Swedish Real Estate Company, Heimstaden, to Sell 1,700 Properties

iceland real estate

Swedish Real Estate Company, Heimstaden, is set to sell 1,700 properties as it prepares to exit the Icelandic market. RÚV reports. 

Heimstaden started operating in Iceland some three years ago and currently owns and manages around 1,700 rental apartments in the country. In total, the company owns and manages some 160,000 properties across 10 European nations.

However, in all other nations except for Iceland, pension funds and institutional investors have played large roles investing in Heimstaden.

Read more: Real Estate Market Slows

Gauti Reynisson, Heimstaden’s CEO in Iceland, stated to RÚV that they had been trying to get Icelandic pension funds and investors on board since the beginning.

However, despite some four months of negotiating, no progress has been made.

According to Gauti, even though demand for housing is high, the market conditions for long-term investment are too difficult in Iceland.

Such a large selloff of properties is likely to have a significant impact on the real estate market both in Reykjavík and the rest of the nation. Gauti stated to RÚV that Heimstaden is trying to manage the situation to minimize the impact on renters.

The company plans to start selling the apartments this summer, but Gauti says that they will respect all rental agreements, and people will have the opportunity to rent their apartments until the end of their notice period. Most of Heimstaden’s tenants in Iceland have a 12-month notice period in their contracts.

Report on Íslandsbanki Sale Highlights Lack of Transparency, Reliance on Outside Consultants

íslandsbanki sale iceland reykjavík

State regulators have released a report on the controversial sale of Íslandsbanki shares that took place this March. Among the considerations of the report are details on the dissemination of information of the sale, the determination of its sale price, and the selection process for determining the qualified investors.

After the 2008 banking collapse, the insolvent banks were restructured, leading to the partial socialisation of Iceland’s three major banks, Landsbankinn, Arion, and Íslandsbanki. Landsbankinn continues to be held by the state with a majority share.

However, Íslandsbanki has been gradually privatized since the restructuring, with an initial 35% of Íslandsbanki shares being sold in June 2021. After a sharp rise in share prices after the sale, some claimed that the shares were undervalued.

In March 2022, a second round of sales was slated, with 22.5% of Íslandsbanki shares to be sold off. This second offering, however, was not a public offering like the first, but was limited to a group of “qualified investors.” Among the qualified investors were the usual suspects, including foreign and domestic investors, and pension funds. However, the list also included some notable individuals such as Benedikt Sveinsson, father of Bjarni Benediktsson, Minister of Finance and the individual legally responsible for the sale.

In Focus: Íslandsbanki Private Stock Offering

The revelations caused widespread critique of Bjarni, the oversight committee, and the coalition government in power. There were also claims of insider trading, as significant numbers of investors sold off their holdings within days and weeks after a climb in price.

In total, the sale involved 450 million shares in the bank to 207 investors. The selling price was ISK 117 per share and the sale proceeds amounted to ISK 52.7 billion (USD 361,000,000; EUR 351,000,000). The state’s share in Íslandsbanki is now 42.5%.

Now, the Icelandic National Audit Office is trying to determine the nature of the sale, how the investors were selected, and how the Íslandsbanki share were valued. The official report can be seen here.

According to the report, the sale could have been better prepared and executed. Outside the scope of the report are the legitimacy and legality of the sale, which are left to the Financial Supervision Authority of the Central Bank of Iceland. Instead, the report focuses on the technical execution of the sale and its valuation of the shares.

According to the report, “the language used in the documents submitted by the Icelandic State Financial Investments (ISFI) to parliament was not suitable for drawing a clear picture of the arrangement of the sale process. Despite the experience and knowledge of the employees and the board of the Banking Authority in the field of administration and sale of the state’s holdings in financial companies, the institution did not have experience in bidding arrangements in the run-up to the sale […] Adequate conditions were not given to supervisors, sales consultants and dealers, and due to shortcomings in the implementation, demand was underestimated when deciding on the indicative final price. Sufficient consideration was not given to possible reputational risks, nor were the principles of transparency observed. As the bidding system was implemented, it could not guarantee full equality for the investors to whom it was directed.”

