We have been communicating more about our operations and as a part of this process we wanted to also wrap Pontos year 2018. The idea is to share what has happened in the core of Pontos as well as briefly summarize some highlights from our portfolio companies.
We have put a lot of emphasis on developing our strategy, processes and especially the team.
Strategy was refined and the target allocation for our portfolio is 50% of direct real estate, 25% direct private equity investments and 25% private equity funds and other investments. We continue to be active owners with 75% in direct investments. The remaining 25% in indirect investments increases diversification and reduces the portfolio risk. It serves also as a buffer considering the high amount of illiquid investments in our target allocation. Pontos is now investing more into our capabilities to be proactive in finding new investment opportunities.
Päivi Tomula giving the team a GDPR lesson in Vierumäki
Pontos is a purpose driven investor. We have the traditional economic targets for new investments, but we are also aware of other impacts our portfolio companies are making. We are developing our own way of looking at this issue. The key has been in concrete actions that are tangible. As an example, we started in our Ombria Resort project the construction of the largest geothermal heating and cooling system in Iberian Peninsula. We also invested into Rtech8, which is a game changer software with capability to save energy in buildings, based on an AI solution. We tested it in Viru Keskus shopping centre and saved 12% in annual energy costs. We also invested in Hintsa Performance, which is a leading provider of high performance and wellbeing services. These are good examples of purpose driven investments, where we can see an interesting investment opportunity with a positive social and/or environmental impact.
In 2018 we recruited two new members in our Helsinki team. Risto Kankaanpää started as an investment manager with a strong strategy consulting background, and Ville Jokela was appointed the head of real estate with a long experience in real estate development and management. This enabled us to give more focus to our portfolio companies. As we believe in active ownership, it is crucial for our way of working to have enough bandwidth and talent to be able to contribute.
We continued investing into our wellbeing by starting a program with Hintsa Performance. We have shared our experiences in a video blog (Hyvä Olo Kantaa Pitkälle). But as we have learnt during our Hintsa trip, it is very important also to take care of your mental wellbeing. That is a very good reason for our team to spend every now and then some quality-time together outside office – for example, indoor skydiving in a wind tunnel!
Real estate investments
Ombria resort in Algarve has been a major challenge for Pontos for over 15 years. During 2018 we built an 18-hole golf course and started the excavation works of the hotel, club house and residential units. The biggest challenge of the project has been the permitting process, which finally started to move with faster speed. We are currently accelerating all the operations expecting Ombria project to move into full construction phase and commercial launch in 2019. Portugal is at the moment a very interesting market with significant growth in the tourism sector.
Viru Keskus shopping centre has been led by Ants Vasar successfully for over 15 years. Gertti Kogermann started as the new CEO of Viru Keskus 1.1.2019 and Ants continues as an advisor to secure a smooth transition. Viru Keskus continued its strong performance in the city heart of Tallinn.
Pontos did one exit in 2018 by selling the RYO shopping centre in Panevezys Lithuania. RYO is a great example of what active and long-term ownership can accomplish in the real estate business. The shopping centre underwent a complete modernisation over a period of seven years in collaboration with the local operator CBRE. Contracts with new anchor tenants were confirmed, the shopping centre was expanded, and the entire commercial image was refreshed. All retail spaces have been let since the modernisation, and the rental revenues of RYO have shown a steady increase year on year. Pontos’ strategy is to invest in areas where we see potential for long-term growth. RYO was a very successful investment for Pontos.
One new real estate investment was made in 2018 by investing into LAK Real Estate Oy. This government owned Finavia’s subsidiary got a new kind of boost when strong real estate experts Pontos and NREP became co-owners of it. Among other assets, LAK currently owns a portfolio of 15 existing properties by the airport in addition to significant areas of strategic development land in Aviapolis.The ambition of the co-operation is to improve the business of the LAK-owned properties in the immediate vicinity of the airport area and to promote the development of the region to support the rapidly growing air traffic (+10,4% in 2018). The development projects include several types of real estate such as a hotel, housing, offices, retail and logistics.
Last year, the company acquired new resources to support its development goals. Tommi Vaisalo started as CEO of LAK at the end of 2018 and Minna Pylkäs as CFO at the beginning of 2019. LAK’s hotel portfolio grew as Scandic Airport opened its doors last year at the TOKE building in the airport area.
More than 20 million people visited the Helsinki airport in 2018.
Ombria Resort construction works
Private equity investments
Valmet Automotive worked hard to develop its operations after a challenging year 2017. The company was able to stabilize production in Uusikaupunki and ramped up successfully a production line for new Mercedes Benz A class. Olaf Bongwald started as the new CEO of Valmet Automotive. Production achieved a new record – 110 000 cars and continued the major employment program by recruiting 1000 new employees. Company also continued investing significantly for new business. Electrification of cars is a fast-growing market and the company is now positioning itself to be also part of that market with suitable engineering and manufacturing capabilities.
Blueprint Genetics continued its strong growth. Currently it is one of the top 3 players in genetic diagnostics of rare diseases. More than a half of the sales are coming from North America. BpG is employing over 150 people globally.
Cloud delivery company Ficolo has continued to grow quarter by quarter. It also acquired a new location and data centre in Tampere. Next step for the company will be to expand into Helsinki region.
Pontos did two new private equity investments, in Hintsa Perfomance and in Rtech8.
In a nutshell
To sum it up, 2018 included both ups and downs, but all in all we are satisfied with our results and overall performance of the group. Pontos is in a strong position to support development of the portfolio companies and we are excited to continue working with our network in 2019. Globally there are big risks looming, which can change the situation fast, but that is normal. We can only concentrate to do our own things as well as possible and there are definitely many interesting things cooking. We hope to be able to share more about them later this year.
Riitta Takala, Fanni Ruissalo and Eha Sadrak relaxing in a shooting range