January 30, 2024
Union Asset Management, an investment asset management company managing more than 80 million Euros of assets across various asset classes, reports the annual results of the “Union Funding Solutions Fund I” directly investing in private company debt securities. In 2023, the fund achieved an annual return of 15.2% after management fees. Calculated from the beginning of the fund’s investments in October 2021, the average return for the fund investor was 11.6% after management fees.
“A stable fund return for the investor is the result of an extensive project selection and analysis. We are pleased to have maintained a high return on fund investments and we see a significant potential in the market. Both investors and fund clients appreciate our flexibility, which results in effective and flexible debt and project management, creating value for all parties involved,” says Ramūnas Baranauskas, CEO of Union Asset Management.
Target Market
The Union Funding Solutions Fund I was established to respond to companies’ need to quickly and flexibly leverage capital sources, offering value-creating solutions to companies. In 2023, the fund analyzed more than 150 financing opportunities from various economic sectors with individual financing needs. Fund management is efficiently coordinated to smoothly and promptly respond to financing needs, filling the gap in the debt market due to more conservative bank financing.
The target market for the fund investment is Lithuania, but we are analyzing projects in neighboring countries as well. Currently, we see increased interest from the business side, especially in the real estate sector and in working capital or acquisition transactions. The size of the loans we consider financing ranges from 200 thousand euros to 4 million euros with a term not exceeding 2 years.
“The fund offers investors the opportunity to diversify their capital and allocate a portion of it to debt instruments, traditionally owned by banks, which are currently a rapidly growing asset class with economic cycle-driven increased returns,” says Ramūnas Baranauskas.
Risk Management
The fund’s team applies strict risk management to ensure a balance between investor safety and project sustainability. Most projects are secured by primary collateral. Diversification is applied across different asset classes, terms, and debt intensity in the fund.
“We do not have strict financing limits for sectors or borrowing levels. It is important for us to understand the issuer’s business plan and the value our financing will create. Then, depending on the project, we propose a deal structure where financing can be traditional with collateral or typical and less common in our market, such as Mezzanine,” says Ramūnas Baranauskas.
About Union Asset Management
Union Asset Management, founded in 2020 and licensed by the Bank of Lithuania, is an investment management company managing 5 different strategies of collective investment entities for informed investors. The company provides a wide range of investment services from asset value growth to conservative investing and asset accumulation with balanced risk. Asset custody and depositary functions are provided by AB “Swedbank”.
In June, a new fund established by the investment management company “Union Asset Management” with a planned size of over 20 million euros intends to acquire three hotels – two in Kaunas and one in Riga. This is the fund’s first step, with a perspective of building a portfolio of up to 100 million euros.
The “Union Hospitality Investment Fund” portfolio will be supplemented by “Ibis Kaunas Centre” and “Ibis Styles Kaunas Centre” hotels located in Vytauto Av. 28 and Vytauto Av. 25, Kaunas, as well as “Ibis Riga Centre” located in Marijas St. 5 in the capital of Latvia.
According to Ramūnas Baranauskas’, CEO of “Union Asset Management”, report to VŽ, the deal is expected to be completed in June, after which the fund will acquire shares of the companies managing the hotels.
According to the data from the Register Center, “Ibis Styles Kaunas Centre” currently belongs to UAB “Union finance”, whose shareholders are Ramūnas Baranauskas and Donatas Karčiauskas. Previously, the hotel “Magnus Hotel” operated in the building, which was sold to “Achema” group for an undisclosed sum in 2020.
Meanwhile, the hotel “Ibis Kaunas Centre” belongs to UAB “NTD3”, which until April 2023 belonged to the investment company “Nter Asset Management” (formerly “Orion Asset Management”) fund “Diversified RE Fund”. Now its shares belong to “Union Capital”, which is equally owned by R. Baranauskas and D. Karčiauskas.
The hotel is being acquired from the “Wisher Enterprise” company in Riga.
The investment fund “Union RE Core Fund I” acquired a company managing a 17,352 square meter shopping, services, and leisure center in Taikos st., Klaipėda from the “Lords LB Baltic Fund III”.
The acquisition of commercial real estate in Klaipėda marks the third investment of the “Union RE Core Fund I”.
The main tenants of the real estate object are “Rimi”, “Topo centras”, “Jysk” retail chains, and other well-known brands. The property is strategically located in a prime area of Klaipėda, near the “Švyturio arena,” the only multifunctional sports and entertainment venue in Western Lithuania, adjacent to the “Akropolis” shopping and entertainment center, and other popular attractions loved by the locals. Additionally, a “Decathlon” store, part of the French sports equipment retail chain, is being constructed on the adjacent plot, along with the “STOCK-O” commercial building complex.
