The real estate investment company INVL Baltic Real Estate will begin a public offering of shares on 2 May. According to the company’s public share offering prospectus published today, shares will be distributed in three stages and a total of up to 22% or 2.893 million of the company’s shares which are currently owned by the company Invalda INVL will be offered to investors for purchase through 13 December. The Bank of Lithuania approved INVL Baltic Real Estate’s prospectus for the public offering of shares on 23 April.
This share offering is considered a relevant alternative for those who want to invest in commercial real estate and is one that makes it possible to do so allocating even a small amount. Shares will be offered for purchase from 2 May through 4 July, from 18 August through 18 September, and from 2 November through 13 December, inclusive. The share price for each stage will be equal to the company’s most recently published net asset value per share.
The shares will be available for purchase by both institutional investors and Lithuanian residents. Purchase orders may be submitted at INVL Asset Management’s customer consulting offices in Vilnius, Kaunas and Klaipėda. An investor may acquire no less than 500 of the company’s shares.
“INVL Baltic Real Estate is a mature company managing an attractive portfolio of real estate. The assets’ great location and a professional team enable it to systematically increase the income flow that’s generated while also growing and expanding leasable areas by modernizing and reorganizing the properties it owns. We think the increased free float will make the shares more attractive and liquid. On our part, we have a policy of investing in the Invalda INVL group’s products together with clients, so we intend to retain a 10% equity stake in INVL Baltic Real Estate,” said Darius Šulnis, the president of Invalda INVL.
Of INVL Baltic Real Estate’s property holdings, 80% by asset value are in the central part of the city of Vilnius. Their occupancy levels at the end of March 2018 ranged from 77% to 100%.
“Thanks to the properties’ attractive location and effective work to ensure high occupancy, INVL Baltic Real Estate’s net operating income from its property holdings has grown in recent years and should, we hope, maintain a similar pace of growth in the future, too. That also means growth in the value of the assets and in the return to investors. So for those seeking alternatives for investing in real estate, this is a chance to allocate some funds to a commercial real estate portfolio with good prospects,” said Vytautas Bakšinskas, the real estate fund manager at INVL Asset Management, which manages INVL Baltic Real Estate.
Unlike when investing in housing, he said, these assets do not require additional maintenance. Moreover, he noted, the investment has flexibility, since the amount invested is relatively small and, if needed, shares can be sold.
INVL Baltic Real Estate’s actual average annual return (taking the net asset value as the sale price) from the beginning of 2016 when the last share offering was held to the end of 2017 was 18.4%. And from the shares’ listing on the Nasdaq Vilnius exchange in June 2014 to the end of 2017 it was 14.9%. The attractiveness of INVL Baltic Real Estate’s shares should also be increased by the more than doubling of dividends in the company’s dividend policy late last year to EUR 0.13 per share. That is the size of the dividends that INVL Baltic Real Estate decided to pay for 2017.
INVL Baltic Real Estate owns real estate in Vilnius and Riga: office and commercial premises at the Vilnius Gates complex in the Lithuanian capital, the IBC Business Centre near Konstitucijos Avenue, office buildings in the Old Town on Vilniaus Street and in Šiaurės Miestelis, and the Dommo Business Park manufacturing, warehouse and office complex beside the Riga bypass. As at 31 December 2017, INVL Baltic Real Estate’s property holdings had a total area of 56 900 square metres and a value of EUR 56.3 million.
Considering real estate investment alternatives, data for the Lithuanian Investment Index*published by INVL Asset Management show the long-term return on investments in housing depends on when the assets are acquired (note that starting in 2016 the return is assessed net of expenses). If the average annual return on an investment in rental housing over the period 1996-2017 was 14.3%, over just the last 10 years it was only 1.2%. For an investment in non-rental housing, the average return for 1996-2017 was just 6.4%, while for 2008-2017 it was negative 3.7%. For the period from 2014 to the end of 2017, the average annual return on rental housing was 8.5% and that on non-rental housing was 3.7%.
INVL Baltic Real Estate’s consolidated equity at the end of 2017 was EUR 33.86 million. Equity per share was EUR 2.57 and increased 11 per cent in the year. INVL Baltic Real Estate’s consolidated net operating income from its property holdings in 2017 was EUR 2.68 million, or 14 per cent more than in 2016. Invalda INVL currently owns 32.23% of the shares of INVL Baltic Real Estate.
Since 22 December 2016, INVL Baltic Real Estate has operated as a closed-end investment company. Management of the company was assumed by INVL Asset Management, one of Lithuania’s leading asset management firms. The company will operate as a closed-end investment company until 2046, with extension possible for another 20 years.
* Return on investments in housing is calculated based on the Ober Haus OHBI index for 1995-2017. Return on rental housing investments is calculated, for 1995-1998, based 50% on the Ober Haus OHBI index and Statistics Lithuania’s rental index and 50% on ads in “Alio Reklama”, and for 1998-2017, based on Ober Haus rental yield data (weighting Vilnius 60%, Kaunas 20% and Klaipėda 20%). Since 2016, income from rental housing is calculated net of expenses, which account for 25% of housing rental income.