EfTEN Capital launches new fund in autumn, to fill apparent financing gap in the Baltic real estate
This autumn EfTEN will establish a new fund aimed at institutional investors, with the objective to fill the financing gap that is emerging in the Baltic commercial real estate market. The fund will finance real estate projects that require additional capital. Financing will be provided both with debt and equity.
“Through banks, the woes of Swedish property market have reached also the commercial real estate in the Baltics. The banks are significantly more conservative when financing the commercial properties. Higher equity capital is required in the projects and higher debt amortization is expected. We have observed it at recent refinancing cases for EfTEN’s commercial properties, as well as in the wider property market. All that is starting to lead to a financing gap in the Baltic commercial real estate”, Viljar Arakas, Chairman of the Management Board of EfTEN Capital, elaborated on the current situation in the real estate sector.
“In developed markets, it is rather common that in a changing business environment, funds with a special investment mandate are being launched. For example, at the peak of the 2008 financial crisis, several largest international private equity investors both in Europe and the US established special opportunity funds that invested in real estate projects. We see that both the market and timing in the Baltics is right for that. With the support of the new fund, the real estate sector will get a new non-bank financing source, and the fund’s investors can expand their investments in real estate sector”, Arakas explained the rationale of setting up the fund.
The launch of the fund is planned for autumn 2023. Unlike so-called traditional real estate funds, the new fund will have a relatively short duration – about five years. It will include the investment phase of about two years, followed by the holding phase and, if necessary, reprofiling of the investments, and realization of investments at the end.