|
Mihails Morozovs,
Managing Partner
Colliers International Baltic States
Riga, December 22, 2005
Saules Akmens of Hansabank, LMT headquarters, various warehouses – all these objects are „built-to-suit” – i.e. created for one’s own needs and for one’s own money. Though LMT as well as different trade, logistics and distribution companies earn in quite different businesses. However, since there are no buildings projected specially for business needs on the market, the companies were forced to construct such premises on their own.
There is bought a land plot and developed a project, but this is done by a company (people) that is not an expert in this field. This causes a great risk – professionals in their sphere, they do not orientate themselves so well in real estate. Even when the object is developed, its proper maintenance requires specific knowledges. If a real estate project is developed rightly, and there is a guarantee that the tenant will maintain it, the property may be interesting for investors.
Advantages got from selling real estate:
- Release of funds. By pawning the property you can gain 70-80% of its cost, by selling it – 100%.
- You can fix the revenue and invest it in the company’s basic activity development.
- You usually sign a sales contract for 10 years and get net income at once, keeping the possibility to utilize the building/property in future.
Example. RIMI distribution centre has been sold, and now RIMI is renting it from the investors. The deal enables RIMI to develop and invest the money in the main business. The deal is closed if it is profitable both for the property owner-tenant and for the investors. Thus, the investors buy a stable (guaranteed) long term cash flaw! The scheme is quite popular and widely used in the Central and Eastern Europe as it allows the company to focus on its basic business.
Five years ago to buy a land plot meant to get a guaranteed profit since the costs of the plot and the buildings grew very rapidly. Today, due to a rise in real estate and construction prices, there is no such a huge difference anymore. It is more profitable to rent than to develop, for the risk is much lower then. You have to bear in mind that not all projects will be sold as in the first place investors are interested in liquid and attractive objects.
Summary:
- Lithuanian and Estonian companies have achieved much success in trade, logistics, etc. as initially they invested all the funds in the business and not in the building development.
- It is important for the market to have a balanced structure among professional investors, who finance an object, developers, who promote it, and tenants. To function in the proper way the market needs choice.
- The abovementioned scheme suits small and medium companies, which do not have excess free assets. They either put up the money in their own development and work on the market, or invest in property and crash. This does not refer to big financial institutions, which seek for opportunities to invest excess money, such as real estate, for example.
It is necessary to fix the revenue at the right moment. Some time later the interest of investors may decrease, especially if the project is very specific, i.e. meant for a company’s specific needs.
About Colliers International
With 250 offices in 50 countries Colliers International is one of the leading real estate companies in the world. Today Colliers International operates in all three Baltic States, challenging the region’s real estate sector by serving as a unique “one-stop” real estate agency providing its customers with a full range of services in commercial real estate, including the implementation of investment projects in the real estate sector, lease and sales of offices, retail and warehouse premises, as well as conception development, research and market analysis, consulting, real estate property valuation and other services.
More information:
Margita Otto
Director of Marketing & PR Department
Colliers International, Baltic States
Tel.: (+371) 778 3333
Fax: (+371) 778 3334
Mob. tel.: (+371) 2917 3173
|
Home
