Real estate (RE) development company Eika, which decided to issue securities for the first time, has successfully distributed a bond issue worth EUR 5 million. The two-year bonds attracted more than 100 retail and institutional investors, and the investment amounts ranged from a minimum of EUR 1,000 to EUR 500,000..
“The successful distribution of bonds shows that the trust we have in the real estate market and the business community can be “transferred” to the capital market. This method of raising funds allows us to take advantage of alternative financing options for real estate projects and thus diversify funding sources. This is especially important now, during the quarantine period, because we are not stopping projects and everything continues as planned,” says Domas Dargis, CEO of Eika.
UAB “Eika” bonds were distributed by AB Šiaulių bankas from October 26 to November 11, and the asset manager UAB FPĮ “Gerovės valdymas” also declared its clients’ interest in the public space.
“Eika’s debut on the capital markets was special because, during a time of economic uncertainty, it managed to attract the interest of a large number of investors. The company’s reputation, experience, reliability, and diversified activities are some of the main factors that determined the successful distribution of bonds. By opening the doors of the capital market, the company will have an additional source of financing for its activities or specific projects in the future,” says Tomas Varenbergas, Director of the Markets and Treasury Department of Šiaulių bankas.
For all investors – 5 percent interest
The distribution of Eika bonds attracted a total of 107 investor applications. Each market participant could offer an annual interest rate of 4.5 to 5 percent when filling out bond purchase applications. The majority of applications – 61 percent – indicated the lowest interest rate of 4.5 percent, the rest indicated higher interest rates: 30 percent – 5 percent, and the remaining 9 percent – in the interest rate range of 4.6 – 4.99 percent.
“We carried out the distribution under the aggravating circumstances of the pandemic, when an increasing number of investors switched to remote work, but thanks to joint efforts with partners, we managed to maintain buyer interest and successfully complete the bond distribution,” says Indrė Dargytė, member of the board of Eika Asset Management.
According to her, despite the possibility of issuing a smaller issue with the lowest interest rate, Eika decided to satisfy all investor applications, so the final interest rate for all investors will be 5 percent. “In our case, the demand for bonds matched the supply and, despite the deteriorating expectations in the capital markets, allowed us to secure a positive result,” says I. Dargytė. Interest will be paid to investors every six months, and the bonds will be redeemed after two years.
Plans to return to borrowing after a year
As planned, a large asset manager, UAB FPĮ “Gerovės valdymas”, invested in the Eika bond issue – the oldest independent licensed multi-family office (Eng.. multi-family office) in Lithuania.
“As we expected in the first days of the issue, investments with a fair return and risk ratio are always in demand. This was confirmed by both our clients, who purchased about 30 percent of the Eika bond issue, and other individual investors. This event is important for the entire Lithuanian capital market, as it shows that successfully operating companies can borrow in the form of bonds and thus diversify their sources of capital. And investors contribute to the development of such companies,” says Vilius Oškeliūnas, wealth manager at the financial advisory company Gerovės valdymas.
Eika plans to allocate the raised funds to the development of future projects of the company group, and primarily to the co-living apartment project planned on Šv. Stepono Street.
Depending on the need for funds, the company plans to return to borrowing from the capital market in about one year.
The consolidated revenue of the real estate development and construction group Eika last year reached 53.3 million euros, i.e. 11.5 percent more than in 2018. In 2019, Eika sold a record number of apartments – 450. Also, in July 2019, the company completed the development of the multifunctional complex Live Square worth 49 million euros, which consists of the Live Square business center with a shopping gallery and a roof terrace, the Hilton Garden Inn hotel and residential apartments.