47-year-old Andrius Barstys, a co-Founder together with Lithuanian SBA Group and a CEO of Capitalica Asset Management, an investment management company that develops and manages commercial real estate (RE) properties in the Baltics, has been through thick and thin, but he has persevered unscathed – even in the early 1990s, again free Lithuania’s ‘Wild West’.
The latest two adversities – the coronavirus pandemic and especially the war in Ukraine – will have tangible ramifications, Andrius agrees, but the avid Harley-Davidson rider who enjoys making nesting boxes when off the bike and his working desk in spring remains upbeat: “The crises we’re in may push the brakes, which is not just bad – it will allow us to separate the grain from the chaff and bring more rationale into real estate decision-making on all levels.”
Andrius Barstys’ lifetime track record is already more than impressive: 1.2-billion-euro assets under Finasta Group custody, 250-million-euros assets under Finasta Group management, 100k+ clients and five acquisitions. Among Capitalica’s distinguished projects are VERDE, an ongoing A-class ‘green’ office building project in Riga and Kauno Dokas, the most modern business center in Kaunas. Worth to mention the supportive role of SBA Group which holds 70 percent of shares in Capitalica. SBA Group, together with its real estate development company SBA Urban, also has examples of extraordinary architecture. It owns two Business Leaders Centers, BLC and BLC1, in Kaunas and SBA’s gem in Vilnius, Green Hall business valley.
Capitalica Baltic Real Estate Fund I has by now funded 95% of the office RE projects, while Capitalica Green Logistic Fund invests in logistics storage.
In early April, Capitalica Asset Management announced a new landmark - the company's assets reached 100 million euros. The Bank of Lithuania has just granted Capitalica a license for an alternative collective investment undertaking (CIU) management company, which lets them manage more than 100-million euros assets of CIUs for investors and distribute shares of CIUs both in Lithuania and in any other European Economic Area (EEA) country.
Andrius Barstys, who, now, has been in the capital market, asset management and real estate for over 20 years, sat down for an interview with The Baltic Times Magazine.
Why did you choose real estate for investing?
The answer goes back to the Finasta times when we were investing in tradable stocks globally on exchanges. These investments usually are very volatile. It did not scare me, but I knew that, in the long run, I want to be in a business encompassing relatively lesser risks, an investor’s prudence and big investment potential with high-profit margins. The dream has been fulfilled by Capitalica – its investments profit margins target 15 percent yearly. That’s impressive, meaning that the money invested doubles in five years. Most importantly, at the end of the day, I am calm.
So far, the Lithuanian capital, Vilnius, has attracted the most investment by Capitalica and the SBA Group from all three Baltic metropolises in sustainable real estate projects. Riga has unofficially been named a “sleeping beauty” when compared to the Vilnius and Tallinn development. What is the reason for that?
There is no single reason. With regards to commercial RE developments, Riga has indeed been lagging behind Tallinn and especially Vilnius. In the wake of the 2008-2010 worldwide financial crisis, Vilnius and Tallinn have leaped rampantly forward with their real estate projects – in office space building too. Not Riga though. Perhaps, we can talk about different mentalities – Estonians and Lithuanians seem to me more confident and more willing to take risks and use every opportunity. Not to offend our ‘braliukas’ (colloquially, ‘brothers’ in Latvian – L.J.), the Latvian RE developer market is vastly dominated by Lithuanian and Estonian developers. There is little local capital invested in Riga. That’s the reality.
You already have a slew of solid projects under your belt. What was the very start though?
If I were to go back all the way to my early childhood, I ought to mention an interesting 'Influencer' - The Financier, a novel by Theodore Dreiser, based on real-life streetcar tycoon Charles Yerkes. I was 16, in the 9th grade, when I read it and was carried away by it. I just knew I would be in economics – study hard and all.
You studied both, in Lithuania and abroad?
I hold a Master's degree in Economics from the Kaunas University of Technology. I’ve also completed a financial technology program at Oxford University and a management program at the London Business School.
Frankly, I've always had this inner quest and drive to learn more. It's natural for me.
While still In Kaunas in 1997, I got a job In a finance company whose owners showed this incredible trust In me: "Do whatever you want with it - develop, grow, merge, sell it." I was like "wow!" I cannot mess it up."
Let me humble-brag a little: I succeeded in finding an investor from Estonia and the business of financial brokerage took off. In fact, it marked the start of my professional career. Afterward, I got a job with Finasta, a really large, then private, banking and wealth management group known in all the Baltic countries. I spent 14 years with them.
First, I headed its Kaunas (Lithuania's second-largest city) branch. In 2003, I established Finasta Asset Management for Finasta Group, which got a license to manage pension and investment funds, individual portfolios, private equity and other alternative investment. It really grew exponentially, we were No 1in Lithuania at that time. The private pension funds law had just been adopted, meaning vast opportunities for a pension fund like ours.
