HS Analysis | Helsinki plans to sell the plot of the Garden Hall for EUR 64 million cheaper than before – why?

Helsinki the city is in the process of approving the preliminary contract for the plot sale of the planned Garden Helsinki arena along Nordenskiöldinkatu.

According to the preliminary agreement, Helsinki is ready to sell the 2.5-hectare area for a purchase price of at least 21 million euros to the project’s background company, Project GH.

The purpose of the agreement is to ensure that Project GH can collect the necessary money and partners for the construction of Garden Helsinki.

Garden Helsinki – giant project has been pending for 13 years.

The purpose is to build an underground multi-purpose arena, hotels, apartments and business premises. There are more than one hundred thousand square meters of building rights.

The price tag of the giant project is estimated to be around 800 million euros.

For its part, the City Environment Board approved the sale on May 14. The city is still investigating the legality of the support with a separate assessment. It is expected to be ready for the June 3 city board meeting.

At the meeting of the city environment board, two representatives of the left-wing coalition would have liked the city to have sent a notification to the EU, because the price of the plot is significantly lower than the estimate of the market value of the plot made in 2019.

For example, EU notifications were applied for Nokia Arena in Tampere due to state subsidies of 18 million euros. The EU’s approval was intended to ensure that there would be no complaints about the support to the EU during the long appeal period. If the support is found to be illegal, it must be paid back with interest.

The Garden project is also supposed to apply for state support.

Helsinki Sanomat reminded on May 13 that still in 2019 the city estimates that it will receive from the land sale up to 85 million euros.

According to the preliminary agreement, the minimum selling price of the arena lot is 21 million euros. It is therefore EUR 64 million cheaper than the previous contract.

However, the city can get additional income from the sale if the construction costs are reduced enough from the forecast or if the project is changed to be more profitable.

However, the current contract and the 2019 contract are so different that they cannot be directly compared.

First of all, the 2019 agreement included the preservation of the old ice rink, or Nordis. Its restoration is estimated to cost around 30 million euros.

The city has not wanted to pay that amount. The alternative offered was that the city gives land plots and building rights at market price to construction companies from, for example, Kalasatama and Ruoholahti.

The plan has since been abandoned. The renovation of the old ice rink is not part of this preliminary contract.

Even so, the preliminary contract requires that the project must buy the hall from the city and renovate it.

Second the reason for the impossibility of comparison is due to the way the purchase price is calculated.

On the previous occasion, individual market prices were calculated for Garden Helsingin’s apartments, business premises, multi-purpose arena and underground parking lot, i.e. their plots and building rights, on the basis of which the purchase price was negotiated.

The presentation now under consideration has been prepared with a new revenue-based approach. The starting point is a comparison between costs and estimated income.

The city also counts for its own benefits, for example, the fact that each major concert-goer is calculated to leave 140 euros in Helsinki, or that 700,000 euros in real estate tax is received annually from the plots sold.

The main reason for the new project’s income-based calculation method is the changed real estate market situation.

Helsinki the city desperately needs a multipurpose hall to organize large events and concerts. The event business is growing, and the center needs vitality.

Various concerts and events bring travelers to the city. They spend money on services that benefit the city’s business life. It brings jobs and activity and helps the city flourish.

At the same time, Ilmala’s Hartwall arena is empty due to Russian sanctions, and the Nokia arena, which has started operations in Tampere 2021, is collecting events. Still, many superstars skip Finland from their tour.

Turku supports its local multipurpose arena project with several tens of millions. Oulu, Jyväskylä and Kouvola are also planning to build multipurpose halls.

Helsinki’s pressure to build its own multipurpose arena is growing all the time.

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Helsinki thinks that it can give the plots of the multipurpose hall for free and the premises at a ridiculous price.

Helsinki according to the city strategy 2021–2025, Helsinki will improve its competitive position as a host city for, among other things, culture and sports and other major events.

In practice, it means that you have to get your own hall started, even on worse terms.

Therefore, revenue-based pricing has been adopted instead of market prices as the model for the new pricing of the pre-contract. In that case, the city thinks that it can give the plots of the multi-purpose hall for free and the offices at a ridiculous price, as long as the hall project gets up to speed.

Now, in the revenue-based pre-contract, it is agreed that if the Garden project buys more building rights for housing construction, it will pay 1,400 euros per floor square meter.

In the preliminary agreement, the city is now selling the right to build 15,000 square meters of apartments.

