BTA Baltic Insurance Company, a part of the Vienna Insurance Group, has agreed with the Finnish construction company and developer YIT to establish a joint venture and co-invest a total of €120 million in rental apartments in the Baltics. The seed portfolio consisting of ca. 500 apartments worth ca. €65 million will be acquired by the JV (Joint Venture) as the first step in a forward funding deal. The international real estate consulting firm Newsec in the Baltics advised YIT in the transaction, which is the largest residential rental deal in the Baltic so far.
According to the agreement, BTA will acquire five rental apartment blocks in Tallinn, Riga and Vilnius from YIT, which are currently under construction and will be delivered during 2021-2023. The seed portfolio is valued at €65 million once constructed. YIT’s share of investment in the JV will be 30 percent and BTA’s will be 70 percent. The JV intends to acquire future YIT’s residential development projects in pursuit of building up a portfolio of €120 million.
According to Andrius Švolka, the Head of Transactions at Newsec in the Baltics, this is one of the first rental housing portfolio deals of its size in the Baltic region. It is structured as a forwarding funding transaction, where the buyer finances the developer at an early stage in the development of properties. It is also a joint venture between the buyer and the seller which in addition to the sale of a seed portfolio includes housing projects that YIT will develop in the future.
“The market is seeing an increasing interest in residential rental property among institutional investors. The tender that Newsec organized for the sale of YIT’s portfolio also attracted a lot of attention from both international and regional investors. In the Nordics, for example, the rental housing segment accounts for 30-40 percent of the entire real estate transaction volume, since this asset class is seen as a safe alternative to zero yielding bonds. Residential rental projects will gain popularity among institutional investors in the coming years,” Švolka says.
This is the second residential rental investment transaction in the Baltics this year. In June, the Belarussian video game developer and publisher Wargaming bought 76 apartments in the Lithuanian capital of Vilnius. That deal had a value of €20 million.