## All by the law The project decision was announced by the Chairperson of the RD Committee on Housing and Environment, Elina Treija (National Alliance). The legal basis was created in the form of a number of articles from the Law on Local Governments; the Law on the Management of Public Capital Companies; the Commercial Law; the Law on the Completion of the Privatization of State and Local Government Residential Buildings. All this, considering "paragraph 2 of the Riga City Council Resolution No. 1048 'On the Preservation of Direct Participation of the Riga State Municipality in the LLC Rīgas namu pārvaldnieks', the valuation report by Sorainen ZAB dated November 6, 2025, and the established absence of legal grounds for the preservation of the participation of the Riga State Municipality...". The enterprise itself, the Competition Council, and even the Bank of Latvia provided their assessments. **Therefore, the municipality resolves:** n 1. To terminate the participation of the Riga State Municipality in the LLC Rīgas namu pārvaldnieks (hereinafter - the capital company), to reorganize the capital company into a joint-stock company, and to support the placement of its shares in a public securities offering, including the shares in the regulated securities market. n 2. To instruct the representative of the capital holder in cooperation with the capital company to assess the assets and make a decision on the acquisition of assets not necessary for the economic activities of the capital company for the ownership of the city of Riga. n 3. To instruct the executive director of the city of Riga to conduct a public procurement to attract an independent, professional, and experienced organizer of the public offering of shares, in order to develop the most effective strategy for the public offering of shares in accordance with the assessment of the enterprise's readiness to participate in the capital market. This includes conducting an enterprise valuation, ensuring the attraction of a legal consultant, and providing necessary support to the Riga municipality, as well as organizing and managing the public offering process after the Riga City Council's decision to place the shares in a public securities offering. n 4. To establish that the costs for the services of the consultant mentioned in paragraph 3 will be covered from the main budget program of the Riga State Municipality 1.19.00. 'Expenses for unforeseen cases (Reserve Fund of the Riga City Council)'. n 5. To establish that the decision on the placement of shares in a public securities offering and the procedure for the alienation of shares will be made by the Riga City Council after the procurement mentioned in paragraph 3 and the development of the public offering strategy. n 6. The executive director of the city of Riga, the representative of the capital holder, and the capital company are responsible for the implementation of the decision. n 7. To establish the deadline for the execution of the resolution as December 31, 2028. ## A complicated process - This is a complicated, highly regulated process, and it requires special professional qualifications and experience, explained Deputy Treija (herself an economist by profession, former chair of the board of LLC Celsius, engaged in financial consulting and accounting services). - Because there are many legal and financial risks that need to be identified and prevented. As for the expenses for the above-mentioned process - if previously "we piled them on the account of the capital company itself," now "we would not want the capital company to be involved in its own sale." - That would not be the right way, believes E. Treija. - Therefore, the Riga City Council and the Central Administration will organize this event themselves and finance it from unforeseen expenses. In any case, the committee head pointed out, the decision made on February 26 is merely a prelude to further consideration of the RNP topic in the Council, and "we will still decide - with what proportion of shares we will start this initial offer and go public." ## How much are intermediary services? - Thank you to the reporter for a very detailed report, thanked Mayor Viesturs Kleinbergs ("Progressives"). However, Deputy Lyubov Shvetsova, who previously served as a colonel in the Financial Police, reminded that the first project for implementing RNP in the market appeared back in December... - The first project was not submitted to either the committee or the Council meeting, responded the executive director of Riga, Janis Lange, responsible for capital companies. - There were only discussions with politicians... "Currently, it is not being decided how many percent to sell, we are attracting consultants," continued J. Lange. - The best strategy will be developed and proposed to the deputies for decision. - And what amount is reserved for the procurement of consultant services? continued L. Shvetsova regarding intermediary services. - At the moment, nothing is reserved, as it will come from unforeseen expenses. But our estimates show that attracting consultants could cost many tens of thousands of euros, replied the executive director. Further, J. Lange mentioned that "from our side, there will be no delays, we will prepare the procurement specifications." ## What about the timelines? - I cannot say for sure, but I hope that, well, by the end of this year, at the beginning of next, we will be able to offer some clear, specific timeline, vaguely suggested Lange. "The amount is not so large as to announce it at the European level," noted Mr. Lange. - We need to look at the market situation. Today, there are at least three candidates who could participate from Latvia. So that the municipality receives as much value as possible from the sale of RNP." The deputy inquired about the assets mentioned in paragraph 2 of the decision as being purchased by the city from the municipal housing management. What is it about? - Rīgas namu pārvaldnieks has many plots of land on its balance sheet, explained J. Lange. - So, we will go through all these assets. And then we will offer it to the Riga City Council - only it can decide what to take on its balance. ...Surprisingly, no one showed up for the RNP debates - although an hour earlier, deputies had heatedly debated a somewhat smaller issue, the allocation of city funds - 100,000 euros - for the