My presentation in Baltic Real Estate Investments Forum 2015

1. PRIVATE EQUITY REAL ESTATE: fundraising and structuring
Baltic Real Estate Investments Forum, 2015, Vilnius
Benas Poderis, Head of Investment Funds Center, ORION ASSET MANAGEMENT

2. Access to Private Equity investors: what do all these have in common?
People having
money:
High Net Worth
Individuals,
corporations etc.
People (?)
money: lawyers,
tax advisers,
evaluators, other
service providers
etc.
People making money
(having RE projects /
target investments):
developers, project
managers etc.
People managing
money : family
offices, asset
managers, pension
funds, insurance
companies banks etc.

3. Access to Private Equity investors: securitization way to attract all
People having money: High Net Worth Individuals, corporations etc.
People making money (having RE projects / target investments):
developers, project managers etc.
People managing money : family offices, asset managers, pension funds,
insurance companies, banks etc.
IPO/SPO (listing)
BONDS /
CONVERTIBLES
COLLECTIVE
INVESTMENT
SCHEMES

4. Access to Private Equity investors: simple math (Lithuania)
1 2
6 7 7
12
18
2 2 2 2 2
3 3
1 0 0 0 0 0 0
0
5
10
15
20
2009 2010 2011 2012 2013 2014 2015*
Number of financial instruments
RE Investment Funds (licensed in LT)
Listed instruments
RE private BONDS
5 5 11
23 25 28
130
0
50
100
150
2009 2010 2011 2012 2013 2014 2015*
RE Investment Funds (licensed in LT)
Listed instruments
RE BONDS
New capital raised
200 m. EUR
*expected, due to the data about funds currently raising capital or funds currently being
established
0 m. EUR
37,5 m. EUR

5. Expectations of HNWI and other PE investors:
0
2
4
6
8
10
12
14
16
18
20
2007 2008 2009 2010 2011 2012 2013 2014 2015*
6 month EURIBOR (%) 2 year+ deposit (%) Target returns (%) Inflation
Correlation (does not) implies causation?
The magic of double digits.
Trendy words: conservative scenario; low risk; stable cashflow; HQ collateral;
track record; unbreakable lease agreements. But what do double digits stand
for?
local banks

6. Simplified practical example: development project
Project RE development
Size 50 m. EUR
Developers
equity (project
initiator)
5 m. EUR
Capital needed 45 m. EUR
Expected
returns (no
leverage)
6 %
Advantages Lease agreement.
Step 1: project
Project RE development
Bank financing 65 % (32,5 m. EUR)
Equity needed 35 % (17,5 m. EUR)
Developers
equity
5 m. EUR
Additional capital
needed
12,5 m. EUR
Expected returns
(with leverage)
13-15 %
Step 2: financing structure Step 3: project structuring
Instrument Problems
Finding co -
investors
Development risk
Too big exposure
Control of project
As more co-investors as
harder the management
Bonds No collateral (everything
will e pledged fo a k’s
financing)
Guarantees of parent
o pa ies’ to e e ui ed
Listing Almost impossible for
project companies

7. SEED
EUR 50 m. INVESTMENT PORTFOLIO
A class (EUR 5 m.) B class (EUR 12,5)
INVESTMENT FUND
EQUITY 17,5 Bank financing 32,5 m. EUR
Simplified practical example A: project structure
Financial
investor B
PROJECT Company
INVESTMENT FUND
(EUR 12,5 m.)
EQUITY 17,5 Bank financing 32,5 m. EUR
DEVELOPER
(EUR 5 m.)
Financial
investor C
Financial
investor A
Financial
investor B
Financial
investor C
Financial
investor A
Step 4: project structuring and fundraising
Option A Option B

8. 1+
m. EUR
0,5 – 1 m. EUR
125-500 K EUR
30-125 K EUR
40%
30%
20%
10%
Ancher investors (1-2 m.
EUR)
Big investors (0,5-1 m.
EUR)
Medium investors (125 K
- 500 K EUR)
Small investors (30 K -
125 K EUR)
Simplified practical example A: investors structure
Number of investors Amounts invested
2-4
3-5
6-12
20-30

9. 2015 III-IVQ. SUMMARY & INSIGHTS:
• LACK of specific RE products:
• PE RE investment products in the Baltics are too focused on big retail and office properties
• It implies growing demand for non – standard RE investment products (not correlating with traditional RE classes):
SAFE PROJECTS
Low leverage;
Return 6-8%;
Collateralized;
Fixed yield
INFRASTRUCTURE RE:
Property related to
infrastructure objects / PPP
projects
Very focused investment
strategy
Backing of State / municipality
SPECIFIC PURPOSE / UNIQUE
RE
Focused investment strategy
RE for accommodation, health
procedures.
POLITICAL RISK – FREE
ASSETS
Property outside Baltics
• TRANSPARENCY:
• Market transparency will continue to increase
• More RE projects will be developed under or bought by regulated investment vehicles
• GROWTH of RE related financial instruments and assets of REIFs:
• Baltic pension funds investing into RE funds managed by local managers
• First signs of resurrection of corporate bond market
• LEAKAGE OF CAPITAL:
• Baltic asset managers / RE developers will look out for RE projects outside Baltics & raise capital locally
• Political risk, Increased assets implies possibility to reconsider the domicile for business

10. THANK YOU FOR YOUR ATTENTION
Benas Poderis
Head of Investment Funds Center
bp@orion.lt
A.Tumeno str. 4, Vilnius, Lithuania
www.orion.lt