By Nigina Mirbabaeva

First private equity real-estate fund in the Baltic states to focus on assets in need of additional capital

The European Bank for Reconstruction and Development (EBRD) is supporting the first special opportunities-focused real-estate fund in the Baltic region with a clear emphasis on investments in assets that need an injection of equity or quasi-equity capital to execute a business plan.

The EBRD will make an equity commitment of up to €20 million(US$21.7million) to Usaldusfond EfTEN Special Opportunities Fund (EfTEN SOF), which is managed by EfTEN Capital, the largest real-estate fund manager in the Baltic states. This will be the Bank’s second investment in a real-estate fund managed by EfTEN Capital, following the Bank’s €30 million capital commitment to Usaldusfond EfTEN Real Estate Fund 4 in 2019.

EfTEN SOF was launched in January 2024 to invest in all real-estate asset classes, including residential property, in Estonia, Latvia and Lithuania. The fund will pursue a strategy targeting development projects that need additional capital and operational real-estate assets facing funding gaps.

The fund will aim to achieve very high energy efficiency in its projects, at least 10 per cent better than national “nearly Zero Energy Buildings” (nZEB) standards, which align with the EBRD’s green goals, as set out in its Green Economy Transition (GET) approach.

EBRD Head of the Baltic States, Tomas Kairys said: “We are proud to strengthen our partnership with EfTEN Capital through our investment in its new special opportunities fund. Our investment will not only support greater energy efficiency across the real-estate sector in the Baltic States, but also contribute to the strengthening of the private equity sector regionally – two of the EBRD’s priorities in the Baltic region.”

EBRD Head of Real Estate, Vlaho Kojakovic said: “We are proud to support a leading market player like EfTEN Capital in increasing and diversifying its range of strategies. Our investment will contribute to its continued  institutional development and will provide the necessary liquidity to address a specific financing gap in the market. This project is fully in line with our new real-estate strategy, reflecting our commitment to supporting innovative market solutions and enhancing the resilience of the real-estate sector in the region.”

EBRD Head of Equity Fund Investments, Anne Fossemalle said: “The EBRD is pleased to support EfTEN Capital and the wider Baltic states real-estate and private equity market at a time when the fundraising environment remains rather challenging.”

CEO of EfTEN Capital, Viljar Arakas said: “EfTEN SOF is the first ever fund in the Baltic states to provide capital for real-estate projects that are in an early stage or do not yet qualify for sufficient senior lending. The fund aims to fill the gap created by tighter banking-sector financing conditions and the decline in interest among foreign investors in the Baltic property sector. The fund’s preferred targets are those where, in joint control with the existing owners, we can successfully take real-estate projects to a successful exit. We expect to exit these projects over a 3-4-year horizon. The fund will provide financing through both equity and debt capital. The EBRD’s sizable commitment is proof that the viability of the fund’s investment strategy has been recognised at the highest international level.”

The EBRD is a major investor in the Baltic states. To date, it has invested over €1.1 billion through 117 projects in Estonia, more than €1.1 billion through 112 projects in Latvia and more than €1.6 billion through 133 projects in Lithuania.