About EfTEN’s new property fund
Today we launched a new fund with a bold and powerful name – EfTEN United Property Fund. The fund is suitable for investors who are interested to invest in real estate voluntary savings or pension assets. With the new fund, we want to break down several existing barriers and dogmas when investing in real estate:
- Even the smallest one-room apartment costs tens of thousands of euros, not to speak of a large shopping center or office. You can start investing in our fund from 10 euros and you can contribute even on a monthly basis.
- Our ambition is to turn the fund into a kind of Baltic real estate market index. No, it would not be a passive index fund, managed by a few mouse clicks. It would not be even possible – real estate is a tangible asset that is not listed on the stock exchange and whose price changes do not constantly fluctuate on the computer screen. Instead, the fund’s diversified investment portfolio should become index-like. It will include cash-generating commercial real estate and residential real estate investments, real estate development projects and investments in other real estate funds of EfTEN across the Baltics.
- The fund’s fees also reflect the best practice of low-cost index funds. Unlike real estate funds, EfTEN United Property Fund has only one fee – 1.5% per annum, applicable only after the fund has invested money directly in real estate.
We are convinced that compared to owning real estate and the obligations associated with ownership, EfTEN United Property Fund is a good opportunity to invest in real estate. Unlike a rental apartment or crowdfunding, it is also suitable for a pension investment account.
The widest possible opportunities for base investments
A quick look at the fund’s investment plans may create a deceptive first impression, as if we would serve to investors three meals at once and even on one plate – while not taking any responsibility for how it would taste. Of course, this is not the case. Actually, we plan to establish a fund of at least “1000 years”, as it is commonly known that real estate market is cyclical. Although the last statement can be disputed in the light of the massive quantitative easing, real estate was, is and will remain a cyclical investment, like any other asset class. As the new fund does not have a specific investment period, then a classic asset-holding period and exit period, the management company has enough room to maneuver, so that in case real estate market trends turn around, we can smoothly restructure the portfolio if necessary.
Where we plan to invest:
- Other EfTEN real estate funds. Until now, our funds have mostly been available only to institutional or professional investors with at least 100,000 euros to invest. Through the new fund, anyone who wants to can become an investor in other EfTEN funds.
To be honest, a certain exception has been EfTEN Real Estate Fund III AS, which is listed on the Tallinn Stock Exchange, and was initially aimed primarily at private banking clients (when the fund was established in 2015, the minimum initial investment was 10,000 euros). In subsequent issues, existing shareholders have always exercised their pre-emptive subscription rights very extensively, which is why our third fund has also been somewhat inaccessible to new investors, at least in terms of public issues – though the fund’s shares can still be bought on the stock exchange. In a recently completed issue, the existing shareholders exercised their pre-emptive subscription rights arising from the law for 85% of the total volume of the offered shares, i.e. there was essentially no room left for new entrants.
- Direct investments. The fund will certainly make cash-generating direct investments in real estate, as we have been doing it in EfTEN funds for over 13 years. At the same time, we exclude the possibility that EfTEN United Property Fund would compete with our other funds for new properties. As other EfTEN funds are not able to make new investments at any time (for example, the investment period has ended or the fund’s equity has been fully invested), the new fund can buy real estate to its portfolio without any conflict of interest. Also, why not to consider co-acquiring some of the larger assets with another EfTEN fund? This possibility also fully exists. The fund may also acquire a land plot, in which we will see a strong growth prospect in the later phase – today none of our funds does have such a mandate.
- Other investments. We also see opportunities to have a slice of the real estate crowdfunding market. No, we are not setting up another crowdfunding platform, but we plan to be a proper competitor for the current players. For example, EfTEN United Property Fund may finance a promising real estate development led by another developer, but only in case the fund’s management is convinced in the success of this project. Would things take a wrong turn for any reason, we are ready to take over the management of the project and under our guidance lead the project to the success. If necessary, developing the projects on their own and taking full control of the project will be an important differentiating factor compared to today’s crowdfunding market.
We also reserve the right to invest a piece of the fund in some real estate start-ups or PropTech, as they are called nowadays. We are not going to cultivate start-up business, but if we see from our asset base that a real estate start-up is doing a good and right thing, and could add value to our investors, our managed properties and tenants – believe me, these companies already exist in the Baltics today – then we would seriously consider an investment in a start-up.
Low management fees
If we look at the virtues of index funds, in addition to a good diversification of assets, low management fees come to mind immediately. We want to follow the same logic with EfTEN United Property Fund. In fact, it would be easier to count the activities for which we do NOT charge than the ones for which the charge applies. Namely, we do not charge any management fee for investments in our other funds (other EfTEN funds have fee-based management agreements with the management company and we do not charge a double fee for the United fund). Nor there will be a fee imposed on uninvested capital. The fund does not have any subscription, exit or success fees. We only charge a 1,5% management fee per annum for direct real estate investments. It would be difficult to find another real estate fund holding real assets with such a low fee. Definitely not in the Baltics right now.
You can invest at any time
One of the most important innovations that EfTEN United Property Fund brings to the market is the possibility of regular subscriptions. You can invest money in the fund in the amount and the time that suits you – even on a monthly basis. You can make investments from your current account, investment account as well as from the newly created PIK (pension investment account). However, you can also invest as a one-time contribution or choose another suitable investment frequency (e.g. quarterly or annual). Through such a flexible approach, we are making the very conservative and capital-intensive asset class accessible to absolutely everyone who has a securities account and a desire to invest. In addition, if you do not have a securities account yet, you can easily open it in banks operating in Estonia.
Some important facts to conclude. Before investing, be sure to read the fund terms and the prospectus (www.eften.ee/united), and if necessary, consult an expert. It is not a guaranteed fund. We cannot promise investors a guaranteed return. Of course, we also invest personal money of fund managers and the capital of the founders of EfTEN in the fund. Real estate is not Tesla stock that would grow parabolically. It is instead a calm and composed asset class characterized by a constant return on cash flow, regular dividends and capital growth. The fund’s units are not suitable for short-term speculation, but rather for long-term value growth, preferably with a ten-year time horizon.
We intend to list the fund on the Tallinn Stock Exchange later this year, but certainly not later than in May 2022. It should be noted that selling the fund units before listing might be somewhat more difficult than usual. To do this, a person who is interested in buying them must be found without the support of the stock exchange system.
As the CEO of EfTEN Capital, I can promise you one thing – EfTEN, with its experienced team of 55 members across the Baltics, will do its best to make the best decisions and increase the value of EfTEN United Property Fund units in the long run.
Welcome to us!
EfTEN United Property Fund
- Beginning of the investment period 22 June 2021.
- The first Baltic real estate fund where you can invest from 10 euros.
- Investing is easy and flexible – invest when and how much you want – you can make a one-time investment or invest regularly even every month.
- Low management fees – the fund has no subscription and success fees. In addition, the fund does not charge a fee for uninvested capital and investments in other EfTEN funds. The fund’s management fee of 1.5% per annum is charged only for investments made directly in real estate.
- The Fund is the first in Estonia to invest in real estate in the Baltic States across all segments: commercial real estate (logistics, offices, trade, etc.), residential real estate, real estate development projects.
- EfTEN’s 55-member team of real estate professionals takes care of your investment.
- We aim to pay dividends to investors 1-4 times a year.
- The fund will be listed on the Tallinn Stock Exchange this year, but not later than in May 2022. Before listing, it may be more difficult than usual to sell units.