Latvia


K.Cerbulis
NCH Investment Fund     September 2010
• PART I:    Latvia – Overview

• PART II:   NCH Latvia – Experience




                                       2
Three Laws in Real Estate:
       „Location, Location, Location.‟
Distance (km)
to Riga from:
 London: 1,662
 Berlin:   ...
Latvia‟s GDP (% change y-o-y)




Source: Central Statistical Bureau, SEB
                                             4
Bank Loans & Inflation
                       25,000                                                                      ...
Bank Loans & Apartment Prices
                       25,000                                                               ...
Wages and Productivity
(seasonally adjusted data, per one working hour, 2004Q1 = 100)



                              Nom...
Share of Manufacturing in Economy (% of GDP)

                                         Czech
                             ...
Latvia Reacts Quickly
                            Current Account (% of GDP)
       2000    2001      2002     2003   2004...
Latvia Reacts Quickly
                                Retail Trade (growth % YOY)
 60%

 40%

 20%

  0%
                 ...
Credit Default Swaps: Latvia / Greece / Iceland




                                Latvia



                      Icelan...
Credit Default Swaps: Latvia / Romania / Hungary




                              Latvia

                  Romania



  ...
„Swedish Occupation I‟
       Estonia and Latvia (1629 – 1700)



“Positive times, during which this period also
      acq...
„Swedish Occupation II‟
      (1998 - ...)




                          14
Rankings on the Ease of Doing Business
               (out of 183 countries)
                    2010 rank               E...
The World‟s Best Countries
(A Newsweek study of health, education, economy, and politics ranks;
                      out ...
“A crisis is a terrible thing to waste”
Latvia doesn‟t waste crisis opportunities:

    Fourth crisis since re-independen...
Part II:
NCH in Latvia –
  Experience



                  18
NCH in Latvia
 14+ years;
 One of the biggest US-based investors in Latvia;
 Initially largest investments in company p...
NCH Office-building Portfolio




   Kungu Str. 1, Offices & Retail, Old Town, Owned




                                 ...
„Riga Plaza‟ Retail Mall,
(50% NCH Owned, with partner „Plaza Centers Europe‟)




           90,000 m2 GBA, 50,000 m2 GLA...
NCH Land Bank Example - „Dreilini‟, Riga
Description:
 52 hectares in developing area at the
  inner-Riga Ring road, at a...
„GroGlass‟ nano-coating glass factory
        (inaugurated 2009)
        www.Groglass.com




                            ...
Latvian JV partners for farming projects in Ukraine
                 and Kazakhstan




                                  ...
NCH Fields in Ukraine




                        25
Positives of Latvia and the Baltics:

 Small and open economies;
 Advantageous location to bridge economies of East &
  ...
Investment Opportunities

 Real estate;
 Agriculture;
 Forestry;
 Transit (ports, logistics);
 Back office (incl. „ca...
Karlis Cerbulis
Senior Vice President
 NCH Capital, Inc.
www.nchcapital.com
 karlis@nchriga.lv


                        28
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Current Financial Situation in Latvia

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Presentation by Mr Kārlis Cerbulis, economics expert, Senior Vice President, NCH Advisors Inc. Baltic States at EP ECR group meeting in Riga, Latvia on September, 2010.

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Current Financial Situation in Latvia

  1. 1. Latvia K.Cerbulis NCH Investment Fund September 2010
  2. 2. • PART I: Latvia – Overview • PART II: NCH Latvia – Experience 2
  3. 3. 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
  4. 4. Latvia‟s GDP (% change y-o-y) Source: Central Statistical Bureau, SEB 4
  5. 5. Bank Loans & Inflation 25,000 16% 14% 20,000 Bank Loans 12% Bank loans, mill. Ls + 533% ! Inflation 10% 15,000 Inflation 8% 6% 10,000 4% 2% 5,000 0% - -2% 2003 2004 2005 2006 2007 2008 2009 2010-Q2 Source: Association of Latvian Commercial Banks, Central Statistical Bureau 5
  6. 6. Bank Loans & Apartment Prices 25,000 100,000 119 Series 2-room apartment (55 m2) 90,000 20,000 Apartment 80,000 price Bank loans, mill. Ls 70,000 +269% price, EUR 15,000 60,000 - 73% 50,000 10,000 +32% 40,000 Bank loans + 533% ! 30,000 5,000 20,000 10,000 - 0 2003 2004 2005 2006 2007 2008 2009 2010-Q2 Source: Associtaion of Latvian Commercial Banks, Ober-Haus 6
  7. 7. Wages and Productivity (seasonally adjusted data, per one working hour, 2004Q1 = 100) Nominal wages Productivity Source: Bank of Latvia 7
  8. 8. Share of Manufacturing in Economy (% of GDP) Czech Republic Poland Lithuania Estonia Latvia Source: SEB Bank 8
  9. 9. Latvia Reacts Quickly Current Account (% of GDP) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-Q2 15% 10% 5% 0% -5% -10% -15% -20% -25% Source: Bank of Latvia 9
  10. 10. Latvia Reacts Quickly Retail Trade (growth % YOY) 60% 40% 20% 0% Retail turnover -20% -40% -60% Registration of new vehicles -80% -100% Source: Latvian Association of Authorized Car Dealers, Central Statistical Bureau 10
  11. 11. Credit Default Swaps: Latvia / Greece / Iceland Latvia Iceland Greece 11
  12. 12. Credit Default Swaps: Latvia / Romania / Hungary Latvia Romania Hungary 12
  13. 13. „Swedish Occupation I‟ Estonia and Latvia (1629 – 1700) “Positive times, during which this period also acquired fame as golden times.” Wikipedia 13
  14. 14. „Swedish Occupation II‟ (1998 - ...) 14
  15. 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. 15
  16. 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 16
  17. 17. “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. 18. Part II: NCH in Latvia – Experience 18
  19. 19. 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. 20. NCH Office-building Portfolio Kungu Str. 1, Offices & Retail, Old Town, Owned Baznicas Str. 20/22, Offices & Basteja Str. 16, Offices & Retail, Old Town, Sold (2006) Retail, Downtown, Owned 20
  21. 21. „Riga Plaza‟ Retail Mall, (50% NCH Owned, with partner „Plaza Centers Europe‟) 90,000 m2 GBA, 50,000 m2 GLA 21
  22. 22. NCH Land Bank Example - „Dreilini‟, Riga 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.
  23. 23. „GroGlass‟ nano-coating glass factory (inaugurated 2009) www.Groglass.com 23
  24. 24. Latvian JV partners for farming projects in Ukraine and Kazakhstan 24
  25. 25. NCH Fields in Ukraine 25
  26. 26. Positives of Latvia and the Baltics:  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‟). 26
  27. 27. Investment Opportunities  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);  ... 27
  28. 28. Karlis Cerbulis Senior Vice President NCH Capital, Inc. www.nchcapital.com karlis@nchriga.lv 28
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