The report also identifies an over-reliance on external consultants in the private sector.

 

 

 

Newly Planned Green Industrial Parks to Bring Jobs to Rangárþing Ytra

rangárþing ytra green industrial parks iceland

Rangárþing ytra municipality in South Iceland and Orkídea have recently signed an agreement to establish a green industrial park.

The new project will aim to achieve cleaner production, reduce pollution, and improve resource efficiency through sharing infrastructure with several businesses. Vísir reports that the new industrial park could bring some 50 to 100 jobs to the region.

In a statement to Vísir, Sveinn Aðalsteinsson, managing director of Orkídea, said: “We envision that Rangárþing will witness a growth of demand for electricity.” The new industrial park aims to meet this growing demand with green electricity, and to share infrastructure in an efficient manner between enterpreises.

Sveinn hopes to attract businesses in food production, biotechnology, and sustainability into the region.

Although no concrete numbers have yet been produced, Sveinn stated that investments in excess of ISK 2 billion were expected for the municipality.

‘Out with Bjarni’: Íslandsbanki Protesters Continue Calls for Minister of Finance’s Resignation

Bjarni Benediktsson icelandic politics

Protesters gathered in Austurvöllur Square in front of parliament once more on Saturday to voice their anger at the government’s recent sale of shares in Íslandsbanki bank. Hundreds of protesters gathered last week; the exact attendance numbers of Saturday’s event were not available at time of writing. However, Vísir reports that 2,000 people marked themselves as attending on the protest on Facebook, an event entitled “Bjarna Burt, Spillinguna Burt,” or “Out with Bjarni [Benediktsson, Minister of Finance], Out with Corruption.”

The protest was a festive one, and kicked off with a performance by Páll Óskar, and included speeches by former and current MPs, a reading by the “poet of the protest,” Anton Helgi Jónsson, and performances by hip hop acts XXX Rottweiler and Blaffi. Hot chocolate and doughnuts were served before and after the rally itself.

See Also: Hundreds Protest Sale of Íslandsbanki Shares

Íslandsbanki was fully owned by the government until last year, when it sold a 35% stake in the bank, something that had been on the government agenda for years. While that first offering was open to the public, last month’s offering was solely open to professional investors. The second sale was successful, reducing the government’s stake in the bank from 65% to 42.5%. The government has been criticised for the latter share offering’s lack of transparency, and for the 5% discount buyers received on the shares’ market value. The majority of the investors who purchased shares sold their stakes almost immediately for considerable profit.

Days after the first protest at Austurvöllur, the Icelandic government announced that it would be introducing a parliamentary bill to abolish Icelandic State Financial Investments (ISFI), the government’s holding company on the financial market. But protesters are not yet satisfied.

See Also: Government to Dismantle State Investment Company

The protesters have three demands: that the sale be rescinded, that Minister of Finance Bjarni Benediktsson resign, and that the board and CEO of the ISFI step down. Now that the latter demand has been achieved with the dismantling of ISFI all together, protesters remain focused on their first two goals.

‘Out with the puppets of capitalism in the government’

Davíð Þór Jónsson speaks at Saturday’s ‘Out with Bjarni!’ rally. Screenshot via Vísir.

“We’re going to learn from this,” said headlining speaker Davíð Þór Jónsson, a pastor and actor who has been an outspoken leader in the Íslandsbanki protests. “We’ll learn to never, never, never again trust these people with a single thing. We’ll learn to never, never, never again trust political parties that form a government that would allow this to happen.” His remarks were met with cheers from the crowd.

“Our demands are unambiguous and reasonable,” Davíð Þór continued. “Out with the psychopaths [amoral people] in our financial system! Out with the puppets of capitalism in the government! Out with an ineffectual, cowardly Alþingi that doesn’t have the guts to affirm its lack of confidence in an unfit government that doesn’t just permit, but rather gives its blessing to the psychopaths plundering their own country!”

State Sells 22.5% Stake in Íslandsbanki

Prime Minister Bjarni Benediktsson

The Icelandic government sold a 22.5% stake in Íslandsbanki bank last Tuesday in an offering for professional investors. Opposition MPs have criticised the shares’ low price and the sale’s lack of transparency. Finance Minister Bjarni Benediktsson says the aim was to acquire long-term investors and that Icelandic pension funds were the main purchasers.

