jokinen - Real Estate Investment Manager

Property sold, a grand finale for the project

Once the property was leased and the refurbishment scheme was ready, it was again possible to continue selling the property. In August 2020, Ecorum launched a sales process for about 50 investors, and several bids were received. The negotiations took some time as e.g. the cost estimates for the refurbishment were carefully examined. Finally, in March 2021, a building permit was obtained and the transaction could finally be announced. Hemsö, a company with investment focus on properties for public use, became the new owner. The investment was at the same time an entry ticket to the public real estate market in Espoo for Hemsö. The buyer will invest a total of approximately EUR 21 million in the property.

“The years of development effort were in the end generously rewarded. I doubt that anyone had even dared to dream of such a good outcome during the process. The Ecorum team played a major role in the success story, and we look forward to working with them on our future projects. All of their people have been very knowledgeable and proactive. And it has also been a pleasure to work together with them, which is something one learns to appreciate in such a long and challenging project that really requires persistence”, concludes Minna Jokinen of the Church Pension Fund.

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