Baltics: 368 mil­lion Eu­ros pumped into com­mer­cial prop­erty ac­qui­si­tions

The Baltic Times - - RE LITHUANIA -

In the first half of 2017, in­vestor ac­tiv­ity in com­mer­cial real es­tate in the Baltic coun­tries was not un­com­mon, but the recorded scope of in­vest­ment showed an un­fad­ing in­ter­est in mod­ern com­mer­cial prop­erty. A to­tal of 18 in­vest­ment trans­ac­tions were con­cluded in this pe­riod in Lithua­nia, Latvia and Es­to­nia, which in­volved the pur­chase of over 312,000 sq.m. of cash-flow com­mer­cial prop­erty (mod­ern of­fices, re­tail, ware­hous­ing and in­dus­trial build­ings and premises, at least EUR 1.5 mil­lion in value). The to­tal value of the ac­qui­si­tions was EUR 368 mil­lion, nearly 18% less com­pared to the first half of 2016, Ober-haus writes in the re­view of the com­mer­cial real es­tate mar­ket.

Ac­cord­ing to Ober-haus, one trans­ac­tion con­cluded in mid-2017 had a ma­jor ef­fect on this year’s in­di­ca­tors. The trans­ac­tion in­volved the ac­qui­si­tion of 80% own­er­ship in­ter­est in the prop­erty in­vest­ment com­pany, Baltic Re­tail Prop­er­ties, by CPA®:17, owned by the US in­vest­ment com­pany W. P. Carey and the Fin­nish Kesko Cor­po­ra­tion. The prop­erty port­fo­lio of Baltic Re­tail Prop­er­ties com­prises 18 re­tail stores in Lithua­nia, Es­to­nia and Latvia, and a lo­gis­tics cen­tre in Lithua­nia. Fol­low­ing the ac­qui­si­tion, CPA®:17 be­came the main share­holder of Baltic Re­tail Prop­er­ties, pay­ing EUR 127 mil­lion (including ac­qui­si­tion-re­lated charges and costs) for its 70% share. Mean­while, Kesko ac­quired 10% of the shares of Baltic Re­tail Prop­er­ties fol­low­ing Kesko’s sale of its 7 re­tail stores in Latvia and Es­to­nia to Baltic Re­tail Prop­er­ties for EUR 64 mil­lion.

“Lithua­nia shared the ma­jor por­tion of the in­vest­ment in the first half of 2017, i.e. EUR 198 mil­lion or 54% of the over­all in­vest­ment in the Baltic coun­tries. The largest in­vest­ment trans­ac­tions in Lithua­nia dur­ing the pe­riod were the said ac­qui­si­tion of the shares in Baltic Re­tail Prop­er­ties and the ac­qui­si­tion of the Ver­tas and Pen­tagon of­fice build­ings in Vil­nius,” said Saulius Vag­o­nis, Ober-haus Head of Val­u­a­tion & Anal­y­sis.

In June 2017, the Swedish in­vest­ment com­pany East­nine (for­merly East Capital Ex­plorer) com­pleted the ac­qui­si­tion of Ver­tas. The com­pany paid EUR 29 mil­lion for the build­ing, which, ac­cord­ing to the buyer at the time of the ac­qui­si­tion, guar­an­teed about 6.5% yield. The Fin­nish prop­erty in­vest­ment and man­age­ment com­pany Tech­nop­o­lis pur­chased an al­most com­pleted of­fice build­ing in Ozas Park from the ICOR Group. The trans­ac­tion in­volved the pur­chase of both the of­fice build­ing and the par­cel of land next to the build­ing. The ac­qui­si­tion of the build­ing was com­pleted in April, and the ac­qui­si­tion of the land is sched­uled for com­ple­tion by the end of 2017. The to­tal trans­ac­tion value is about EUR 32 mil­lion. Ac­cord­ing to the of­fi­cial no­tice of Tech­nop­o­lis, the ini­tial yield of 6.5% is fore­cast on com­ple­tion.