Íslandsbanki was fully owned by the Icelandic state until last year, when it sold a 35% stake in the bank, something that had been on the government agenda for years. While last year’s sale was a public offering, this week’s was only open to professional investors, who received an invitation to buy shares, which were then sold at a 5% discount from their market value. The sale was successful, reducing the government’s stake in the bank from 65% to 42.5%.

Investors received insider information

According to information from Icelandic State Financial Investments (ISFI), demand for the shares was high. Both Icelandic and foreign investors showed interest in the sale, though the identity of the investors has not been made public. Investors were required to sign a confidentiality agreement, meaning they were temporarily granted access to inside information. Investors had already made a profit yesterday, when shares in the bank rose by ISK 4-5 billion [$31.1-38.9 million; €28.3-35.4 million] following the sale.

MPs criticised the sale’s lack of transparency in Parliament yesterday, as well as the discount given to investors. Financial expert Ásgeir Brynjar Torfason told RÚV it is unclear how the investors were selected, and that is a question that ISFI and the Ministry of Finance need to answer. He also called on authorities to answer why such a large discount was given, despite high demand for the shares.

Finance Minister responds to criticism

In an interview with RÚV, Minister of Finance Bjarni Benediktsson called the discount on the shares a small one, saying that Icelandic pension funds were the main purchasers in the offering. “We did not go the route of looking for the pension fund or the investor who wanted to offer the highest price and let them have as much as they wanted. We took another route. We wanted to go toward more decentralised ownership and we wanted to consider what the market conditions would be like when the offering ended. That there would be a [financially] healthy group behind the bank.”

Purchase of Icelandic Telecommunications System is Long-Term Investment, Says French Company

fibreoptic cable infrastructure

French fund management company Ardian, which has signed an agreement to buy Icelandic telecommunications company Míla, says the purchase is a long-term investment. Speaking to RÚV reporters, Ardian’s CEO of Infrastructure Investments Daniel Graf von der Schulenburg stated he expects the company to hold onto Míla for decades. Icelandic politicians have expressed concern that selling the telecommunications company abroad could pose a threat to Iceland’s national security.

All of Iceland’s homes, businesses, and institutions are serviced by Míla’s nationwide telecommunications infrastructure, which includes copper wire, fibreoptic, and microwave systems. The company is therefore the basis of all telecommunications and electronic communications systems throughout the country.

Massive investment expected to impact króna

Ardian’s purchase of Míla is the largest foreign investment in Iceland in the past decade. The influx of foreign currency the purchase entails could cause short-term deviations in the exchange rate of the Icelandic króna, the Central Bank has stated. The sale is, however, expected to lead to an appreciation of the króna.

Míla has been sold to Ardian for ISK 78 billion ($603 million/€520 million). The French company took over the debts of Míla’s previous owner, Síminn ehf., which will make a profit of ISK 46 billion from the sale. Icelandic pension funds are expected to acquire shares in the company amounting to 20%, with a price tag of ISK 10-12 billion. Von der Schulenburg says negotiations with pension funds are going well.

Icelandic government sets conditions

The Icelandic government has set some requirements for Míla’s sale, including that the equipment remains in Icelandic jurisdiction and that authorities are informed of who the real owners of the company are at all times. Opposition MP Þorgerður Katrín Gunnarsdóttir, chairperson of the Reform Party, has criticised these requirements as being too little, too late. VR Union Chairman Ragnar Þór Ingólfsson has harshly criticised the sale, fearing it will lead to price hikes for users. He expressed disappointment that pension funds, who hold a majority in Síminn ehf., did not prevent the sale in the first place.

“You will be seeing us for decades”

Von der Schulenburg described Iceland as an attractive country to invest in due to its wealth, educated population, and bright future of its economy. “We like that stability and good outlook as a place to invest in,” he stated. According to von der Schulenburg, Míla is an exciting investment opportunity because “there’s still opportunities to improve. He stated that Ardian would place emphasis on extending fibreoptic lines to more sparsely populated areas and continue developing the 5G cellular network.

