East Capital strikes first deal for Baltic fund

The Stockholm-based firm reveals details of its first investment for the East Capital Baltic Property Fund II, which has a €10m commitment from listed parent company, East Capital Explorer.

East Capital, the Stockholm based investment manager, has secured a first deal for its East Capital Baltic Property Fund II.

Unveiling details of the maiden investment, the firm with €3.4 billion under management in public equity, private equity and real estate, said it had bought a 430,000 square feet newly-built, fully-leased logistics property in Tallinn, Estonia. The seller of the property is VGP, a real estate development company specialising industrial parks and logistics complexes in central and eastern Europe.

The strategy for the East Capital Baltic Property Fund II is to invest in commercial properties in the Baltic region, primarily in shopping centres and retail properties, as well as logistics and office properties.

It is seeking an internal rate of return of between 15 percent 20 percent and is slated to last seven years with a possible extension of up to three years. In a first close in December, the fund received a €10 million commitment from listed parent, East Capital Explorer, also based in Sweden.

East Capital said the Baltic countries were hit hard by the global financial crisis, however all of the region’s economies have since recovered well with Estonia leading the way. The real estate market is recovering, the oversupply has been handled and rents have stabilised, it added.

Biljana Pehrsson, head of East Capital Real Estate, said: “There is an opportunity to invest in the Baltic real estate market at attractive yields. The outlook for the property market is positive in the medium term and the trend is for institutional investors to increase the weight of real estate assets in their asset allocation.”

Mia Jurke, chief executive officer at East Capital Explorer, said in December of its commitment to the fund: “Real estate has been a targeted sector for East Capital Explorer since its start and we believe that this is a good time for us to increase our exposure to this sector. The current yields are attractive and we are convinced that the investment will add value to our shareholders.”