STOCKHOLM—Nokia Corp.'s hulking glass-and-steel headquarters overlooking the Gulf of Finland was built in several phases with half-a-million square feet of space, enough room for thousands of employees to take the onetime galoshes maker to the top of the world's cellphone market. Today, the building houses just 1,800 workers and, as of Tuesday, has a landlord.
The struggling company, scrambling to raise cash and cut costs amid deepening losses, raised €170 million ($222 million) by selling the suburban-Helsinki building to Finnish property investor Exilion Capital Oy and agreeing to lease it back on a long-term basis. The deal, which Nokia first said it was pursuing in October, follows a move earlier in the fourth quarter to raise €750 million in a bond offering.
.The economy in Finland, located on the euro zone's northern edge, has slowed in recent quarters due to federal budget constraints and pressure on exports, but it still remains a relatively attractive market in Europe. The Finnish office market has been particularly hot due to limited space and a robust startup culture, and the general global appetite for sale-leasebacks has been healthy of late given attractive financing terms and a desire to park assets in havens.
Sale-leasebacks have become a common practice for companies looking to raise cash, but they are also used as a defensive measure against potential acquirers buying the business and then selling off pieces, like real estate, as a means to raise money.
Nokia finance chief Timo Ihamuotila said "owning real estate is not part of Nokia's core business." Nokia is willing to exit these types of noncore assets "when good opportunities arise," he said.
The company has also been selling patents and divesting itself of parts of its business, including an optical-network unit sold this week by its Nokia Siemens Networks arm.
The 540,000-square-foot headquarters building includes rich Scandinavian interior-design features and a massive employee cafeteria with hardwood floors. It was completed in three phases, with the wings of the building connected by glass-enclosed bridges. The final portion of the building was finished in 2001, when Nokia still dominated the global cellphone market.
Nokia will lease back its 540,000-square-foot headquarters in Finland.
.Nokia's workforce in Finland has shrunk by 30% over the past half-dozen years.
Sale-leasebacks are occurring more frequently. Credit Suisse Group AG CSGN.VX +2.23%last week sold its main building in Zurich for $1.08 billion to Norway's Government Pension Fund Global and now plans to lease those offices, following similar property moves by Bank of America BAC +1.12%and HSBC HSBA.LN +0.05%. "It's become pretty commonplace over the past decade to extract capital out of their real estate when needed for their core business," said Dan Fasulo, managing director at Real Capital Analytics in New York. "It's not just struggling companies that use this."
Still, it is a convenient tool for companies in need of cash. For example, Sony Corp., 6758.TO -0.25%once an icon of Japanese industrial prowess, is considering a sale of its U.S. headquarters on Madison Avenue in Manhattan, and remains open to a leaseback.
Nokia has been under significant scrutiny over its cash position in recent quarters, and has been subject to a series of credit downgrades from the three major credit-rating firms, all of whom have cut Nokia's debt rating to junk. Its net cash position stood at €3.6 billion at the end of September, off from €4.2 billion at the end of June.
Still, Mr. Fasulo said Exilion Capital must have faith in Nokia to pay its bills if it was willing to agree to a long-term lease. "Basically, you're buying a Nokia bond," he said.
In a news release, Exilion said the property fit "very well" into its investment strategy because of the building, location and long-term contract. The deal for the building, which is one of the largest office complexes in Finland, doubled the value of Exilion's property portfolio.
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