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ICON Suurpelto Bond
ICON Suurpelto Bond is the bond of real estate developer ICON's newest real estate project. The bond will pay an interest of 8% p.a. and it is secured with possibility of conversion into shares in ICON Suurpelto Bond Oy.
The ICON Suurpelto Bond is continuation to ICON Real Estate Funds' successul bond offering on Invesdor.com. With the funding we raised, we acquired a finance and property management company and strengthened our team with two new key persons. WIth this lineup we are continuing to develop our existing 130 million euro project portfolio as well as new properties even more profitably. The function of our first bond was to bring ICON's human resources up to the level required by our existing projects and to grow parent company ICON Real Estate Funds' operations to match the rapid growth rate of recent years.
The purpose of our new bond, the ICON Suurpelto Bond, is to raise funding directly to a real estate development project in the Suurpelto area in Espoo, Finland. The issuing company is ICON Suurpelto Bond Oy.
Real estate is generally regarded as lower risk investments that retain their value well. Normally bonds issued through Invesdor are unsecured; however, our bond is secured with a possibility of converting the bonds into ICON Suurpelto Bond Oy's shares. ICON Suurpelto Bond Oy will own up to 50 % of a condominium that will own a property currently valued at 6.5 million euros in Suurpelto.
ICON Suurpelto Bond is the retail investor's possibility to invest in a secured bond of a real estate development project with low investment minimums. The minimum investment for our bond is 1,000 euros, whereas the minimum investments in ICON-managed funds are generally in the tens of thousands. Indeed, one of the main purposes of our bond is to enable all investors to access the world of real estate development because our funds are out of reach for many due to the high investment minimums.
The Suurpelto area
Suurpelto (Storåkern in Swedish) is a new and developing residential area in Espoo, in the Helsinki metropolitan region in Finland. The area is 325 hectares in size, and there are plans to build apartments for a total of 10,000–15,000 residents in the area. Additionally, the Suurpelto area is to be the location for up to 5,000 jobs. The first area is currently more than 50 % completed, and ICON's real estate project is the largest poject of the remaining portion.
The project in question will be the central block of the whole of Suurpelto. Built upon the block's first floor of business space will be seven residential stories in the east and, following a zoning change, a 20-story highrise in the west, which will be a landmark of the entire Suurpelto.
The concept of the Suurpelto area is designed to strive for ecologically sustainable solutions that increase the energy efficiency of construction of the area as well as the entire society.
After the opening of the Western Metro Extension (Länsimetro), ICON's Suurpelto plot will be within three kilometres of the Niittykumpu metro station. The opening of the metro extension will likely grow demand for apartments in the neighboring areas, and we expect it to also grow the value of Suurpelto as a location. There is a well-planned traffic infrastructure from the area to the metro line.
Vår affärs- och marknadssituation
What are we building in Suurpelto?
ICON Real Estate Funds is managing the Suurpelto central block project, which includes construction rights for floor area totalling almost 20,000 square metres, and following a zoning change, almost 25,000 square metres. Once completed, the whole central block will include a commercial space, parking lot and four apartment buildings.
The ICON Suurpelto Bond is being issued to raise capital for buying one of the four aforementioned apartment buildings. The apartment building is situated next to a brand new residential area, Lukutori.
Whole project Building to be bought
Residential space 18,750 sqm 5,880 sqm
Commercial space 2,500 sqm 700 sqm
Other space 3,750 sqm 0
Parking spaces 250 70
The real estate to be bought will stand eight floors tall. The first floor will be covered by commercial space of approximately 700 square metres; this space is reserved for a grocery store. The second to eighth floors will be filled with more than 130 apartments. Something to note about the apartments is that they are all studio or two-room apartments. Parking space will be located underneath the inner courtyard; approximately 70 spots are reserved for this property. Each parking space can also be fitted with a charging spot for electric cars in the future.
We follow our three core guidelines in all our real estate development projects, including Suurpelto:
- We build small apartments, because these are best for countering housing shortage and demand for studio apartments is considerable.
- We optimize the apartments' floor area and residents' living costs by offering all extra facilities, such as saunas and gyms, as additional services.
- We strive for energy efficiency and self-sufficiency, because energy is the largest single expense for a property.
Thanks to the digital and energy efficient solutions that have been taken into account in the planning phases of the project, the finished building will be a highly modern residential building where common optimization decisions will directly benefit all residents. The full life cycle of the property is considered throughout the decision making processes; essentially we already thinking how to best build the building so that future maintenance and renovation work will be as easy and cost-efficient as possible.
The consumption of utilities, such as heating and hot water, can be measured in real time. This means that they can also be billed based on the actual consumption of each individual apartment, which translates into low fixed maintenance charges for residents.