In 2008/2009, Finasta Group was taken over by a now defunct bank, Snoras, and it was when I started to lead the whole Finasta Group, with many other companies under the name. Including, Finasta Bank and Finasta Asset Management, as well as the companies abroad.
Alas, in 2011, Snoras went bankrupt – for nearly four years, the Group did not effectively have a shareholder.
Notably, Finasta was the only regulated entity of Snoras that retained its license and continued operation after the Snoras bank’s license was revoked. Throughout the ordeal, at Finasta, we have maximally protected investors’ money and assets.
When in late 2014 Finasta was acquired by a new owner, I left. In 2015-2016, I started a major new project, Capitalica, an investment management company that develops and manages commercial real estate properties.
Was it your idea?
It was. There are two shareholders involved – SBA Group and me. The Group is one of the largest Lithuanian-capital enterprises investing in state-of-the-art innovations to create a better environment. The activities of SBA companies focus on furniture, textile, modular construction, and real estate, sectors. I own one-third of the company.
They had executed some impressive architectural projects, of which the all-glass edge-cutting Green Hall 1 (used to be Barclay's office) building in the business district of Vilnius, springs to many mind first. It was, perhaps, their signature project, the-then landmark of the business city Vilnius.
Frankly, I had known SBA’s main shareholder before. We clicked and got on well right away. Sometimes I joke I must have met him in my previous life (grins). The message I had for him from the outset was simple: “Hey, I know how to manage money and you know all the peculiarities of building. So let’s join our efforts and turn your bricks into solid stocks!” He nodded and we shook hands.
What does the word “Capitalica” mean?
(Grins) I was scratching my head for quite some time before I came up with the name. To me, being engaged in an activity is like playing jazz. I like to repeat that. But since I am more into rock music than jazz, the name of the legendary heavy rock band Metallica popped up. So here we go: combine ‘capital’ and Metallica and you get a cool catchy company name, Capitalica. (grins).
At 47, you are in your prime, aren’t you?
(Grins) Any age is good, isn’t it? With its benefits and shortcomings.
We’re nearly in the same age group. Does having grown up in the Soviet era and having seen a once-in-a-lifetime- epochal shift, from communism to capitalism, make you in a way more absorbent and understanding of the world? More persevering and prudent?
Indeed, the history I’ve been through and witnessed first-hand is unique. The turn from the so-called plan economy, marked by a deficit of goods and long queues at stores, to a market economy has not been simple. Especially, if you were in business then. I’ve seen things with my own eyes that today’s businessman can learn just from books or documentaries – I mean the nerve-racking volatility of the market, bankruptcies, even violence. But I believe that, objectively, bad times give birth to strong people – I mean mentally. And strong people tend to create good times for all. To go on, unfortunately, in good economic times, more weak people than usual emerge. To sum up, no wonder that many top-tier Lithuanian businessmen have come from the turn of the epoch mentioned above.
The early 1990s, the start of the market economy, is coined as Lithuania’s Wild West. How did you manage to sail safely through all the riffs and icebergs and never get scathed? What safeguards did you use then?
It was not easy. But the core I adhered to was simple: be honest and build trust. The latter is just key if you are investing. If people mistrust you, you won’t get even a dime. Perhaps (you will get it) just out of mercy. And if you have built trust, you can earn a lot of money – not just for yourself, but for everyone involved and the people you work with, the shareholders and the state, too.
To answer your question bluntly, I’d never been entangled in a situation where I’d need to compromise my honesty, trust and integrity. Even then. No exaggeration – with the bankruptcy of Snoras, we, together with my team, drove Finasta through what I call the eye of a needle. We did it.
When Capitalica was established in 2015, had you embedded all the buzzy ‘must’ words now, like innovative, sustainable, green?
To be honest, the evolution to what you just mentioned occurred a little bit later. But with the company being established, the other shareholder and I got the gut feeling that, in order for it to be successful, it must be way different, setting eyes on the future, sort of a maverick. We were realising – perhaps intuitively then – that the future is all about doing things differently than previously, even if that means bigger costs for us. Some of the signature projects of SBA had been the paragon for me. There was already the realisation that, by doing things innovatively, we will come away victorious in the long term. We were right!
For example, when carrying out the Kaunas business center Kauno Dokas project, for cooling, we employed the nearby Neris water. The decision landed us a prestigious award – it has become the first business center in Kaunas to receive the global BREEAM Excellent building sustainability certificate.
