Placement|The announcement made on New Year’s Eve at 4 p.m. prevents for the time being the receipt of money from redemption announcements of more than 70 million euros, which have been made since July. No deadline was given for the end of the redemption ban.
The summary is made by artificial intelligence and checked by a human.
The OP management company temporarily suspends the redemptions and subscriptions of its two real estate funds.
The suspension applies to the OP-Palvukinteistöt and OP-Vuokratuotto funds.
The measure is aimed at protecting the interests of unit owners and preventing underpriced sales of real estate.
The closing of the funds will continue until the real estate market stabilizes.
OP management company said on Tuesday, December 31, 2024, that it will temporarily suspend the redemptions and subscriptions of the fund units of its two real estate funds. The decision of the company’s board of directors applies to the OP-Palvelukiinteistöt and OP-Vuokratuotto funds.
In other words, for the time being, fund unit owners cannot exchange their ownership units for money and additional funds cannot be put into the funds.
The restriction applies to all redemption requests reported from the beginning of July 2024. They will only be paid when the funds are opened again sometime.
OP justifies the decision with the desire to protect the interests of unit owners.
“At the same time, we ensure the equal treatment of unit owners,” it said in a message sent at 4:00 p.m. on New Year’s Eve in the bulletin.
In professional in real estate investing, closing funds for a fixed period can be considered relatively normal.
In this way, it can be prevented that real estate would have to be sold at a ridiculous price, so that those who withdraw their money from the fund would get cash to cover the redemptions. A mass exodus of investors can also start a cycle of falling prices in the real estate market.
In real estate funds offered to small investors, suspending redemptions is more problematic.
They may not have understood or found out about the rules of the fund that the fund can temporarily prevent investors from getting their money out if they want to.
OP: n the management company also justifies its decision with the fact that the real estate market has been exceptional for a long time.
“For example, large-scale real estate transactions have been made clearly less than usual. By suspending assignments, we ensure that the fund does not have to sell its high-quality real estate investments in a stagnant market at a price significantly lower than the fair market value, which would not be in the interest of the unit owners.”
The fund company does not say how long the temporary closure will last.
It only says that it aims to restart subscriptions and redemptions as soon as the situation in the real estate market stabilizes.
OP-Rental income is, according to OP, the largest fund in Finland that mainly invests in apartments.
The fund’s portfolio includes approximately 5,400 directly owned residential apartments and 21 business premises.
The value of the fund is approximately EUR 1.1 billion, and it has more than 38,000 unit owners. The profit share for the year is 8.42 percent at zero.
On the other hand, OP-Palvelukinteistö has 55 properties. Its annual return is 1.17 percent at a loss.
There are approximately 13,000 unit owners in OP-Palvikuinteistö, OP-Rahastoyhtiö’s CEO Juha Takala tells.
According to him, redemptions made between January and June 2024 will be paid in January from OP-Rental income in the amount of 87 million euros and from OP-Serviced properties in the amount of approximately 20 million euros.
In July–December, redemption notifications were made to OP-Rental income for approximately EUR 60 million and to OP-Serviced property for approximately EUR 13 million. These redemptions are paid when the funds sometimes open.
“The funds operate in the wholesale market, and there are simply no buyers in the market for larger real estate lots. The deal hasn’t gone through,” Takala justifies the freeze on redemptions.
Back up according to the rules of the funds, it would also have allowed the redemptions to be paid with loan money.
In Takala’s opinion, the use of debt money would not have been reasonable in this market situation.
It would not have treated all unit owners equally, he says.
Takala does not want to give any estimate on how long the closure will last.
“It’s about a temporary closure. We monitor the market situation closely and aim to restart subscriptions and redemptions as soon as the market situation stabilizes,” he promises.
“Now there have already been cautious signs of an increase in the sale of individual apartments.”
Timo Rothovius.
“The small investor in terms of security is quite weak”, professor of accounting and finance at the University of Vaasa Timo Rothovius comment on the case.
“Many would probably like to redeem their shares when the situation is weak. The situation will probably come as a surprise to many. After the investment was made, many must have thought that the situation looks good.”
In the years 2008–2022, Rothovius served as the chairman of Suomen Sakesäästätäjä.
He reminds that the previous collapse of housing and real estate prices was experienced in 1993–1994.
“Since then, it has been forgotten that this kind of thing can happen.”
“The funds probably operate according to their own rules, which the investor has agreed to when joining. It might be worth waiting for the prices to rise, but of course it’s a shame for those who need the money right now,” he sums up.