Elena Ristavaara, Kensington Advisors

Тoday we’re talking with Elena Ristavaara.

Elena’s company, Kensington Advisors, is based in Finland, and Elena herself spends a lot of time where her projects are going. Elena manages international real estate investment projects from conceptualizing hotel and recreational facilities and mixed-use complexes to structuring large infrastructure projects such as an airport or a marina. Kensington Advisors accompanies a project from birth to completion. To look at the global market for investment in real estate projects through the eyes of a “professional” is never redundant and often helps you reconsider your own approach.
Elena, when we are building a house for ourselves, we can afford to be subjective and do everything without regard to the opinion of others. But, for example, in income-generating investments in branded residences and hotels, what to do with the “emotional attachment” and whether we should rely solely on the calculation?

ER: Since we are talking about investments where profitability plays a major role, we need a professional, objective approach and a sober calculation. Of course, there is also an “emotional tie-in” when it comes to choosing the location, type and format of the object to be invested. For many, the status of the project, a famous architect and designer are also important.

How you can understand, if a certain project has an added value, and the other one, although it meets the trend criteria (location, famous architects) “will not fly”.

ER: This is precisely why we need professional advice. You need an independent assessment of the prospects of the project and market analysis. The availability of an international management company and a hotel brand plays an important role. The investment analysis is the most important final part of the business plan. Investment analysis uses methods to assess the effectiveness of the project, developed to calculate the main indicators of economic efficiency of investments.

Which three figures in the calculation of the profitability of the project – are necessary and in extreme cases – sufficient, the most important. That is, if there is something wrong with them – all can not be good, well, and vice versa, if they are, the rest can be pulled up.

ER: The main profitability indicators are the internal rate of return of the project, the payback period and the net present income. All in all, there are about 10 key financial indicators.

How to see today a “blue ocean” for real estate investment projects among the few remaining oases in the world. And how to go there without drowning. What risks should be recognized and whether it is possible or impossible to cooperate with them. (the political economic regime, the development of the market, etc.)?

ER: It all depends on what a potential investor wants and what he is guided by. Of course, there are more stable and less risky real estate markets in Europe and North America. But, as in all developed markets, there is high competition, which means that returns will not be as high as in the emerging markets of Asia and Latin America.

To enter new and promising markets, it is necessary to have the support of local players, to have a qualified consultant to assess market prospects and possible country risks.


The risk of investing in real estate has its own characteristics, which are due to its specific features – the need for operational management of the investment process, the liquidity of objects, the volume of time and money and the prospect of payback.

he sources of risk can be:
  • an unfortunate choice of property type. Such risk is associated with fluctuations in supply and demand in the market.
  • poor location of the property. For example, the selected area or region did not meet the hopes of investors for rapid business development in it, respectively, the demand for offices, trade, housing in the region can fall.
  • breach of lease terms. The risk of non-payment by the tenant of the agreed amount, or part of it.
  • depreciation of buildings. Over time, the price of real estate decreases because of its useful life and physical deterioration. Usually investors prefer to invest additional finances in repairs and renovations.
  • Changes in tax law. The likelihood of higher tax costs, due to changes in rates in tax law.
  • reinvestment.
  • inflation. Inflation and reinvestment are the least risk factors in real estate investments.
Any real estate investment risk can always be attempted to be mitigated, or even reduced to zero, if the issue is approached knowledgeably.

When hotel operators consider an offer to take a project under their brand, what happens at that point with the project, with its market positioning, its value.

ER: One of the prerequisites that support the competitiveness of hotels in an expanding supply of quality hotel services is the presence of an international operator.

The main function of a hotel operator is direct management of hotel operations. As a rule, companies providing such services are represented both by local small players providing management services for several properties and large international hotel chains, which in addition to operational management provide their trademark and reservation system services, which are an integral part of the services provided.

Work with international operators can be based on contracts of direct management or franchise, and in rare cases, lease agreements. In each specific case, the choice of cooperation depends largely on the project and on the investor’s goals in terms of the benefits and risks associated with them. This will allow determining the key conditions and terms necessary to achieve these goals. Low risk for long-term investments implies the choice of such forms of business conduct as a lease agreement or a management contract. Higher income implies higher risk, in which case a franchise or independent development path may be considered.

The operator’s impact on hotel operations and the value of the asset:

By entering into a direct management contract, the owner entrusts the hotel to be managed by an operator, who will run the hotel business using the facilities provided by the owner. In this case the operator’s activity includes both sale of hotel services and their provision. This in turn means control of the operator over the formation of the product, management of the promotion strategy and pricing policy, personnel, business processes, purchasing and supply and maintenance of the asset in proper condition.

By taking over the project, the hotel operator guarantees the use of leading technology in all these areas.

The most tangible effect of attracting an international operator compared to self-management is often an increase in the overall margin of the business, manifested to a large extent by a quality sales system using corporate reservation networks and club programs, as well as by optimal business processes that reduce the cost component. It is also possible to speak about an earlier conclusion of this or that object at first to self-sufficiency and later to stabilization.

At the same time, an additional effect is associated with a positive impact on the company’s capitalization. It is generally accepted that having a management agreement with a professional international operator reduces operational risks, which in turn affects the discount and capitalization rates, increases the value of the asset and the business.

How do you see the future of unbranded hotels today. Is it an oasis of private sphere and individuality for the market and customers or is it a factor of unpredictability and lack of transparency of the business model. 

A brand is a consistent set of functional and emotional promises to the target consumer. They are unique, meaningful and difficult to imitate. The culture, employees, and development program of the hotel chain are what create a quality hotel product, and what are the value to consumers and the basis for creating a relationship with them.

A brand means quality understood by the consumer, a certain set of services, various bonus programs and concierge service. Hotels without a brand are, as a rule, small family hotels, which rely on “boutique” and individual approach.

If we talk about personal preferences, it all depends on the purpose of travel. For example, honeymooners, looking for privacy and paying attention to cost, probably choose a small hotel without a brand. For business travelers choose chain hotels due to the presence of various corporate programs.

From the point of view of a professional investor, chain hotels with well-known brands, competent management, a transparent system of operational and financial management are of greater interest.

How the market is changing today – who are the main investors today?

The main investors in the hotel real estate market were and still are investment and pension funds, international development holdings and private PE funds/private individuals.

The pandemic has made its adjustments in terms of preference for certain real estate formats. Today development projects of student dormitories, hostels, apart hotels, mixed-use hotel and residential complexes arouse great interest among investors. The demand for such formats is also influenced by the changed consumption structure of potential users. One of the fast-growing trends in Europe is the development of apartment complexes for senior citizens with a full range of services (senior housing), in which pension funds participate in the financing of the construction.

Some of the largest investment deals recently include the financing of the construction of a multifunctional residential complex in Berlin by the investment and development company Grosvenor, and the purchase of student housing in Spain by Amro Partners.

The projects of reconstruction of the existing residential buildings for creation of apartment complexes for rent/sale in the big European cities are also in demand among professional investors.

Another in-demand direction is recreational real estate. People began to pay great attention to their health and longevity, which influenced the growth in demand for high-quality recreational facilities. This trend is developing very quickly in the markets of SE Asia and Latin America.