“With this acquisition, which is already the third within the first year of the Fund’s operation, we have formed a well-diversified real estate portfolio characterized by both a unique location in the city and a solid tenant structure. Currently, the fund manages over 40,000 square meters of premises, all fully leased.
Although during the acquisition process, we encountered a rapidly changing economic environment due to the war in Ukraine, we were forced to briefly pause and reassess the macroeconomic landscape and the increasing inflation outlook. We made the decision to proceed with completing the ongoing acquisition,” said Ramūnas Baranauskas, the company’s CEO.
“Despite the highly complex geopolitical situation, quality commercial real estate in major cities continues to attract active investor interest. We are pleased to start a successful collaboration with the “Union Asset Management” investment fund in a classic market transaction, where one professional investor, “Lords LB Asset Management,” completes its long-term investment cycle and transfers the created value to a new fund in the growth stage,” said Vilius Juzikis, a SEB bank board member and a corporate banking director.
“The fund invests in both income-generating and development real estate projects. Currently, we are completing the development of a commercial car service center project in Vilnius and expanding the area of our managed industrial real estate property in Kaunas.
The shopping, services, and leisure center in Klaipėda will complement the list of commercial real estate properties managed by the Fund in Vilnius and Kaunas, which we plan to expand by acquiring new properties not only in Lithuania but also in Latvia and Estonia. The attractive rental yield of the properties, competitive price per square meter, and good technical condition will undoubtedly ensure the growth of the property value in the future.
The fund is in an active acquisition stage, and we are focused on real estate assets in the industrial, services, and retail sectors. We are consistently implementing the Fund’s strategy and aiming for the risk-return ratio to meet investors’ expectations,” commented the Fund Manager Andrius Baranauskas.
“The port city will always remain a strategically attractive location for real estate investments, especially if the property is located in touristy areas. The sold shopping and leisure center has loyal tenants and customers and is strategically located in Klaipėda,” commented Efim Hiterer, the fund manager of “Lords LB Baltic Fund III”.
The “Union RE Core Fund I” real estate transaction was represented by the law firm “Cobalt,” with legal advice provided by the law firm “Sorainen”. The transaction was brokered by the real estate consulting company “Newsec”.
The first investment of the “Union RE Core Fund I” was made in February 2021 – the acquisition of the “Sostena” car service center project in Vilnius.
The object is currently under development and Renault and Dacia car maintenance and repair center, as well as a car dealership, will start operating there in the second quarter of 2022.
The second fund investment is an industrial complex of more than 18,000 square meters in Kaunas, acquired in November 2021.
“The Union RE Core Fund I” fund started operating in January 2021 and plans to fully form its managed portfolio within the first two years, with a value of up to 50 million euros.
Briefly about “Union Asset Management”
“Union Asset Management” an investment management company licensed by the Bank of Lithuania, managing collective investment entities for informed investors. The company currently manages three investment funds and is establishing new ones, distinguished by their investment strategies and a professional management team. The company provides a wide range of investment solutions from asset value growth to conservative investing and asset accumulation with balanced risk.
“Union Asset Management” has expanded its portfolio with the acquisition of a commercial building in Klaipėda – Verslo žinios (vz.lt)
“Luminor” bank has provided €12.8 million financing to the real estate investment fund “Union RE Core Fund I” managed by the investment management company “Union Asset Management” for the acquisition of a 17,700 square meters industrial building complex in Kaunas.
The acquisition of the commercial real estate located in V. Krėvės pr. 129 in Kaunas marks the second investment for the “Union RE Core Fund I”. The property consists of manufacturing, warehousing, and administrative premises strategically located in a well-developed area of Kaunas with easy access to infrastructure, adjacent to the A1 highway, and currently fully leased. The fund is acquiring this property from the private limited company “Cetarium”.
“Despite the COVID-19 restrictions and the increasing costs of raw materials and labor, most business sectors are expanding their operations this year, and the need for business financing has grown significantly. The real estate market remains dynamic, with investors showing strong interest in industrial projects. The office segment also remains relevant, despite the impact of the COVID-19 pandemic. The investment by “Union Asset Management” is interesting because the property is multifunctional and easily adaptable, already has reliable tenants, and can be expanded on the managed land plot, providing flexibility for tenants as production volumes grow,” said Gediminas Kesminas, real estate financing expert at Luminor Bank.
“With the acquisition of the second property by the “Union RE Core Fund I,” the Industrial Building Complex in Kaunas, we continue to diversify the fund’s portfolio, paying particular attention to industrial and service-related real estate as one of the most promising investment directions in commercial real estate, with significant potential for value growth. The decreasing rental yield spread between office and logistics segments and the increasing transaction volumes in industrial real estate only confirm that this segment is no longer an alternative but a significant part of commercial real estate,” commented Fund manager Andrius Baranauskas.
