The University to make an offer for property investment company shares

The University of Helsinki has decided to make an offer for the Government-held shares of Helsingin Yliopistokiinteistöt Oy. University aims to secure the availability of moderately priced facilities.

The University currently owns 61% of the property investment company’s shares, while the Government holds 33% of the shares through Senate Properties. The remaining 6% are owned by Hanken School of Economics and the University of the Arts Helsinki. Following the acquisition, the company would be fully owned by the universities using the facilities. The Government’s goal regarding the sale of shares is in line with the Government Programme.

“We wish to make the company’s operations truly serve the universities’ needs without causing disagreement about the target yield among shareholders. The present ownership model, in which the universities are both the main users and the principal owners bound by the shareholder agreement, leads to conflicts of interest. It can be challenging if the company’s interests differ from those of the principal tenant. The dividends and taxes paid by the company reduce the assets available to higher education and research,” says Director of Administration Esa Hämäläinen.

This is also why the University of Helsinki intends to base facility leases on actual costs instead of seeking profit. The facilities have been constructed for university use, and the plots they stand on have been allocated for the same purpose. Neither the facilities nor the present ownership structure are therefore suited to typical commercial property investment.

“Cost-based leases, the smart use of facilities and possible divestments will ensure that more assets will be available to the University’s core duties – teaching and research – in the future,” Hämäläinen adds.

Solid property competence

The University of Helsinki handles the management and renovation of its partially and fully owned properties, as well as new construction projects. Decisions on property investments are based on the same principles, whether the University’s ownership is 61% or 100%. In this respect, nothing will change if the proposed deal goes through.

The University’s goal to increase its property ownership will not affect its objectives for the use of facilities. The University will continue to intensify usage and concentrate activities in its own facilities. The new ownership structure would make operations more flexible, as the leases could be changed more quickly to match changing facilities needs and redundant property would be easier to divest.

The properties owned by Helsingin Yliopistokiinteistöt and their value also involve risks. Last year the company was forced to write off large sums on one of its properties and more may yet follow.

No impact on the University’s core operations

The intention is for Helsingin Yliopistokiinteistöt Oy to purchase the shares, mainly financed by a long-term loan. The company is financially stable, and its equity ratio would remain above average even if it took out the loan. For now, leases are to be kept at their present level, and the yields will be used to repay the loan.  

The financing arrangements will not eat into the assets allocated to basic education nor will they pose any risk to the capital or yield of donated funds. The profit from investments will be used to support the University’s operations, as before.

The offer will be made in February 2015.

The final decision on the matter will most likely be delayed until the new Parliament takes office.