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EfTEN Capital will establish a new fund that will invest in rental apartment buildings in Estonia, Latvia and Lithuania. EfTEN Residential Fund will be launched soon and aims at becoming the largest residential property fund in the Baltics, by attracting in the inaugural stage 60 million euros of equity investments.
„In the field of commercial property, EfTEN is the largest fund management company in the Baltics and our next step is the expansion into residential property. EfTEN was founded during the previous financial crisis and the recession-driven by coronavirus provides good timing for entering a new business segment. We are planning so-called bulk purchases during upcoming low tide in the construction market, which means that the fund will purchase entire residential buildings, not individual apartments,” said Viljar Arakas, CEO of EfTEN Capital.
The first planned and committed investment of the fund will be a residential building with 112 apartments and 93 parking lots of Kadaka Metsapark development in Tallinn, to be completed by autumn 2021. Mitt & Perlebach is the main contractor and the first apartments will be rented out in autumn 2021.
“We are not exactly aware of rental levels of apartments for the next one to three years – because they are volatile in time –, but the prices of entering an investment will not change over the time. We see a good potential in the residential rental property market because compared to Scandinavia it’s still in the very beginning and not yet institutionalised,” Arakas said.
EfTEN has previous good experience in residential real estate development in Riga, where eight apartment buildings with 112 apartments were built in the Bišumuiža residential area during the first development phase, of which 85% have been sold to customers. EfTEN has on-site teams in all three Baltic countries, which gives the management company a good starting position. “EfTEN is a well-known company in the Baltic real estate community. Our ambition cannot be less than to create a leading residential property fund covering all three Baltic countries, with a portfolio of about 1,000 apartments, but this is not the final volume of our ambitions, only the first step,” Arakas noted.
In the new fund, EfTEN puts a lot of emphasis on the energy efficiency of buildings as well as the digitalisation of business processes, so that all customer communication, building maintenance, ordering additional services, and other operations are as easy and innovative as possible. A corresponding end-user app will be developed, which will be integrated with the entire building management software.
EfTEN Residential Fund will be registered in Estonia as a private fund (usaldusfond) with Viljar Arakas and Tõnu Uustalu being fund General Partner’s Management Board members. The fund’s everyday operations will be managed by Annika Ole, a longstanding member of EfTEN Capital’s team, who will become the head of the residential property segment where Annika has 15 years of experience. The fund’s investment period will be five years from the founding and the leverage target will be 50% of the portfolio.
The investors of the first investment round, mostly private professional individuals and institutions that have invested in EfTEN funds before, will place 16 million euros in the fund. EfTEN Residential Fund is planned to be a private fund offering investment opportunities to professional and institutional investors only.