Nokia staying in Espoo HQ, but considers selling and renting to cut maintenance and repair costs?
HS.Fi reports that last year, Nokia’s operating expenses was around 5 Billion Euros. In order to cut some costs, including maintenance and repair of the HQ in Espoo, Nokia is supposedly considering selling AND then Renting out the property. By renting, Nokia would still use the HQ themselves (i.e. not rent to others). Not sure how much HQ’s expenses are on that regard. The article notes that several large companies have done exactly this because maintenance and ownership is not part of their business.
- forest industry companies UPM and Stora Enso did not own at the head office, but they are rented.
- lifts manufacturer Kone has sold its headquarters.
Peter wanted to clarify further
Before any post is made from this Finnish article, I’ll add some detail:1) They are only evaluating if that would be cost-efficient for Nokia
2) Repair & Maintenance of buildings and owning property costs are high and either one of those are not part of Nokia’s core competence.
3) Nokia would continue to use the building as their HQ, only now renting them instead of owning them4) This is a trend happening in Finland, many other big companies in recent years have done the same
There is absolutely no plans to move HQ abroad.
More belt tightening. :/ Any news on whether Nokia are gonna temporarily stop the dividends in order to weather out a few more quarters?
Cheers jiipee and Peter L for the tip.
Category: Nokia
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Sites That Link to this Post
- Mobilissimo.ro | October 3, 2012
- Press Release: Nokia to sell and lease back head office building : My Nokia Blog | December 4, 2012
I read that Microsoft was increasing security in some of its buildings (because apparently of the new windows phone they are making) but maybe its preparations for Nokia move? heheheeh
BTW got to love the “you don’t understand how real estate business works” If I’m not mistaken it was the people saying exactly that that brought the current crisis, by saying “this is very complex derivative products that you cant possibly understand, but should buy because I do”…..
Some how we have to be convinced this is good business because some (stupid) is gona give money to Nokia for the buildings assume all the risk take care of the maintenance ans still provide nokia with a year profit in comparison, tss tss tss, Guys make no mistake no one is stupid if this deal goes through nokia will have to be on the global losing side because it is Nokia that needs the money now, No one will buy the building without a good estimation on were will they have a positive return for their investment, given how volatile the markets are this days and the price of money I say the risk factor is pretty big plus if you had to the equation the fact the the main client might not have a bright long future as your tenant. In good math, that people that have this sort of money tend to do, all of this factors trickle down in to the rent Nokia will have to pay…
So unless Nokia is truly desperate for quick cash NOW! I suspect there will be no deal as the rent will be to high to make sense.
I’m not actually sure if any of the neighbours of Nokia own their buildings anymore, with the exception of Fortum who built their tower in the 1970s when the world was a little different… Nokia is clearly one of the few large corporations (or any corporations) in Finland to still own their headquarters. Everybody else next to them has already sold their houses and rented them.
There is a major tax/accounting benefit in not owning cars or buildings in Finland for companies, that’s why everybody leases/rents them. Companies used to own lots of cars and houses in the 1970s and 1980s, but no more. When renting, you can write the cost off immediately as expenditure (instead of depreciation spanning multiple years), which will lower your corporate tax.
It is crazy, but you could actually pay more for the use of the property and still profit from it due to the taxation savings, because the goverment takes less from you. Not to mention the flexibility it offers not having to maintain cars/houses and the personnel required for that (with all the obligations, limitations of an employer, which are significant in Finland when employment has legal protections).
So, unless your business is owning buildings or cars, it makes sense to rent them. Of course in the case of Nokia, there might be some PR value in owning Nokia House, but that is a different question.
No Janne, this type of creative book keeping is bad for companies, it only helps them in one quarterly report, because they get cash for an already outwritten asset, the way book keeping is made were part of your realestate value is taken every year makes this “business” make “sense” but in realty they don’t, its just a trick to get a positive quarterly report at the expense of future extra expenses… But the CEO’s that do it get their bonus based on the quarterly reports not on what it good for the company so we see this sort of thing all the time….We specially saw this a few years ago wen credit was cheep and the investor could raise the capital without major interest burden, today and with credit alot more difficult and expensive this sort of deals are more rare.
Nokia would have to agree to pay a very generous rent and for a very long number of years to make this deal make sense, problem is that not sure any buyer would trust such a long commitment from Nokia this days… The risk must be translated into the rent and as we know Nokia’s debt Risk is pretty high.
“No Janne, this type of creative book keeping is bad for companies”
Oh no, it is very, very good.
“Nokia would have to agree to pay a very generous rent and for a very long number of years”
You are contradicting yourself. Either Nokia would pay a “generous” rent for a short term lease, or a rather reasonable rent for a 10-20 year lease. Maybe you don’t have much insight to how real estate deals are done in Finland?
And what did you expected? Since This Elop came, it was always about cost and I see Jay defending like anything!
Jay this post should not be for Elop’s defense, it should be a RANT!!!!
Bein in HQ is core competency for which company??? Core competency and Ecosystems… My A$$