In the spirit of floor area optimization, no saunas will be built in the apartments. Instead, there will be a common sauna area which is planned to include different types of saunas. The saunas are offered to residents as additional services, which will include easy online booking systems for sauna shift. The modern living solutions and additional services will enable residents to optimize their living expenses and focus on what they find important.
Real estate development in Finland
The market situation for real estate development in Finland is covered in ICON Real Estate Funds' bond materials.
ICON Suurpelto Bond Oy (currently NH-bond Oy, name change in process for registration) is part of the ICON group and was founded for this bond issue. ICON Suurpelto Bond Oy is a wholly owned subsidiary of ICON Brokers Oy, which is a wholly owned subsidiary of ICON Kiinteistörahastot Oy (ICON Real Estate Funds). The intermediary role of ICON Brokers Oy is necessary, as the parent company is only engaged in business relating to the management of its funds.
ICON Suurpelto Bond Oy will own up to 50 % of the shares of the condominium. The actual percentage owned depends on the amount of capital raised with the bond offering. The remaining shares will be owned by ICON Real Estate Fund III, a fund managed by ICON.
The selling price of the entire central block project will climb up to a hundred million euros once the project is complete. The entire project will be owned by our funds ICON Real Estate Fund II and ICON Real Estate Fund III. The project is set to be completed in 2018.
ICON’s core team consists of a compact group of six, combining robust and versatile experience in real estate development, real estate investing and growth company marketing and sales. Following the first bond we issued through Invesdor, we have strengthened our team with three new key members: Susanna Vatanen (project manager), Jan Hellbom (business controller), and Sami Saarnisto (real estate manager).
CEO (APV-1 investment service degree, entrepreneur’s vocational examination, ITS property manager degree)Havulehto is responsible for ICON’s management and fundraising. He has worked in investing since 2004. He has prior experience as an investment broker and real estate agent. The past seven years he has worked as a real estate investor. Havulehto has also completed an APV-1 investment service degree, an entrepreneur’s vocational examination and an ITS property manager degree. https://fi.linkedin.com/pub/markus-havulehto/28/173/4a4
Chairman of the Board (Doctor of Science (Economics), MBA)Koskinen acts as ICON Kiinteistörahasto’s Chairman of the Board. Koskinen is one of Vacon Oyj’s co-founders and has worked as a production manager and sat in the executive board of Vacon for 18 years. Additionally he has worked as Vacon China’s CEO and sat in Vacon Italy and USA’s boards and on Vacon Oyj Group’s board. Koskinen has a doctorate in economic sciences specializing in dynamic business models. Koskinen brings the efficient procedures of industrial manufacturing and strategy work to ICON’s operations.
Sales and Marketing manager (BBA, Specialist qualification in management)Nuutinen is ICON’s Sales and Marketing manager. He has worked in several growth companies being responsible of growth strategies, sales and the building of a successful team. He has strong experience in training companies all the way from startups to stock exchange listed company management. He has worked as an investor in many industries knowing the mindscape of the investors and how to best help those who make investment decisions to succeed. https://fi.linkedin.com/pub/teemu-nuutinen/42/a08/1a
Real estate managerSaarnisto is in charge of managing the ICON portfolio's real estate in all phases of the real estate's life cycles. He has an investor-based attitude and a firm grasp on real estate management. Before joining ICON, he was the CEO in a real estate management firm. He also possesses experience from the Finnish OP group where he was involved in both the banking and real estate sides of the business. Saarnisto is bachelor of business administration by education in addition to which he has an ITS property manager degree.
Project managerVatanen is responsible for management, supervision and completion of development projects. She has experience from international construction companies and has held several project management posts in core areas of urbanization in the Finnish capital region and Russia. Vatanen is joining ICON from SRV Rakennus Oy, in which she worked for twelve years. https://fi.linkedin.com/in/susanne-vatanen-2887653
Business controllerHellbom's area of responsibility is financial management. He is also in charge of the continuous development of monitoring tools as well as reporting and legal matters together with ICON's management group. Hellbom has experience from international project-driven companies and has been part of various management groups during his career. Hellbom joined ICON from Destia Oy. https://fi.linkedin.com/in/jan-hellbom-7462275
Onoterade tillväxtföretag är investeringar med hög risk. Risker som finns i onoterade företag är t.ex. risken att förlora hela din investering, brist på likviditet på aktien, oregelbudna eller sällsynta utdelningar (vinstutdelning) och utspädning av din insats. Läs denna denna riskvarning noggrant innan du gör en investering.