Prices will not rise, according to von der Schulenburg, as Ardian will aim to get more cost-efficient usage out of Míla’s infrastructure. Asked whether Ardian would consider selling the company to Russia or China in the future, von der Schulenburg stated: “No, that is not going to happen. We are a very long-term investor and there’s two reasons for that. One is that almost all of our investors are insurance companies, pension funds, and sovereign wealth funds. The majority of the funds are coming from Europe. And these investors have a very long-term perspective.”

Von der Schulenburg added infrastructure investing is long-term in general as it takes time to get a return on your investment. “Most likely you will be seeing us for decades.”

Up to 35% of State-Owned Íslandsbanki For Sale

Icelandic state-owned bank Íslandsbanki launched its share offering at 9.00am this morning. The bank will sell up to 35% of its share capital in the initiative, which stands until June 15, following which all its shares will be listed on Nasdaq Iceland (the Icelandic stock exchange). Two foreign investment companies and two local pension funds are said to be the cornerstone investors in the initiative. RÚV reported first.

Government Moves to Reduce State Ownership

Of Iceland’s three largest banks, just one (Arion Bank) is privately owned. The other two are in state ownership (Íslandsbanki, currently at 100% and Landsbankinn at 98.2% state ownership). Iceland’s current governing coalition prioritised reducing state ownership of financial institutions in the government agreement made at the beginning of its term. A sale of part of Íslandsbanki was discussed earlier in the term but side-lined during the pandemic as conditions for the sale were not considered favourable. Government officials have argued that the sale could free up funds for investment in essential infrastructure.

Read More: Sale of State-Owned Banks

A notice on Íslandsbanki’s website states that the bank’s estimated market value following the offering is ISK 150 billion ($1.24 billion/€1 billion). The aim is to sell over 636 million shares, the suggested retail price of which is between ISK 71 and 79 per share. The offering will take place both through a public offering of shares to institutional investors and retail investors in Iceland and through a private placement to specific institutional investors in various other jurisdictions.

Four Key Investors

Foreign investment funds have already committed to buying in the bank, according to Íslandsbanki. Funds managed by Capital World Investors have committed to purchasing nearly 77 million shares while RWC Asset Management LLP has committed to purchasing nearly 31 million shares. Icelandic pension funds Gildi-lífeyrissjóður and Lífeyrissjóður verzlunarmanna have also committed to buying more than 46 million shares each. These four parties are said to be the cornerstone investors in the offering.

Government to Sell State-Owned Íslandsbanki

Iceland’s government will likely sell one of three state-owned banks this coming spring. The bank in question is Íslandsbanki, though it is not clear what percentage of the bank, now fully state-owned, will be put up for sale. The sale is intended to reduce government risk as well as meet the government deficit expected next year as a result of the pandemic.

According to a government notice, Iceland’s Minister of Finance Bjarni Benediktsson has approved a proposal from the state holding company ISFI to sell Íslandsbanki. The Minister will now prepare a report, to be reviewed by Parliamentary committees and the Central Bank of Iceland. After considering their comments, the Minister will make a final decision on whether to begin the sale process, expected by January 20.

What percentage of the bank is to be sold is not yet known, though earlier this year government ministers discussed a possible sale of 25-50% of its shares. The aim is to sell shares in a public offering and subsequently list all shares in the bank on a regulated securities market in Iceland.

Iceland an Outlier in State Ownership of Banks

The Icelandic government owns a bigger proportion of its country’s banks than any other government in Europe. Two of the country’s three largest banks are in state ownership: Íslandsbanki (100%) and Landsbankinn (98.2%). Reducing state ownership of financial institutions has been an aim of Iceland’s financial policy in recent years and is part of the current coalition’s government agreement. The sale of Íslandsbanki has been in discussion for some time.

Read More: Sale of State-Owned Banks in Iceland

The government notice states that market conditions now appear to be favourable for the sale, in addition to which the bank is in a good financial position. Its sale is intended to reduce government risk in the financial system, promote competition in the banking industry, and increase domestic investment opportunities for individuals and professional investors.