With the mentioned price per square meter, the price of the building right now available for the apartments will be 21 million euros.

Karrikoi can therefore say that the Garden project is getting everything else for free.

Right after, it’s worth remembering that, for example, Tampere and Turku have had to sink a lot of the cities’ own money into their projects. They have also given investors housing plots.

After all, Helsinki would be on the receiving end, even though there is no gold mine to speak of.

It is therefore good for the townspeople to compare the project with the efforts of competing cities, both in Finland and in the Nordic countries.

Pre-contract the actual purpose is to give the project leaders the opportunity to find financing for the giant project.

The construction permit plans for the Garden project cost an estimated 5–10 million, the whole project 800 million, and in addition, you have to commit to buying and renovating the current ice rink.

One problem is time.

The hall is supposed to be dug into the ground so that the buildings curve around it. Excavating Monttu easily takes a year and erecting the buildings takes three years. The hope is a 4-5 year project, but it can take up to eight years.

Project GH and its owner company Friends of Garden must secure their own funding, at least for that time.

The city has demanded that 40 million euros from the income from the sale of the project’s apartments, hotel and offices must be invested in the construction of the arena as an equity investment.

City after the preliminary agreement is approved, will strongly support the project.

That is why it is important now at the latest that the project’s potential beneficiaries and financiers are known. Until now, the development of the project has not been very open.

Project GH’s affairs have been publicized by the company’s CEO Ilkka Kilpimaa and served as chairman of the board Timo Everi.

Project GH is a project company owned by the Friends of Garden company. In addition to Everi and Kilpimaa, its owners and representatives are a former partner of the Roschier law firm and a board member of Oy HIFK Ab Kaj Swanljung and former CEO of HIFK Jukka Valtanen.

Everi’s holding is known to be the largest, Valtanen’s the smallest.

The ownership of Project GH is divided into three parties: HIFK Hockey owns 40 percent, Friends of Garden 40 percent and the real estate developer Raimo Sarajärven and Janne Kotamäki financial company Fincap 20 percent.

HIFK Hockey’s largest owner is HIFK ry and a number of private owners, including Timo Everi.

Project GH has reportedly received a different kind of capital from private equity firm Taaler, the principal owners of the Seagulls basketball team Tendon and Sinikka from Kulvik, from YIT and largely already repaid loans from Friends of Garden. In addition, the company has loans from various parties.

So it seems that in practice the four owners of Friends of Garden own 40 percent of Project GH without having invested anything in the project.

Timo Everi has estimated that more than 20 million euros have already been spent on the development of the project, including interest costs.

Pre-contract has been accelerated by the “unofficial” information that a large international player had promised to be the operator of the arena and part owner of the property.

In practice, this means the American Live Nation. The agreement has not been proven.

In some circles have had time to wonder that the former mayor of Helsinki Jan Vapaavuori is promoting the Garden project.

He has been a member of the board of Project GH since the fall and contributed to the creation of the preliminary agreement.

Last year, Vapaavuori stopped working for the Danish real estate investor Nrepi. He currently works through his company as an advisor in several real estate development projects and lectures around the world on topics related to urban development and urban management.

Vapaavuori says that he joined the Garden project because he felt that it would benefit Helsinki significantly if it were implemented. However, he booked an audience with the mayor Juhana Vartiainen to ask if he sees this Vapaavuori board membership causing some problems.

“He showed the green light,” Vapaavuori says.

The Garden project is just one of the major projects underway in Helsinki.

SRV’s former vice president Timo Nieminen piloted by Suvilahti Areena Oy would still like to build an event center in connection with the old power plant in Suvilahti.

The advantage is that the concert trucks would not have to dive for a long time in a tunnel underground, and in the summer festivals could be held outdoors.

The disadvantage is that the Garden project is ahead in terms of time, and Helsinki is already busy.

There are plans for the same area Mikko Leppilammen piloted by the smaller Event Hub entertainment center.

The city, on the other hand, recently announced preliminary plans that a party area and a grandstand for up to 17,000 people could be built in the Teurastamo area.

Timo Nieminen says that Suvilahti Areena is familiarizing itself with that destination as well, although he still considers his current project a priority.

The approval of the pre-contract of the Garden project by the Helsinki City Council already seems certain. However, the battle of event arenas in Helsinki is just beginning.

Correction 26.5. at 7:03 a.m.: Etu-Töölö was incorrectly written in the caption. In fact, the project is located in Taka-Töölö.