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Ober-Haus cashes in on investments

  • 2003-09-25
  • Aleksei Gunter
TALLINN - The Ober-Haus Group, the largest real estate agency in the Baltics and Central Europe, recently sold the majority of its retail portfolio in Tallinn, though the group will carry on with property development in the Estonian capital.
According to Paul Oberschnei-der, CEO of Ober-Haus, the group sold a total of 50,000 square meters of retail space, mostly located in Tallinn, to Apollo Real Estate Investment Fund III.
The price of the deal was approximately 38 million euros.
The portfolio transaction included the 15,000-square-meter Norde Centrum mall located in the passenger port area and the 25,000-square-meter shopping center to be opened in Lasnamae, a Tallinn suburb, this week.
Apollo Real Estate is a group of private U.K. investors with whom Oberschneider has acted as regional operating partner since 1998.
The portfolio sale did not spell the end of Ober-Haus' involvement in property development in Estonia.
Rather, the decision to sell was based on "right market conditions," according to Oberschnei-der.
"The assets have now reached an investment stage in their life cycle. We had been working on this transaction for a year, meeting with a number of both institution and private investment groups. In the end, we felt that the private group could close the deal," said Oberschneider.
"The purpose of selling the assets is to return capital back to our partners, and the time was right to do that."
Apollo will remain Oberschneider's partner in other property developments, including the Schlossle Hotel Group's three luxury hotels and the Ober-Haus real estate agency business.
Estonia's Hansapank refinanced the portfolio for the transaction by replacing a syndicated loan with L.B. Kiel and now is the sole lender on the portfolio.
Oberschneider told the daily Aripaev that although the bank still considers the retail sector a risky business, refinancing is seen as less dangerous.
According to Chris Eddis, senior partner at Mornington Capital, the company that assisted Ober-Haus in structuring the sale, the transaction should set the standards for future deals in the region.
"The deal represents the first large investment transaction of a modern built retail portfolio to an outside investment group. Many investors and funds have been circling in the region for some time, but this is the first regional transaction of this size," said Eddis.
Established in 1994, Ober-Haus has closed deals worth about 89 million euros on behalf of its clients last year.
Commenting the current market situation, Oberschneider stressed that the retail market in Estonia was "saturated."
"There is enough retail space on the market now. It would be unlikely to see any new developers doing new projects," he said, adding that Tallinn has the highest rate of retail space per capita compared with Prague and Warsaw.
In the future, Ober-Haus could shift from retail to residential housing. "We're looking to do a residential project in the near future in Estonia," Oberschneider said.
Pindi, a real estate agency, described the current situation in the retail sector as an "intensification of existing trends," adding that no one has come up with a new major shopping center project in the last several months.
Pindi also emphasized the banks' skeptical attitude toward retail sector financing and predicted longer – up to 10 years – rent contracts with strict termination clauses that would replace the current two or three year contracts.
Analysts from Arco Vara, a real estate company, said the next major change to take place on the property development market would come with the introduction of VAT on land plots and new building sales beginning May 1, 2004.
As a result of the tax, the profits of real estate developers will decrease, and smaller developers will have to give up their business as a result of the taxation that is required of all EU member states, according to Arco Vara.