The COVID-19 pandemic and the government’s economic response measures are expected to result in a deficit of around ISK 320 billion ($2.5 billion/€2.1 billion) in 2021. “With the sale, we mitigate the blow of the coronavirus crisis considerably, in addition to which it makes it easier for us to finance continued measures for people and businesses,” stated Finance Minister Bjarni Benediktsson.

Nasdaq Central Securities Depository in Iceland Merges with Nasdaq CSD

Nasdaq central securities depository in Iceland has merged with Nasdaq CSD, which will now operate in Iceland, Lithuania, Latvia, and Estonia, RÚV reports. An announcement about the merger states that in its wake, Icelandic operations will be able to make full use of the opportunities and connections that Nasdaq CSD’s securities depository system has to offer, thus creating new opportunities for both domestic and foreign customers.

“This is both the biggest infrastructure change as well as technological advancement that has taken place in the Icelandic securities market for 20 years and will allow us to participate in innovation and development in this branch that will deliver to our clients,” stated Magnús Kristinn Ásgeirsson, CEO of Nasdaq CSD in Iceland. It is expected that the technical part of the merger – the introduction of a new central securities depository system – will be completed on 15 June.

In 2017, Nasdaq CSD became the first European securities depository to obtain operating licenses under the new European Central Securities Depository Regulation (CSDR), and was recently granted a licence to operate in Iceland according to that regulation. Nasdaq CSD has integrated the operations of Nasdaq Securities Centre in Iceland with Nasdaq CSD in accordance with CSDR’s requirements for governance and operations, with a view to ensuring more secure and efficient settlement services in the Icelandic securities market in accordance with international standards.

Icelandic Government Presents Economic Response Package to COVID-19 Crisis

Icelandic Government COVID-19 package

The Icelandic government presented an ISK 230 billion ($1.6bn/€1.5bn) response package to the COVID-19 crisis last Saturday. The package is equivalent to just under 8% of Iceland’s GDP, and its measures are intended to mitigate the effects of the COVID-19 pandemic by safeguarding the economic livelihood of individuals and businesses, protecting the welfare system, and boosting the economy.

Prime Minister Katrín Jakobsdóttir, Finance Minister Bjarni Benediktsson, and Minister of Transport and Local Government Sigurður Ingi Jóhannsson announced the first-phase response measures to mitigate the effects of the ongoing COVID-19 pandemic at a press conference in Harpa last Saturday. As part of the measures, the government will take on up to 75% of salaries for struggling businesses, back bridging loans for companies, and defer tax payments, as well as accelerating public projects.

Government takes on up to 75% of salaries

In an effort to project jobs, part-time employees will be allowed to claim up to 75% of unemployment benefits in order to avoid job losses. This means that those who are under threat of losing their jobs can move to part-time hours as low as 25% of their previous hours and boost their earnings with Government support up to a combined level of ISK 700,000 ($4,975/€4,620) per month. The overall aim of this legislation is to encourage businesses to keep employers on their payrolls rather than lay them off. Self-employed and freelance workers are also eligible for this benefit.

Taxes postponed

Companies can delay the payment of taxes until next year and hotel taxes will be abolished until the end of 2021. Reduction in bank taxes and state guarantees on loans are aimed to encourage banks to lend to companies that require loans to continue operations.

Measures for households

During the next 15 months, individuals may withdraw a monthly sum from their voluntary pension savings to a maximum of ISK 800,000 ($5,680/€5,280). Families with children under the age of 18 will receive a one-time child benefit payment on June 1, 2020 of ISK 20,000 ($140/€130) or ISK 40,000 ($285/€265) per child, depending on their income.

Public investment

The measures also include an ISK 20 billion ($142m/€132m) investment initiative toward transport, public construction, technology infrastructure, research, and science in collaboration with municipalities.

The government will also create a marketing campaign to encourage Icelanders to travel domestically within the coming months. This campaign will include giving each Icelander 18 years and older a gift certificate valued at around ISK 5,000 ($35/€33) that can be redeemed at Icelandic hotels and tourism businesses.

A detailed English-language FAQ on the response package is available on the Icelandic Government’s website.