The BREEAM (Building Research Establishment Environmental Assessment Method) certificate means that the building meets the highest standards of energy efficiency and environmental friendliness. Kauno Dokas has been awarded a BREEAM In-Use certificate with the rating “Excellent”. The categories of compliance of the materials used with the concept of sustainability, waste management and transport were rated as the best.
Objectively, the business center is the only one in the Baltic States to have a unique, environmentally friendly air-conditioning system with a river water-based cooling system.
All the premises of Kauno Dokas are designed so that they receive natural daylight, and the raised floor allows to change the location of office equipment and the distribution of electricity sources.
Besides, we’ve thought thoroughly about the leisure family-oriented infrastructure nearby – there is a lively children’s playground and other leisure amenities.
Nearly all of our offices have ‘Green Excellence’ certificates. So it will be also for our first and very important project in Latvia – VERDE, an office complex fully compliant with BREEAM “Excellent” and nZEB standards making it the greenest A-class office in Riga and one of a few built this year. Already this summer VERDE will open its doors to such A-class tenants in financial, tech and services fields like KPMG, Swisscom, DECTA, Swetch and many more. They chose VERDE due to its remarkable glass design, excellent location, but first and foremost due to all of the benefits that a sustainable architectural solution together with smart management and energy efficiency provides.
A couple of years ago, we told ourselves clearly that only going green and sustainable secures an auspicious and firm future for us.
There is this adage that investment bankers walk into a room in reverse, with their backs towards the door. Do you know why?
(Laughs) They need to see the exit all the time. As an investment banker, I always got the question: “How will I sell things? Will they be marketable and in demand when the time of sale comes?”
The bottom line is you have to think this way in advance about how the building and, importantly, the surroundings will look when you put it on sale. The technological stuff we cram into our commercial RE projects makes them more expensive, but we definitely win by riding the ‘green wave’ – now and by doing so in the future. It is irreversible.
Frankly, I am lucky to be working with SBA, which is very embracive and supportive of my ideas, most of which receive a green light.
How has the COVID-19 pandemic impacted you?
There was some scare in the beginning. We needed to do a lot of talking to our lessees, so they do not move out. In the short term, most of them have received discounts on their rent. Honestly, the period has not been notably bad for us. In the picture of the ongoing war, the pandemic has been forgotten. We are proud to keep many loyal tenants at Capitalica and SBA properties like well-known Moody’s, Citadele Bank, Danske Bank, Bentley Systems, Hyarchis, second Lithuania’s unicorn Surfshark, and others.
As an investor and builder, are you worried about the war? Do you have a plan ‘B’?
Some of the raw materials, like some metals or timber, were imported just from Ukraine, Russia, or Belarus. It is evident that with the ties cut off, the prices will go upward and the delivery time will be longer. In some cases, the alternative markets are in Asia or in other far-flung parts of the world, so the end price of an office building, storage, etc., will inevitably go up.
Capitalica-managed funds are not directly involved in this – the contractors we work with are.
A naive question perhaps. Do you feel the breathing of your competitors on your shoulder?
Frankly, there are few but not too many …This is perhaps due to our focus – office buildings being built in the very center of the three capital cities, and then the ‘all-green’ philosophy we’re adhering to in every project.
What sets us apart from the others is also that, with every project, Capitalica strives to create tangible knock-on effects – for the neighborhood, the district, and the city. I always want to see the big picture before laying the first brick, so to speak.
Do you dare to try to look into the future of real estate in the Baltic capitals?
The segments of real estate need differentiation. We have to face the reality check – we are already seeing an impact of the adversities and it will be lingering for a while. I think we need to wait a little bit and see how everything looks when the fog clears. Indeed, our neighbour (Russia) is hardly predictable and very belligerent. The sanctions slapped on it are and will be affecting the prices of supplies and materials for the foreseeable future.
On the other hand, until now, we’ve seen an insanely rampant real estate expansion. The crises we’re in may push the brakes, which is not just bad – it will allow us to separate the grain from the chaff, bring in more rationale and allow for a cooling-off effect in decisions.
You don’t invest in the residential real estate market. Why not?
Indeed, no. But as I say – never say never (grins).
What tenets are you looking for in people you work with?
I like hard-working, creative and delivering teammates. I always allow a new member of our organization to prove what he or she is capable of. At the end of the day, all of us are judged by the results we’ve delivered. Namely, results motivate and drive me forward.
Do you still fancy hard rock?
I do. It has always been in me. To me, the music style comes together with the Harley-Davidson I ride whenever I need a break from the business. Coincidentally or not, quite a few friends of mine do the same – like rock and ride a Harley. Sometimes we get on the road together. When off the bike and the desk, I like to do some sweating on my homestead in the countryside (grins). I always make at least a couple of nesting boxes for every nesting season. I really enjoy that (grins).