Raiko Uri, Managing Partner of Lumi Capital, will be a speaker at the conference “Investing in Commercial Real Estate” on April 17th.

Raiko Uri confirms that investors are still interested in the Estonian real estate market, but the final financing decision depends on several circumstances, such as how Estonia is portrayed in the media as a country, or elementary communication skills with a potential investor.

What is your opinion on the current investment environment in Estonia?

The general interest in real estate investments remains high. Funds have a lot of money and they need to invest it in something. The field of Estonian real estate investments is above all characterised by the small size of the market as there are few properties, transactions and market participants. One of the main questions for all the biggest investors is how they can later exit their investment. We cannot make our country any bigger, but we can apply a clever touch. For example, we can present ourselves as a part of the Baltic States, thus already making us a bit bigger.

It is also important to bear in mind that no international investor is obligated to invest a certain amount of capital in Estonian projects. Our rate of return may be a bit higher, but just a few reasons are enough to drive away a potential investor. Therefore, every negative message has a significant impact.

Recently, we met a Norwegian investor whose first comment was, “What’s going on over there in Estonia?! First you had that 200 billion money laundering scandal; now doping – are you even able to do anything without cheating?”

You could retort that you have problems in Norway too, but who cares about that? Norway doesn’t need to prove itself – they are pumping up cash from the ground. In our case, every little matter is important. We cannot allow to make any mistakes. What the foreign media writes about us and how they do it matters, as well as the image of our country, government, and investment environment.

What are the main stumbling blocks upon finding and involving investors?

Often enough, too few efforts are made to sufficiently understand the counterparty. What matters for this investor; why are they interested in this specific transaction? Furthermore, what are the main issues from the investor side and how to address them. This makes people overplay their hand – they don’t understand that investors do in fact need a great deal of information in order to even make an initial decision. 

The Estonian poet Juhan Liiv wrote 100 years ago, “Those who wish to be likeable must crawl.” Unfortunately, that’s still the case today. Local property owners are naturally more knowledgeable about their property and the local circumstances, and in that aspect, the investor’s questions may seem silly and annoying, especially in a situation where no offer hasn't even been made yet. But one won’t get far by rubbing it in for the investor. Once one has engaged in a plan for selling property, all sorts of questions need to be answered promptly, correctly, and as concisely as possible.

Furthermore, there’s a common myth that Estonia is a very simple environment for conducting business. That’s not really the case. The KYC (Know Your Customer) procedures of our banks are some of the most complex in Europe. Our taxes may be low, but our tax system keeps getting ever more complex.

Additionally, there are no agreed standard transaction terms and conditions and processes in the sector. In the case of most transactions, long negotiations are held over matters that have been adopted as standard in the rest of the world. This can easily create a conflict in which the foreign investor thinks that there is no real desire to conclude a transaction while the local partner thinks that they have been taken for a ride. The level of transaction advisers is inconsistent as well – many advisers lack an actual experience in international transactions. Fortunately, this is improving correspondingly to the increase in the transactions concluded.

What are the investment decisions of Lumi Capital based on?

To put it simply, we have three fields in Lumi Capital – neighbourhood shopping centres, rental apartment buildings, and everything else. Each field has its own important nuances and they all differ from each other. The sector of neighbourhood shopping centres depends on the location to a great extent. The number of consumers in the surrounding area must be known as well as how many of them reach the store and why. In this sector, we are willing to pay a high price for an excellent property, while our offer may seem low in the case of another location since we are able to see that rental income would decrease in the long term.

The strategy for rental apartment buildings is an example of us creating an entirely new market and a new real estate sector in Estonia. In a few months, the first apartment building (127 apartments) in Northern Tallinn that has been developed according to our Lumi Kodud concept will be completed. It has been created with a view of long-term rental business. We can see that this sector has a potential for growth in Tallinn as well as outside Estonia.

In the ‘everything else’ field, we must be diverse and flexible. This requires a different type of focus. In the case of each and every property, we must consider the pros and cons.

We have often received feedback from sellers that we are annoyingly thorough, but this is due to our long-term experience. Previously, before founding Lumi Capital, we have had to deal with property purchased without proper analyses and have seen the toil and issues related to it. This level of thoroughness has also helped avoid several bad decisions in the history of Lumi.

As we move on, we are planning to grow by means of involving enterprising and vigorous people. The real estate sector is currently in the middle of very interesting changes and developments. Making the correct decisions requires a very strong team with the desire and vision to perform to the fullest potential in this field.


Kentmanni 4, Tallinn 10116, Estonia (5. floor)

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