Riigi Kinnisvara wants to manage state real estate

  • 2001-06-28
  • Kairi Kurm
TALLINN - Estonia's Ministry of Finance is planning to establish a real estate company, Riigi Kinnisvara, to administer the state's real estate holdings more effectively and sell unnecessary plots.

Finance Minister Siim Kallas presented legislation forming the company to the state chancellery on June 20 and it will be discussed by the government in a week.

The state owns about 15,000 pieces of real estate, which are managed by different ministries and state institutions. The new company will cut administration costs, maximize revenues, sell unnecessary buildings and improve transparency, ministry officials say.

According to Enn Teimann, the ministry's deputy secretary general, the new company would acquire most of the real estate managed and owned by the state. It would then renovate them, and rent them to state institutions or sell them. Similar companies have already been established in Latvia and Finland, he said.

"Its primary task is to set the administration in order," said Teimann. "It is much easier to draw a state budget when the managing of the household is transparent. It would enable comparison of the different ministries. It is not reasonable to reside where the expenses are high."

Teimann said that the Estonian Border Guard is currently located in the offices of the Estonian Customs Board, which pays for its maintenance.

Some of the specific cultural, educational or historical buildings like the government building on Toompea or the president's office in the Kadriorg palace, would not be given to Riigi Kinnisvara.

The Ministry of Finance is planning to give away its buildings this year. The share capital of the company would rise each time it acquires a new building. It would start with a 93 million kroon ($5 million) share capital and 6 buildings.

According to Teimann, the state does not expect the company to earn much profit.

"It would be like moving money in the same pocket. If it rents the building out on the real estate market, it should take into account the market prices and make profit. The other source of revenue would come from the sale of real estate," said Teimann.

Teimann admitted that the state had had a number of unprofitable rental contracts since the beginning of the 90s, when rental prices were low. "A contract is a contract and it cannot be changed," he said "We rented our cellar to a restaurant for 2 kroons per square meter until the contract ended this year."

Teimann said that state institutions would also have the right to rent bureaus from other real estate companies, but he doubts any of the ministries would want to do it.

The Ministry of Justice is presently the only state institution that rents rooms from a private company.

Urmas Laur, head of the company that operates the real estate portal www.city24.ee, said that Riigi Kinnisvara would regulate the market if it worked effectively and was not influenced by the personal interests of the people behind it.

Ain Kivisaar, an analyst from the real estate company Uus Maa, also feared that corruption might become a problem.

Laur suggested not creating a big administrative unit.

"They should decide on what to do with the buildings and buy the rental and services from real estate companies," said Laur.

He said that the supply of state buildings might decrease the rental prices of midlevel bureaus, where the prices range from 120 kroons to 160 kroons per square meter.

Kivisaar believes that the foundation of Riigi Kinnisvara would provide more intermediate work to real estate companies. The new company would not threaten their business but activate the market instead.

"Real estate companies usually do not own the property so they have nothing to lose when the prices drop," said Kivisaar.