The value of in­vest­ment trans­ac­tions in Es­to­nia in the first half of 2017 to­talled EUR 91 mil­lion or 25% of the over­all in­vest­ment in the Baltic coun­tries. The largest in­vest­ment trans­ac­tions in Es­to­nia in­volved the sale of 3 re­tail cen­tres man­aged by Kesko to Baltic Re­tail Prop­er­ties, the ac­qui­si­tion of the shares in Baltic Re­tail Prop­er­ties men­tioned above, and the sale of the Prisma Shop­ping Cen­tre in the city of Narva (the shop­ping cen­tre was pur­chased by the French prop­erty man­age­ment com­pany CO­RUM for EUR 16.7 mil­lion from EFTEN Kin­nis­vara­fond AS con­trolled by EFTEN Capital).

Ac­cord­ing to Ober-haus, Latvia saw the small­est share of in­vest­ment over the pe­riod to­talling EUR 79 mil­lion. The ma­jor por­tion of the in­vest­ment in Latvia ac­counted for the sale of 4 re­tail cen­tres man­aged by Kesko to Baltic Re­tail Prop­er­ties and sub­se­quent sale of the shares of Baltic Re­tail Prop­er­ties to CPA®:17 - Global.

Trans­ac­tions in­volv­ing W. P. Carey Inc., Kesko and Baltic Re­tail Prop­er­ties de­ter­mined the dis­tri­bu­tion of in­vest­ment by prop­erty seg­ments in the first half of 2017. Ac­cord­ing to Ober-haus, of the to­tal EUR 368 mil­lion in­vested in Lithua­nia, Latvia and Es­to­nia, 69% went to the re­tail prop­erty sec­tor. A to­tal of 25% in­vest­ment was made in of­fices, and the re­main­ing small­est por­tion (6%) was tra­di­tion­ally in­vested in ware­hous­ing fa­cil­i­ties. The largest trans­ac­tion in the ware­hous­ing prop­erty seg­ment was the pur­chase of a 21,000 sq.m. lo­gis­tics cen­tre in Vievis (with Rimi as the an­chor ten­ant) by the Es­to­nian in­vest­ment com­pany United Part­ners Prop­erty from Sirin De­vel­op­ment.

“One large in­vest­ment trans­ac­tion de­ter­mined that US in­vestors (W. P. Carey Inc.) were the largest sin­gle in­vestors in mod­ern com­mer­cial prop­erty, ac­count­ing for 33% of the to­tal in­vest­ment in the Baltic coun­tries in the first half of 2017. Lo­cal in­vestors from the Baltic coun­tries ac­counted for an­other 33% of the to­tal in­vest­ment, and in­vestors from other coun­tries (Denmark, Finland, France, Swe­den, Rus­sia and the UK) ac­counted for the re­main­ing 34% of the to­tal in­vest­ment. The ge­og­ra­phy of in­vestors in the Baltic coun­tries has not ex­panded con­sid­er­ably – lo­cal, Scan­di­na­vian and pri­vate in­vestors con­tinue to take cen­tre stage. How­ever, new in­ter­na­tional in­vestors in the Baltic mar­ket (e.g. W. P. Carey Inc.) have ex­panded their port­fo­lios; the mar­ket has also at­tracted new mar­ket play­ers (e.g. the French prop­erty man­age­ment com­pany CO­RUM, which has made its first ac­qui­si­tion in Es­to­nia this year). De­spite the new larger in­vestors in the mar­ket, the ge­o­graphic pat­tern of in­vest­ment re­mains limited,” said S. Vag­o­nis. Ac­cord­ing to Ober-haus, over the past 17 years, in­vestors from 15 dif­fer­ent coun­tries have in­vested in de­vel­oped com­mer­cial prop­erty in Lithua­nia, and this num­ber has not changed since 2015.

Ober-haus Lithua­nia

Saulius Vag­o­nis is Head of the Val­u­a­tion & Anal­y­sis De­part­ment at Ober-haus

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