construction of Latvia's pavilion at the Venice Art Biennale. The voting was 39:9, with only members of the "Sovereign Power/Young Latvians" and "Stability!" factions voting against. Applause followed from the ruling coalition. - We have made a historic step, declared Mayor Kleinbergs. ## A profitable business Before the vote, only a few particularly inquisitive members of the Council could review the presentation prepared by the aforementioned law firm Sorainen ZAB. This material is available in the database of the Riga City Council. The enterprise RNP, established in 2010 based on 15 capital companies of the municipality - former housing managements, "was necessary to ensure management in houses in conditions where the process of completing privatization was prolonged, creating an understanding among private owners of their responsibilities, forming a private market for management services." The legislation of the Republic of Latvia "provided for the obligation of local governments to ensure the management of apartments until the management is transferred to the apartment owners." At the time of the document's preparation (end of 2025), RNP: * managed 3,400 residential buildings in the capital with 140,000 apartment owners (of which 3.2% - apartments of municipalities); * employed 1,900 workers; * had a turnover of 80.5 million euros (for 2024) The enterprise did not receive subsidies and grants from the municipality (which sharply distinguishes it from another major municipal capital company - Rīgas Satiksme), on the contrary, over 4 years it paid dividends to the municipality amounting to 14.3 million euros. ## What needs to be done "Currently, RNP operates in a free competition environment: providing management services for buildings in private ownership," the material states. - Historically, there were other functions, such as social apartments, but they have all been transferred to other enterprises/institutions. **To ensure the further operation of the enterprise, however, constant investments are necessary. This is explained by:** * The aging housing stock, which is now over 70 years old, energy efficiency requirements, safety, and convenience; * The heavy physical workload on employees and labor market difficulties due to low unemployment; * The low level of participation of residents in managing their property; * Various customer expectations regarding service quality; * Competition. **For the development of RNP, the following directions are proposed:** * Installation of "smart" meters; * Supplementing the range of services; * Expanding the area of activity outside Riga, "significantly not increasing the cost of services"; * Construction of rental housing. The private market for providing services in this sector in Latvia is developed and highly competitive - the register of managers of residential buildings lists 2,000 participants. Consultants mentioned, in particular, "significant size and stable market players, such as Civinity, Rīgas namu apsaimniekotājs, City Service Engineering." The Consumer Rights Protection Law and the Construction Information System contribute to civilized business conduct. ## They want it like in Vilnius and Tallinn Meanwhile, starting from 2026, the Law on the Completion of the Privatization of State and Municipal Residential Buildings "no longer provides for the obligation of local governments to ensure management in buildings whose management has not been taken over by apartment owners." "Instead, the law states that since the apartment owners have not taken over the management rights, the management contract is considered concluded with the current manager (without the involvement of the local government)." "At this moment, no market incompleteness or other conditions have been established that would justify the participation of the RD according to the Law on State Administration Procedures...", the law firm indicates. Therefore, it is recommended to the municipality: "Not to take reputational and other risks associated with eliminating the alleged market incompleteness and not to spend municipal resources on them." In Vilnius and Tallinn, a fully free market for residential management currently operates, and local governments only partially manage their property. Thus, Riga is advised by lawyers to "ensure the quickest possible termination of the Riga City Council's participation in a financially beneficial manner for the municipality (without allowing the squandering of property), maintaining a responsible attitude towards the competitive environment and the interests of residents..." ## Sell the controlling stake As the most likely option, the Sorainen material mentions "the listing of RNP shares on the stock exchange (IPO), with the sale of 51% participation by the RD and the alienation of the remaining participation within 3 years." This will allow the council to: * Increase the value of RNP, maximize revenues from the share listing, and obtain additional funds to fulfill the main functions of the Council; * Retain 49% participation, thus having the ability to influence key decisions; * Ensure transparency of activities and enhance reputation. "The approximate total profit of the Riga City Council from the sale of the housing management (dividends and revenues from the sale over 3 years) is estimated at 87.4 million euros," the Sorainen firm assessed the situation in the material distributed among the municipal deputies. At least 7 scenarios for privatization are likely. The first path - the reorganization of RNP into a joint-stock company and the listing of shares on the stock exchange - provides for two possible forks - the Riga City Council loses participation completely or gradually. When selling parts of RNP to private investors, there are already three options - the council loses participation completely, or retains a controlling stake with partial sale, or minority participation. Finally, when selling RNP in parts to many buyers, the enterprise itself can initially be reorganized and divided for partial sale - or these parts will be sold and liquidated. The division scenario is considered the least favorable, as it may yield around 55 million euros, while the maximum share listing on the stock exchange could yield even 106 million euros. In any case, last Thursday, the Riga City Council merely started an exciting series with many seasons...