Vi rekommenderar att du tar reda på investeringsmålet som du är intresserad i, diversifierar genom att investera i flera investeringsmål, och balanserar din portfölj genom att likvida investeringar. Vi rekommenderar även att du studerar noggrant riskbeskrivningarna som finns i målföretagens riskavdelningar, som du hittar i investeringsmaterialet.
Bifogat till investeringsmaterialet hittar du en kreditupplysning som kan vara relevant för att göra ett investeringsbeslut.
General real estate investing and development risks
The key sources of risk in real estate investing are location of the property, employment situation, purchasing power, availability of loans, and the general interest rate level. And if the markets were to plummet? If the prices of real estate tumbled by 10 %, would ICON's Suurpelto project still be in the green, and repayment of the bond would not be compromised. If the real estate market collapsed by 20 %, repayment might be compromised. In such a situation bondholders would likely convert their bonds into shares if they didn't accept new loan terms that ICON would propose.
The interest risk of ICON's operations is moderate. This is due to properties owned by ICON being nearly self-supporting even before their development is started. An interest risk exists during the actual development or construction, although the duration of the risk period is very short due to development being done fairly quickly, leading to the market being unlikely to change in the mean time.
Construction also involves risks that are beneficial to acknowledge. One of these is zoning risk. ICON makes sure to find out what kind of building is permitted on any land property by the zoning. If the purpose is to build something not permitted by the zoning plan, ICON finds out whether changes to the zoning plan are required or if an exception permit is sufficient. No zoning change is needed for ICON Suurpelto Bond Oy's future property, instead an exception permit will suffice.
Contractor risk refers to a situation in which a contractor would go bankrupt. In so-called RS projects, it is the responsibility of the bank and the insurance company to finish the project together with the contractor. This means that the project is likely to be profitable, but a slight monetary loss is also possible. In other situations ICON must find a new contractor for the project, which would delay the completion of the project and thus undermine the returns of the project. This would only affect the returns of investors in ICON's funds, while the ICON Suurpelto Bond investor would still get the stated 8 % average interest.
Builder risk, on the other hand, refers to a situation in which ICON would go bankrupt. However, this is highly unlikely as ICON’s equity ratio is always at a good level prior to the development or building of a property. The bank requires the real estate to be debtless or nearly debtless before it will grant a so-called RS loan. In such a situation bondholders would likely convert their bonds into shares if they didn't accept new loan terms that ICON would propose.
Increases in construction expenses. The state of Finland is currently planning expense cuts targeted at the job markets which will affect the cost structure of ICON’s projects, but currently it seems that the effect would be positive. For instance, building the Suurpelto project will require approximately 125 man-years of labour. Marginal or non-existent salary increases would significantly affect building expenses. There is also little pressure for increase in prices of raw materials because, among other reasons, China's economy is stalling and properties aren't being constructed as quickly as a few years back. ICON will build the property as either a so-called KVR or a project management contract, which means we will know the price of the contract before construction starts. However, if constructions expenses were to increase, this would not have no effect on the interest paid for the bond.
Risks related to loan payback
The following risks related to the repayment of the ICON Suurpelto Bond can be identified:
- A total crash of the real estate market. If the Finnish real estate market were to experience a complete collapse in the coming years (e.g. 20 %), ICON’s real estate projects would be put on hold for a time to wait for the market to recover. In such a situation bondholders would likely convert their bonds into shares if they didn't accept new loan terms that ICON would propose.
- If the project were to be delayed for some reason, it is possible that the loan would not be paid back on time. In such a situation bondholders would likely convert their bonds into shares if they didn't accept new loan terms that ICON would propose.
- Legislative changes. Significant legislative changes in the coming years might affect the company's solvency, but currently no such new legislation is in sight.
- Deepening of the financial crisis. If the European financial crisis were to deepen dramatically (e.g. due to the situations in Spain and Italy) and access to debt capital would disappear, the situation might affect ICON’s solvency as projects would no longer be financed by foreign banks. However, we believe that also in such situations ICON would have the possibility to raise capital from the free market.
What happens if the bond is not repaid?
If the company does not pay the capital to the investor in accordance with the bond terms, the investor is entitled to the assets of the company on a pari passu basis with all other creditors. If the funds do not cover the whole capital and the accrued interest, the investor is entitled to convert the remaining part to equity in ICON Suurpelto Bond Oy according to the terms of the bond offering.
According to the bond terms, the bonds will be convertable into ICON Suurpelto Bond Oy's shares at a ratio of 1:2, i.e. one bond will convert into two shares. In the event of a conversion, investors will become shareholders in ICON Suurpelto Bond Oy which owns up to 50 % of the shares of the condominium owning the property in Suurpelto, Espoo. The current value of the property is approximately 6.5 million euros.