Representative of UAB “Cetarium,” Andrius Rimdeika, commented that this transaction will provide an opportunity for the group’s companies to further invest in the Kaunas real estate market: “We are pleased with the transaction. We will continue to develop industrial and commercial real estate objects and acquire old building complexes, converting them into modern multifunctional premises tailored to tenants under the build-to-suit model.”
“The fund invests in both income-generating and development real estate assets. Currently, we are developing a commercial automobile service center project in Vilnius. The fund is in an active acquisition stage, focusing on industrial and service sector real estate. We consistently implement the fund’s strategy and aim for the risk-return ratio to meet investors’ expectations,” said Fund Manager Andrius Baranauskas.
In the real estate transaction of the “Union RE Core Fund I,” the legal representation was provided by the law firm “Cobalt,” and the seller was advised by the law firm “Magnusson” and real estate consultants Rego Group. The transaction was mediated by the real estate consultancy firm “Newsec”.
The first investment of the Union RE Core Fund I was made in February of this year – the acquisition of the “Sostena” automobile service center project in Vilnius. The property is currently under development, and in the first quarter of 2022, a Renault and Dacia automobile maintenance and repair center, as well as a car showroom, will commence operations.
“Union RE Core Fund I” started its operations in January of this year and plans to fully form its managed portfolio within the first two years, with a value target of €40 million.
Briefly about “Union Asset Management”
“Union Asset Management,” licensed by the Bank of Lithuania, is an investment management managing collective investment subjects for informed investors. The company currently manages two investment funds and is establishing new ones, distinguished by their investment strategy and a professional management team. The company provides a wide range of investment solutions from asset growth to conservative investment and asset accumulation with balanced risk.
“Union Asset Management” established a new private debt investment fund, “Union Funding Solutions Fund I” for informed investors. The fund is investing in a 6 MW wind turbine park located in Anykščiai.
“The first mezzanine-type investment of the investment fund into a renewable energy project is not accidental. We support the trends of the international business environment towards sustainability and make investment decisions by evaluating environmental, social responsibility, and good governance principles (ESG Environmental Social and Governance). We want our investments to help businesses not only expand and grow but also contribute to sustainability, in this case, the use of renewable energy resources,” says Ramūnas Baranauskas, General Director of Union Asset Management.
The fund is investing 1.5 million euros in the wind turbine park in the Anykščiai region by acquiring bonds issued by the developing company. The total project value will reach nearly 9 million euros. The work is progressing smoothly, and it is planned that commercial operations at this park will commence by the end of 2022.
The targeted investment market for the fund is Lithuania, where there is increased interest from businesses seeking to understand the fund’s investment principles. For some time now, we have been working with several financing sources and can syndicate loans of significant size. Both in the domestic market and in terms of broader geographical coverage, we are focused on small and medium-sized enterprises. The fund is not limited to specific business sectors; we have experience and can offer solutions to service, manufacturing, or technology companies addressing their financing needs. Currently, we are analyzing projects related to business buyouts, renewable energy, and, of course, real estate financing,” commented Povilas Liutkus, a partner of the Fund and a member of the investment committee.
During its first year of operation, the fund plans to invest €15-20 million.
According to the Union Asset Management director, the chosen strategy of the Fund, the experience of the management team, and contacts in various business sectors, lead to the expectation that the Fund will become a significant financing and development instrument for companies in the Baltic States, as well as an attractive investment opportunity for potential investors.
Investment managers estimate that the Fund’s return on investment will range from 10-12 percent, and the Fund will generate stable dividends for its investors.
Briefly about “Union Asset Management”:
“Union Asset Management,” licensed by the Bank of Lithuania, is an investment management managing collective investment subjects for informed investors. The company is currently establishing investment funds distinguished by their investment strategies. The company provides a wide range of investment services from asset value growth to conservative investment and asset accumulation, assuming balanced risk.
“Union Asset Management” fund invests in a wind turbine park in Anykščiai – Verslo žinios (vz.lt)
Investment management company “Union Asset Management” has established a private debt fund called “Union Funding Solutions Fund I”.
According to the investment manager, “Union Funding Solutions Fund I” will provide intermediate financing, mezzanine-type financing, invest in bonds issued by companies, and indirectly lend to small and medium-sized enterprises in the Baltic States that have a successful or prospective business model, development opportunities, but face a lack of capital.
“The Fund will offer our accumulated business financing experience to Lithuanian and other Baltic small and medium-sized enterprises seeking capital for expansion, together with financial support, helping to grow and strengthen companies by solving their liquidity and development problems and offering solutions to manage their finances,” said Povilas Liutkus, partner and member of the investment committee.
