Newsec is Northern Europe's only full-service company in the property sector, with 12 offices in seven countries. It has recently provided advisory services in transactions with a total value of more than 9 billion. Here Leon Goldwater asks CEO Ricardas Cepas about the company's recent activities and the outlook for the real estate markets in the Baltics.
What was your business in the Baltics last year?
"Last year we were focusing for building pipeline of new investment opportunities for investors, which are about to start shopping in the Baltics in 2012 and onwards. We've closed several transactions including a 22,000 m² shopping center, being one of the 10 largest M&A transactions in the Baltics in 2011."
"The market is coming back and we are staying on track. One of the largest institutional investors in the Baltic region has just appointed Newsec to represent them in exiting a fund comprising prime logistics, retail and office properties in Tallinn, Riga and Vilnius. The overall surface of these properties is around 100,000 m²."
Are there many companies exiting the market right now? How about new investments?
"It is not the best time for exiting, but some clients, which were the first institutional investors in the Baltics are about to face exits. We believe that starting from now, the market will experience an important change professional sellers will start exiting their funds, in this way substantially increasing the supply of well-maintained investment products. And this will significantly increase the liquidity problem, which is one of the main downsides of the Baltics currently.
"It is also the perfect timing for investments, as the economy has already gone down and consumption went down as well, which means that retail and office rents as well as property values are low. With the European economy in such turmoil we do not know, for example, what is going to happen with German retail, but I am sure that in the Baltic countries prices can not go down anymore, as they are already at a very low level.
"Risks and return are quite attractive to investors at the moment, because you get a risk premium that is 200-300 basis points higher compared to Finland or Germany. This makes a significant difference given that you are investing in the same European Union and NATO and other secured agreements of Western European space."
What differentiates Newsec from the competition?
"The fact that we are a full-service property house. We have competition in our separate service lines, for example our apartment sales department is seeing tough competition from local brokers and our valuation team is competing with small or large valuation companies in each country.
"Nevertheless, we do not have competitors covering the whole of Northern Europe with the same style and same standard of high international services. There is no advisory company in the Baltics covering all three countries. For example, many funds have invested in Tallinn, in Riga and in Vilnius and for them it is a burden to deal in such small countries with three different companies."
In your opinion, what will be the situatio