Newsec in the Baltics advised Norwegian Schage Eiendom AS on the sale of the Quadrum BC in Vilnius. On 10th of October German real estate manager Deka Immobilien and Schage entered into an agreement regarding the largest office transaction in the history of the Baltics. The transaction is expected to be closed within about two months, subject to Competition Authority approval. Quadrum BC is the third investment by Deka in Lithuania.
Quadrum BC is located in the heart of Lithuania’s capital, Vilnius, in the area of the central business district. The landmark property is one of the largest office complexes in the Baltic region, built in three stages during 2016-2019. It has over 44,000 sqm of net leasable area. It also has three levels of underground parking with some 700 parking lots. Quadrum BC is anchored by the third-largest Baltic commercial and retail bank, Luminor (owned by Blackstone and DNB/Nordea), which occupies roughly 30 percent of the total area. There are over 35 tenants among which a mix of local head offices and international tenants.
According to Kjetil T. Hanssen, CEO of Schage in Lithuania, this transaction shows that Quadrum BC satisfies institutional investors’ quality requirements for a modern business centre. “Quadrum is the first such centre in the country to have been designed and built according to BREEAM international standard for sustainable buildings. It has been awarded by the Baltic Real Estate Investment Forum as the best office building in the Baltics. Quadrum stands out not just for the quality of the building and the great location, but also for its full occupancy and the long-term lease agreements that have been made,” Hanssen notes.
Quadrum BC is the first office property acquired by Deka Immobilien in Lithuania. Besides Quadrum BC Deka owns two shopping centres: Akropolis SC in Kaunas and BIG SC in Vilnius.
According to Andrius Svolka, Head of Transactions at Newsec in the Baltics, “interest and demand for Quadrum BC during the sale process from local and international investors was unexpectedly high given the size of the asset. This clearly demonstrates the improved liquidity of our markets and supports our assumption that the demand for the best quality assets in the best locations is very strong.”
The Baltic countries, the expert notes, continue to demonstrate solid macro fundamentals, continuous convergence to EU countries and influx of SSC/BPO tenants to the region. “We strongly believe that Baltic commercial real estate pricing/yields, currently 200-300 basis points higher than in Western European countries, will inevitably decrease in the coming years.”
The analysis of the Baltic commercial real estate microstructure clearly reveals that the existing yield gap (across all real estate segments) is unjustified, especially in light of the many advantages of Baltic commercial real estate: Baltic stock is relatively new, the majority of the buildings are energy efficient and have BREEAM/LEEDS certification, and lease agreements follow Western best practice and are typically secured by a Nordic or Western European parent companies, even as rents are at moderate levels. This combined with a higher yield gives EUR 3,000-4,000 as the maximum price per sqm.
Newsec estimates that with growing stock and new projects coming to the market, one can reasonably expect the Baltic transactions volume to set new records in the coming years and exceed EUR 1.5-2 billion per annum.
The seller was advised by law firm TGS Baltics and the buyer was advised by law firm Sorainen.
Savills Investment Management (Savills IM), the international real estate investment manager, transacted more than €3.6 billion globally in private real estate equity transactions in 2022 including c. €3.1 billion...