The partners of the Fund are Povilas Liutkus, Mindaugas Randis, and Mantas Kavaliauskas.
“Union Funding Solutions Fund I” aims to provide financing of EUR 15-20 million in the first year of its operations.
According to Ramūnas Baranauskas, General Director of “Union Asset Management,” the Fund has started attracting investors and will finance its first projects in July. The expected annual return on investments is 10-12% before management fees.
“We shape the management company’s strategy according to the evolving market situation and following fundamental investment values. Our further plans include expanding the portfolio of managed assets and offering investors products and solutions that best match their risk profiles,” says R. Baranauskas.
About “Union Asset Management”: It is an investment management company, licensed by the Bank of Lithuania, managing collective investment schemes for informed investors. The company provides a wide range of investment services from asset value growth to conservative investment and asset accumulation with balanced risk.
About “Funding Solutions”: it is an entity providing professional financial consulting services to businesses, not limited to finding the best financing solutions. Focused on long-term partnerships, the company aims to create added value for businesses by addressing all challenges related to financial management.
“Citadele” bank has reached an agreement with the investment management company “Union Asset Management” for a financing of 4.8 million euros, intended for the construction of the new “Sostena” automotive center in Vilnius.
In Savanorių Av. 163 in the capital, a building with more than 4,700 square meters of floor space, two floors, and an A+ energy efficiency class is planned to be constructed. The center will house an automotive care and repair center as well as a car dealership. It will also feature a modern paint shop – the first one in Vilnius. The new “Sostena” automotive center will be the most modern in Eastern Europe, built according to the latest standards set by “Renault,” which the manufacturer is currently implementing globally.
“Despite temporary economic corrections, there is a significant need for financing in the country’s business sector – companies actively explore expansion opportunities and plan investments. We are pleased that investors have chosen us as financial partners for the project and that we will be able to contribute to the construction of a modern automotive center in Vilnius. The center will be strategically located in a convenient urban area and will strengthen the company’s existing maintenance and repair capabilities. With the increasing volume of automobile sales, especially used ones, there is a growing demand for services,” notes Vaidas Žagūnis, a member of the board of “Citadele” Bank and head of the Baltic States business banking division.
“We see an active and robust real estate market, which has been only minimally affected by the pandemic and is currently dominated by property sellers. The decreased yield of projects generating rental income and the aim to achieve a two-digit investment return prompted us to shape the strategy of the “Union Core RE Fund I” investment fund very carefully by selecting reliable partners and including not only cash flow but also development or reconstruction projects. This project very well reflects the fund’s strategy – development, rental income generation and realization, and we are also targeting industrial and service sectors, which have been somewhat overlooked during the office era,” comments Ramūnas Baranauskas, General Director of “Union Asset Management.”
The new center, where “Renault” and “Dacia” cars will be sold, will be managed by “Sostena” under lease rights. Šarūnas Čekanavičius, General Director of “Sostena,” states that despite the global pandemic, the decision was made not to halt this project because the company is responding to the needs of returning customers and believes in market recovery.
“We value our clients and hear their needs. We are pleased that they are loyal and their numbers are growing, and the brands and products we represent are valued in the market and in demand,” emphasizes Š. Čekanavičius. “Therefore, we stick to the previously approved strategic plan to expand our network. Choosing strong partners who could help implement this project, we opted for “Union Asset Management”. We trust and hope that together we will achieve the best result. When all partners do what they do best, synergy yields good results.”
The “Sostena” group of automotive and repair companies in Lithuania deals in “Volvo,” “Renault,” and “Dacia” cars, providing technical maintenance services for “Nissan” cars in Vilnius. The brands represented by “Sostena” are increasingly valued by customers, and their customer base grows annually. In 2020, the company once again won the award for the best “Renault” dealership in the Baltic States, and therefore, the salon network continues to expand.
About “Citadele” bank: The US-capital “Citadele” group is managed from Latvia, and its subsidiary companies and branches operate in Latvia, Lithuania, and Estonia. In terms of asset value, “Citadele” is the second-largest commercial bank in Latvia. “Citadele” seeks to modernize the banking sector and provide more opportunities for people and businesses in all Baltic States. In addition to traditional banking solutions, “Citadele” offers various services based on cutting-edge financial technologies, including a modern mobile application, contactless and instant payments. “Citadele” bank was the first in the Baltic States to offer the possibility to open a bank account by downloading a mobile application and taking a selfie, as well as contactless payments with a smart ring.
About “Union Asset Management”: It is an investment management company, licensed by the Bank of Lithuania, managing collective investment schemes for informed investors. The company provides a wide range of investment services from asset value growth to conservative investment and asset accumulation with balanced risk.