Latvia

September 2010

K.Cerbulis

NCH Investment Fund

2

• PART I: Latvia – Overview

• PART II: NCH Latvia – Experience

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

Source: Central Statistical Bureau, SEB

Latvia‟s GDP (% change y-o-y)

4

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

-

5,000

10,000

15,000

20,000

25,000

2003 2004 2005 2006 2007 2008 2009 2010-Q2

Bank Loans & Inflation

Infl

ati

on

Source: Association of Latvian Commercial Banks, Central Statistical Bureau

Bank Loans

+ 533% !

Ba

nk

loa

ns,

mil

l. L

s

Inflation

5

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

-

5,000

10,000

15,000

20,000

25,000

2003 2004 2005 2006 2007 2008 2009 2010-Q2

Bank Loans & Apartment Prices

119

Ser

ies

2-r

oo

m a

part

men

t(5

5 m

2)

pri

ce, E

UR

Source: Associtaion of Latvian Commercial Banks, Ober-Haus

Apartment

price

+269%

- 73%

Ba

nk

loa

ns,

mil

l. L

s

Bank loans

+ 533% !

+32%

6

Wages and Productivity(seasonally adjusted data, per one working hour, 2004Q1 = 100)

Source: Bank of Latvia

7

Nominal wages

Productivity

Share of Manufacturing in Economy (% of GDP)

Source: SEB Bank

8

Latvia

Estonia

Lithuania

Poland

Czech

Republic

Latvia Reacts QuicklyCurrent Account (% of GDP)

Source: Bank of Latvia

9

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-Q2

Latvia Reacts QuicklyRetail Trade (growth % YOY)

Source: Latvian Association of Authorized Car Dealers, Central Statistical Bureau

Registration of

new vehicles

Retail turnover

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

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Credit Default Swaps: Latvia / Greece / Iceland

11

Iceland

Greece

Latvia

Credit Default Swaps: Latvia / Romania / Hungary

12

Romania

Hungary

Latvia

„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

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.

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The World‟s 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

“A crisis is a terrible thing to waste”

Latvia doesn‟t 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.

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18

Part II:

NCH in Latvia –

Experience

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).

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20

Kungu Str. 1, Offices & Retail, Old Town, Owned

Basteja Str. 16, Offices & Retail, Old Town, Sold (2006)

NCH Office-building Portfolio

Baznicas Str. 20/22, Offices &

Retail, Downtown, Owned

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„Riga Plaza‟ Retail Mall, (50% NCH Owned, with partner „Plaza Centers Europe‟)

90,000 m2 GBA, 50,000 m2 GLA

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.

NCH Land Bank Example - „Dreilini‟, Riga

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„GroGlass‟ nano-coating glass factory

(inaugurated 2009)

www.Groglass.com

24

Latvian JV partners for farming projects in Ukraine

and Kazakhstan

25

NCH Fields in Ukraine

26

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‟).

Positives of Latvia and the Baltics:

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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);

...

Investment Opportunities

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Karlis Cerbulis

Senior Vice President

NCH Capital, Inc.

www.nchcapital.com

karlis@nchriga.lv