Italian ices deal for riverbank skyrise

  • 1998-09-10
  • Sandra L. Medearis
RIGA - A 40-story combined office space and luxury apartment building will not only change the skyline across the Daugava River from Riga's Old Town, but will also raise a monument to Latvia's favorable business atmosphere.

Italian real estate developer Ernesto Preatoni, whose Ernesto Preatoni Group also includes Neotrust Ltd., told reporters Sept. 3, that he has been drawn to Latvia for cheaper, less risky business development. Neotrust will spend 54 million lats ($90 million) to erect the skyscraper two doors from the Radisson SAS Daugava Hotel on Kugu Street because of lower taxes, lower wages and fewer building restrictions in Latvia and the other Baltic states. The company will restore the old office building between the Radisson and the new building site.

"I don't believe there will be further good investment in Europe with the high taxes, high salaries, and inflexibility of requirements," Preatoni said. "I don't see any risk in your country, but it is difficult to forecast political risk. In Italy, social tensions are very high. This could be the beginning of political risk."

The high-rise building will have a base of 7,900 square meters (9,480 square yards) Neotrust will also renovate the existing 12,269 square meter building at 26 Kugu Street next door to the Radisson. The company is in the process of buying a building at 19 Stabu St. and another at 8A Vecpilsetas St. The firm will restore both of these properties.

Contractors will break ground for the new skyscraper after environmental and engineering work is complete. When it is time, bid specifications will be available to Latvian companies.

"We do not intend to come in here to compete with Latvian builders, Preatoni said. "We come here with jobs for Latvians."

Funds for the acquisitions and construction are the product of a transaction Preatoni is completing with Estonian developers and Neotrust's purchase of a piece of the Riga World Trade Center (RWTC) through Latvia's privatization processes. An Estonian development company, Pro Kapital, is buying 70 percent of the shares of Neotrust by acquiring the holding of a former corporate shareholder owned by Ernesto Preatoni Group.

Pro Kapital will pay for Neotrust shares at their nominal value to equal the amount Neotrust is paying for shares in the RWTC. On Aug. 22, Neotrust won the right to purchase 26.5 percent of the shares of RWTC through the Latvian Privatization Agency. The price of the 107,325 RWTC shares was set at 196,013 lats, with 70 percent payable in cash and the remainder in Latvian privatization vouchers.

Neotrust has plans to boost the stock capital of RWTC by 1 million lats, money that Neotrust will use to finance renovation of 26 Kugu and the skyscraper next door, Neotrust spokeswoman Iveta Vanaga said.

Another Estonian developer, Jaanis Voitla owns the remaining 30 percent of Neotrust.

Why invest in small countries like Latvia and Estonia?

There are opportunities in the Baltics, said Preatoni, and he has enjoyed them.

"It is clear that I was part of the creation of wealth in Estonia," he said. "I helped the country and I also made a big profit. I can see investing in [Western] Europe only for political reasons."