Sponda´s net sales decreased roughly 1% on the same period last year to €73.9 million owing to property sales and lower occupancy levels, but profits on property sales raised the result for the period by 30% to €29.1 million.
Highlights of result (comparable income statement is January-September 2003)
- Sponda derives its revenue from rental income. Total revenue for the review period amounted to €73.9 (74.7) million. The economic occupancy rate decreased 1.5 % from the comparable period and stood at 86.9% at the end of September.
- Net operating income decreased to €55.7 (57.0) million owing to the reduction in total revenue and to slightly higher property maintenance costs than last year.
- Other operating income, mainly profits from property sales, rose to €13.8 (3.2) million.
- The operating profit increased more than 18% to €54.5 (45.9) million.
- Net income for the period was €29.1 (22.3) million.
The office leasing market in the Helsinki metropolitan area continues to be challenging. Sponda´s result of leasing operations in 2004 is not expected to reach the level of 2003 due to property sales and higher vacancy rates, but profits from property sales will compensate for the decrease in leasing revenues and an increase in financing expenses. The operating profit in 2004 is expected to be higher than in 2003 and the profit before taxes to remain at last year´s level.
The occupancy rate is forecast to remain at the current level or to improve slightly.
Economic prospects are positive, according to current forecasts, and employment is expected to increase. However, economic growth and better employment are not yet visible in growing demand for office premises.
According to Catella Property Consultants Ltd, the occupancy rate of office premises in the Helsinki metropolitan area has continued to weaken and the vacancy rate now stands at slightly more than 9%. Regional differences are large varying from rough 6% in Vantaa to over 11% in Espoo. The availability of retail space remains tight and the occupancy rate has remained good, the vacancy rate standing at only 1.6%. Overall demand for logistics premises in the Helsinki metropolitan area has stayed largely unchanged throughout the year and no major construction projects are ongoing. The vacancy rate for logistics premises has remained at around 2%. According to real estate research institutions the fall in office rent levels in the Helsinki metropolitan area has halted.
International investors have already accounted for half of the total value of purchases of business premises this year, of approximately €1.25 billion. The increase in international interest is due to Finland´s positive economic prospects and to greater liquidity in the real estate market. Strong demand has generated competition for good investment sites and reduced yield expectations.
Sponda divides its business operations into three categories by use of property: office, retail and logistics.
Net operating income from Sponda´s properties amounted to €55.7 million, comprising 70% from office premises, 4% from retail space, and 26% from logistics facilities.
The economic occupancy rate of the entire property portfolio decreased 0.7% during the third quarter to 86.9% (30 June 2004: 87.6%). The economic occupancy rate at the end of September 2003 was 88.4%.
Prospects to the end of 2004
Conditions for office leasing in the Helsinki metropolitan area are forecast to remain challenging. Sponda´s result of leasing operations in 2004 is expected to be lower than in 2003 due to the company´s property sales and to the growing vacancy rate, but the profits recorded on the property sales will compensate for the decrease in leasing volume and growth in financial expenses. The operating profit is expected to exceed last year´s level and the pretax profit to remain at the level in 2003. Occupancy rates are expected to remain at their current le