Estonian LHV pension funds made the first direct investment worth 9 million euros in real estate outside Estonia. By acquiring five rental apartment buildings in Riga, the LHV pension funds aims at earning long-term rental income.
“Rental properties are an asset class that is of great interest to us, and this is already our eight direct investment of this kind. Firstly, it’s a good way to diversify your portfolio and secondly, we earn above-average returns. Compared to Tallinn and Vilnius, the apartment prices in Riga are still by up to a third lower today, so we’re hoping to take advantage of this market situation even more. Our long-term plan is that up to 20% of our real estate investments could be located in Riga,“ explained LHV Fund Manager Kristo Oidermaa.
According to Rait Riim, Head of Real Estate Investments at LHV Pension Funds: “The biggest advantage of rental apartment buildings in Riga is their quiet and green location right next to the Ziedondarzs. The buildings are less than 2 kilometres from the Old Town of Riga. The buildings have been designed for rental, they are in a very good condition.”
Three of the five buildings were completed in 2021. The other two buildings of architectural value have recently undergone major renovation. There are a total of 109 apartments in the five buildings, almost all of which are rented out. The properties also have additional building rights for the construction of another 6-storey apartment building. The rental properties of LHV pension funds in Riga are located at: Spargelu iela 10, Matisa iela 52 and Matisa iela 65a.
In addition to the Riga rental apartments, LHV pension funds own a portfolio in real estate in Tallinn, Estonia - 293 rental apartments, three office buildings, and four industrial buildings. LHV pension fund real estate portfolio size is 85 million euros. In Riga, LHV’s target is to build up a portfolio of a minimum of 500 rental apartments, but also to invest in office buildings, retail buildings, and warehouse properties. LHV is also one of the biggest investors in real estate funds, Eften Capital and SG Capital.
LHV is the second-largest pension fund in Estonia, where 165 000 Estonian people are storing their pension savings in 1,3 billion euros. It is the only pension fund in the Baltics that makes direct investments into real estate.