Main investment transactions in the Baltics, 2008 (CEE)

"The obvious impact of the global credit crunch and subsequent financial crisis followed by a remarkable supply of new investment opportunities were the features best describing the situation in the Baltic property investment market in 2008. In addition to higher borrowing cost and price of capital in general, international real estate investors' intentions in the Baltic countries have been challenged by vague macroeconomic outlook," says Ricardas Cepas, CEO of Re&Solution Group international property advisers.

LITHUANIA. "Despite a small number of completed investment transactions, 2008 was the best-ever year in Lithuania in terms of the total volume of investments, which have exceeded €300 million," explains Andrius Stonkus, Investment Director of Re&Solution Group. In 2008 the property investment market was dominated by the sales of retail properties, i.e. Akropolis SC and Maxima portfolio of 9 properties. However, a wide choice of prime properties, available for sale in 2008, did not guarantee the completion of all these transactions. A number of them were terminated even after agreement of the main sales conditions, as the main role of the success of many transactions depended on the borrowing conditions set by creditor. Re&Solution has participated in major investment deals completing most of the transactions in Lithuania by volume.

LATVIA. Despite the promising outlook and expected all-time-high investment volumes in the beginning of the 2008 in Latvia, when the local developers finally initiated sales of the completed commercial real estate properties, the market experienced only one considerable investment transaction in the last year.

ESTONIA. Investment market has remained relatively stagnant and many investors disappeared from the market due to high volatility of the market and remarkably worsened financing conditions. However, many investors still actively watching the market with purpose of entering it, and waiting for first positive signals. Recently the most active players remained local funds and equity players.

Baltic market becomes attractive for investors targeting lower prices

According to Mr. Stonkus yields were following the upward trend, affected by 150-250 basis points during 2008, as depending on the type and quality of investment product.

Economic slowdown, increased cost of borrowing and previously excessive appetite of property developers all lead to frequently excessively risky engagement in real estate activities and speculative approach of many developers, many of which were non-professionals. Consequently, the market faces an increasing amount of distressed property owners, forced to desperately dispose of their properties.

"We believe that the "wait-and-see" mood, which prevailed at the end of 2008 among potential investors, will be soon changed as the market is gaining a shape more comfortable for investors targeting distressed properties and more opportunistic transactions. A number of specialized funds for such transactions are currently taking a close look at the Baltic market," concludes Mr. Stonkus.

Source: RE&Solution

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