Eastnine is a Swedish long-term real estate manager of modern, sustainable and geographically concentrated office premises at prime locations in the Baltic capitals. ~85% of the property value is located in Vilnius, where it is the largest prime office owner. The remaining ~15% is in Riga, including a smaller development portfolio with expansion potential. 22% of its holdings comprises other investments, including 17% in a retail chain and 5% in a real estate fund. The Baltics are growing faster than the Nordics and the office market is picking up speed, with an increasing inflow of international companies. The region is also technically advanced and has an attractive tax regime.
Historical growth has come chiefly through acquisitions and we expect that to continue in ’21-’23. Recent years’ uptick in both supply and demand for Baltic prime office properties provides good opportunities for Eastnine to expand its market share. We believe its financial position supports expansive growth since 1) average financing costs are just 2.3%, and 2) other investments for ~20% of total assets are unleveraged and enable – at divestment – significant acquisition volumes without reaching harmful LTVs.
Real estate companies are subject to macro risks, supply of premises risk, supply of capital risk, debt availability risk, forex risk, regulatory risk, rental income risk, property cost risk, property value risk and ownership risk. We argue that the key specific risks related to Eastnine are forex risk and portfolio risk.