Russian money flooding Estonia’s real estate market

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This is good news for the Estonian commercial real estate market which has recently seen exodus of Finnish investors who are also suffering from Finland’s poor economic growth.

Aavo Kokk, CEO of real estate advisory company Catella Corporate Finance says that these are good times for commercial real estate.

Kokk says that while earlier, attractive commercial properties attracted 3 to 4 bids, there are now over ten bidders competing for it, the majority coming from Russian investors.

Some of the largest deals completed in the last six months include the sale of De la Gardie department store building in Tallinn Old Town, sold by Finnish owners to Russians.

The new owner of the building located at Viru street, Old Town’s main shopping street, is Lepidus Ltd that belongs to Dmitry Skvortsov.

In another deal a few weeks ago, Russia investors Tatjana Tolstaja and Vitaly Yakovlev, who own DLT Capital, acquired the Cinamon chain of cinemas in the Baltic states.

A third deal was the acquisition of the central storage and office complex of Magnum Medical, Estonia’s largest pharmaceutical wholesaler and retailer by Star Investments.

Star Investments has 14 Russian shareholders, most of whom are Russians who received residence permits with the help of Indrek Raudne and Nikolai Stelmach.

In addition to these acquisitions, Russians are behind many other deals which have not been made public as many prefer to keep their holdings secret from Russian authorities.

Specialist asset managers

Several companies are now specialising in managing assets of wealthy Russians in Estonia and Western Europe.

„These companies are very professional,” says Kokk, adding that they usually don’t have to advertise their services as this business works on word-of-mouth and personal references.

One of such companies is Capital Mill which, according to Äripäev, has in 2014 alone invested more than 160 million euros in Russians’ assets in Estonia, including acquisitions of office buildings, department stores, warehouse centres, new developments and even daycare centres all over Estonia.

Igor Mölder, CEO of Capital Mill, said that the interest of Russians towards owning Estonian real estate is growing.

Mölder said that Capital Mill was preparing several sales which are worth more than ten million euros and could be above the reach of most local investors.

Mölder said that he cannot name any specific deals or investors and refused to discuss future plans of Capital Mill.

Family office

One of the companies that manages wealthy Russian assets is Zenith Capital Management, which is co-owned by Kristel Meos, former manager of Trigon Wealth Management.

Meos said that Zenith, founded in 2011, not only manages Russians’ assets, but also advises them in other financial issues such as taxation and attracting capital.

According to Meos, most customers of Zenith are from Russia, Ukraine and the CIS countries.

„Estonia has a good image as an innovative and proactive country and helps to attract customers,” he said. Other reasons why Russian investors are attracted to Estonia is the country’s stable monetary system, economic and political stability, little corruption and lower costs than in Finland or even Russia itself.

Also Meos was not willing to mention any names or deals, although it is known to Äripäev that it advised the acquisition of De la Gardie department store building and had registered Lepidus Invest, the buyer.

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