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Latvia
September 2010
K.Cerbulis
NCH Investment Fund
2
• PART I: Latvia – Overview
• PART II: NCH Latvia – Experience
Three Laws in Real Estate:
„Location, Location, Location.‟
Distance (km)
to Riga from:
London: 1,662
Berlin: 846
Moscow: 835
Stockholm 437
Helsinki: 360
3
Source: Central Statistical Bureau, SEB
Latvia‟s GDP (% change y-o-y)
4
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
-
5,000
10,000
15,000
20,000
25,000
2003 2004 2005 2006 2007 2008 2009 2010-Q2
Bank Loans & Inflation
Infl
ati
on
Source: Association of Latvian Commercial Banks, Central Statistical Bureau
Bank Loans
+ 533% !
Ba
nk
loa
ns,
mil
l. L
s
Inflation
5
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
-
5,000
10,000
15,000
20,000
25,000
2003 2004 2005 2006 2007 2008 2009 2010-Q2
Bank Loans & Apartment Prices
119
Ser
ies
2-r
oo
m a
part
men
t(5
5 m
2)
pri
ce, E
UR
Source: Associtaion of Latvian Commercial Banks, Ober-Haus
Apartment
price
+269%
- 73%
Ba
nk
loa
ns,
mil
l. L
s
Bank loans
+ 533% !
+32%
6
Wages and Productivity(seasonally adjusted data, per one working hour, 2004Q1 = 100)
Source: Bank of Latvia
7
Nominal wages
Productivity
Share of Manufacturing in Economy (% of GDP)
Source: SEB Bank
8
Latvia
Estonia
Lithuania
Poland
Czech
Republic
Latvia Reacts QuicklyCurrent Account (% of GDP)
Source: Bank of Latvia
9
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-Q2
Latvia Reacts QuicklyRetail Trade (growth % YOY)
Source: Latvian Association of Authorized Car Dealers, Central Statistical Bureau
Registration of
new vehicles
Retail turnover
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
10
Credit Default Swaps: Latvia / Greece / Iceland
11
Iceland
Greece
Latvia
Credit Default Swaps: Latvia / Romania / Hungary
12
Romania
Hungary
Latvia
„Swedish Occupation I‟
Estonia and Latvia (1629 – 1700)
“Positive times, during which this period also
acquired fame as golden times.”
Wikipedia
13
„Swedish Occupation II‟
(1998 - ...)
14
15
Rankings on the Ease of Doing Business
(out of 183 countries)
2010 rank Economy
1 Singapore
2 New Zealand
3 Hong Kong
4 United States
5 UK
10 Norway
24 Estonia
25 Germany
26 Lithuania
27 Latvia
72 Poland
Source: Doing Business 2010, World Bank.
16
The World‟s Best Countries(A Newsweek study of health, education, economy, and politics ranks;
out of 100 countries)
2010 rank Country
1 Finalnd
2 Switzerland
3 Sweeden
4 Australia
5 Luxemburg
12 Germany
14 UK
32 Estonia
34 Lithuania
36 Latvia
38 Bulgaria
43 United Arab Emirates
Source: Newsweek
“A crisis is a terrible thing to waste”
Latvia doesn‟t waste crisis opportunities:
Fourth crisis since re-independence in 1991;
Country stronger from each crisis
(previous crisis have been EXCELLENT buying
opportunities);
Latvia dedicated to becoming a regular Nordic / EU
economy;
International competitiveness restored with falling
wages/costs.
17
18
Part II:
NCH in Latvia –
Experience
NCH in Latvia
14+ years;
One of the biggest US-based investors in Latvia;
Initially largest investments in company privatizations
(including „Unibanka‟ – now SEB Latvia);
Financial services (largest insurance company „Balta‟ –
sold to Codan Insurance, Denmark, 2001);
~ 80% of current portfolio in real estate
(www.Domuss.lv, www.RigaPlaza.lv);
Direct equity investments
(www.Sidrabe.com, www.GroGlass.com);
Source of farming JV partners for large-scale farming
projects in Ukraine and Kazakhstan (> 200,000 ha
cropland).
19
20
Kungu Str. 1, Offices & Retail, Old Town, Owned
Basteja Str. 16, Offices & Retail, Old Town, Sold (2006)
NCH Office-building Portfolio
Baznicas Str. 20/22, Offices &
Retail, Downtown, Owned
21
„Riga Plaza‟ Retail Mall, (50% NCH Owned, with partner „Plaza Centers Europe‟)
90,000 m2 GBA, 50,000 m2 GLA
Description:
52 hectares in developing area at the
inner-Riga Ring road, at a large
intersection with heavy traffic flow.
15 hectares - excellent
location for a Retail
Project, 37 hectares - zoned
as residential and mixed-use.
NCH Land Bank Example - „Dreilini‟, Riga
23
„GroGlass‟ nano-coating glass factory
(inaugurated 2009)
www.Groglass.com
24
Latvian JV partners for farming projects in Ukraine
and Kazakhstan
25
NCH Fields in Ukraine
26
Small and open economies;
Advantageous location to bridge economies of East &
West;
Adaptable, multi-lingual workforce;
Much closer than China;
Northern European country;
Quickly adjust to crisis and „learn the crisis lessons‟;
Competitiveness being restored quickly – costs falling;
Things happen fast here (we live in „dog years‟).
Positives of Latvia and the Baltics:
27
Real estate;
Agriculture;
Forestry;
Transit (ports, logistics);
Back office (incl. „call centers‟);
„Stepping stone‟ offices/partnerships for Russia, Ukraine,
Belarus, ...
Export oriented industries;
Small manufacturing plants (closer than China);
...
Investment Opportunities
28
Karlis Cerbulis
Senior Vice President
NCH Capital, Inc.
www.nchcapital.com