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Current Financial Situation in Latvia

Roberts Z朝le
Roberts Z朝le

Presentation by Mr Krlis 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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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: 846 Moscow: 835 Stockholm 437 Helsinki: 360 3
Latvias GDP (% change y-o-y) Source: Central Statistical Bureau, SEB 4
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
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
Wages and Productivity (seasonally adjusted data, per one working hour, 2004Q1 = 100) Nominal wages Productivity Source: Bank of Latvia 7
Share of Manufacturing in Economy (% of GDP) Czech Republic Poland Lithuania Estonia Latvia Source: SEB Bank 8
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
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
Credit Default Swaps: Latvia / Greece / Iceland Latvia Iceland Greece 11
Credit Default Swaps: Latvia / Romania / Hungary Latvia Romania Hungary 12
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
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
The Worlds 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
A crisis is a terrible thing to waste Latvia doesnt 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
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 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
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
Riga Plaza Retail Mall, (50% NCH Owned, with partner Plaza Centers Europe) 90,000 m2 GBA, 50,000 m2 GLA 21
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.
GroGlass nano-coating glass factory (inaugurated 2009) www.Groglass.com 23
Latvian JV partners for farming projects in Ukraine and Kazakhstan 24
NCH Fields in Ukraine 25
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
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
Karlis Cerbulis Senior Vice President NCH Capital, Inc. www.nchcapital.com karlis@nchriga.lv 28

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Current Financial Situation in Latvia

  • 2. PART I: Latvia Overview PART II: NCH Latvia Experience 2
  • 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. Latvias GDP (% change y-o-y) Source: Central Statistical Bureau, SEB 4
  • 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. 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. Wages and Productivity (seasonally adjusted data, per one working hour, 2004Q1 = 100) Nominal wages Productivity Source: Bank of Latvia 7
  • 8. Share of Manufacturing in Economy (% of GDP) Czech Republic Poland Lithuania Estonia Latvia Source: SEB Bank 8
  • 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. 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. Credit Default Swaps: Latvia / Greece / Iceland Latvia Iceland Greece 11
  • 12. Credit Default Swaps: Latvia / Romania / Hungary Latvia Romania Hungary 12
  • 13. Swedish Occupation I Estonia and Latvia (1629 1700) Positive times, during which this period also acquired fame as golden times. Wikipedia 13
  • 14. 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. 15
  • 16. The Worlds 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. A crisis is a terrible thing to waste Latvia doesnt 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 18
  • 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. 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. Riga Plaza Retail Mall, (50% NCH Owned, with partner Plaza Centers Europe) 90,000 m2 GBA, 50,000 m2 GLA 21
  • 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. GroGlass nano-coating glass factory (inaugurated 2009) www.Groglass.com 23
  • 24. Latvian JV partners for farming projects in Ukraine and Kazakhstan 24
  • 25. NCH Fields in Ukraine 25
  • 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. 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. Karlis Cerbulis Senior Vice President NCH Capital, Inc. www.nchcapital.com karlis@nchriga.lv 28