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Interfax Group in partnership with Estates Gazette REAL ESTATE REPORT For Russia & the CIS, Poland, the Czech Republic, Romania, Slovakia and Hungary 07 April 2008 Edition 005 www.realestatereport.co.uk Published every Monday by Interfax Group in Partnership with Estates Gazette. Wave of real estate IPOs unprecedented in Eastern Europe Russia goes public More than 30 Russian real estate companies now Tashir and RosEvroDevelopment, have their eyes planning initial public offerings (IPO)—a stun- set on the London Stock Exchange (LSE). Yet this ningly high figure that indicates Russian players does not appear to be the norm. Russia's economy are seeking alternatives to bank financing in the is booming with GDP growth of 7.3% last year and face of the western credit crunch. Moscow has more billionaires than any other city Featured in this issue: "There are at least 30 Russian companies that in the world. It would seem logical for Russian have announced their intention to access public companies to try to obtain capital locally, and even AFI expands to Ukraine 3 capital through completing an IPO in the next early IPOs, such as OPEN Investments, the first Russian developer AFI has announced plans to enter the three years," said Gerald Gaige, partner and real Russian real estate company to go public, hit pay- Ukrainian market as well as increas- estate industry sector head at Ernst & Young. dirt—the company raised $68.8 million on the ing its interests in Moscow. "And there are undoubtedly others unannounced Russian stock exchange (RTS) in November 2004. Interview: Timur Batkin 5 at this point." That said, London still has its attractions—the The DON-Stroi deputy general direc- Perhaps the reaction was predictable, but in a main one being big money. tor gives his view of the residential market and its prospects. region where IPOs are relatively few and far "The number of investors attracted to the LSE, between, the Russian real estate surge is a wave including American investors, has increased in TriGranit does Moscow retail 7 that cannot be ignored Poland, which arguably comparison to the Russian Stock Exchange Hungarian developer TriGranit has taken the plunge into Russian retail has the most active stock market in the region, (RTS)," said Victor Szalkay, Head of Investment with a 134,000-sqm Moscow mall. still sees only between 40 and 50 IPOs a year, with Relations Department at PIK Group. "In addition real estate IPOs rarely reaching double figures in it is quite difficult to access a large amount of pub- Poland tackles bureaucracy 8 Poland's Infrastructure Ministry is a single year. But with the global credit crunch lic capital in Russia, as there are not so many drafting new procedures to stream- starting to seep over into Europe and possibly into funds that are eager to invest in one company." line planning decisions. Russia, it appears that Russians believe that banks And indeed OPEN Investments initial public Residential margins threatened 12 may no longer be the most reliable institutions to offering pales in comparison to Sistema HALS's Analysts have warned that rising obtain capital. Instead, they are now going public IPO bid ($432 million in November 2006) and building costs and tighter mortgage criteria may eat into margins, hitting or searching out private investors. PIKs astounding $1.8 billion in June 2007, which smaller players in particular. And in Russia, now means now. was then followed by AFI's $1.4 billion in May 2007. Hungary still attractive, say analysts 13 Analysts say the market remains Is the west the best? These are big numbers—and not only is the attractive, though things may get To put the coming real estate wave in clearer per- lure of money real, so is the threat of competition. worse before getting better. spective, it also pays to consider just how few In Russia's fast-moving real estate market, the Orco looks south for new markets 16 Russian companies have gone public in the past. perception among some is to get cash now or per- Orco has said it is undeterred by According to analysts from ReDeal Analytical haps miss development or acquisition opportuni- the credit crunch and is looking for opportunities in new markets. Group, 25 IPOs were held by Russian companies ties that simply might not come later. in 2007, up slightly from 23 in 2006. Russian "An actively developing company must obtain Casino complex planned for Romania18 stocks grew by 33% or $23.6 billion last year from additional sources of financing eventually," said Asian investors have dropped plans to build a casino project in Russia, $17.7 billion in 2006. PIK's Szalkay. "Although completing an IPO is a choosing Romania instead Some major Russian real estate players, such as labor intensive and expensive process, if a compa- Real Estate Report Editorial and Advertising Information For editorial content issues in Russia/CIS Hungarian Section: Balazs Szladek at For subscription and advertising information contact: and Central Europe please contact: email@example.com or (36) 1 269 7808; LONDON: Arthur Soares at firstname.lastname@example.com Preston Smith, Real Estate Report Editor-in-Chief, Tamas Deme at email@example.com or call: (44) 20 7911 1774; at email@example.com Veronika Gulyas at email@example.com Richard Morris at email@example.com or call: (48) 22 630 8396 or call: (44) 20 7911 1725 Real Estate Report Russia and CIS Editor Thomas For Romanian issues please contact: Jonathan Hamer at firstname.lastname@example.com Schafbuch at email@example.com Zsolt Belanszky at email@example.com or call: (44) 20 7911 1725 or call: (7) 495 250 0022 (36) 1 269 7808 MOSCOW: Olga Kouzmina, head of Russian/CIS sales Real Estate Report Assistant Editor Ewan Jones at firstname.lastname@example.com, or call: (7) 495 223 6363 email@example.com or call: (48) 22 630 8386 Czech and Slovak Section: Brian Kenety at FAX: (7) 906 066 1330 email@example.com, Martina Mareckova at WARSAW/Central Europe: Lukasz Rzewuski at Polish Section: Anna Bochenska at email@example.com or call: firstname.lastname@example.com or call: (48) 22 630 8382 email@example.com (48) 22 630 8384 (420) 222 874 430 FAX: (48) 22 630 8391 Real Estate Report 07 April 2008 Russia/CIS (continued from page 1) Eurocement expands production ny is eager to expand and to develop, it is of conducting an IPO, have the advantage Eurocement, Russia's top cement pro- the only way to access a large amount of of already having a rich portfolio available ducer, plans to invest RUB 800 million capital in a short period of time." as equity. Yazikov added that he thinks in 2008 on its biggest plant, Maltsovsk Szalkay is not alone in his opinion. more people will find direct investment Portlandcement, to supply Russian According to a survey by Deloitte, 76% of into Russian real estate more attractive developers' demand for cement, a Russian top managers find that compa- than stock trading in London and spokesperson told the Report. nies that conducting an IPO is an impor- America. In the minds of these Russians, The Maltsovsk facility produced 3.48 tant tool for developing the company or the situation is not that volatile in the million tonnes of cement last year and fueling regional expansion. Russian economy—although he warned is expected to increase output by 8% in that a number of factors could potentially 2008. Sizing up the market... affect this situation in Russia such as fluc- Last year the company spent RUB 492 But not so fast, say even some of the same tuations in the price of oil. million on capital expenditures on experts. A company's value is largely driv- equipment upgrades and environmen- en by it's assets, and real estate assets are No stopping the wave... tal projects. Eurocement Group also not easily evaluated by public market Yet despite the doubters, the wave is com- plans to invest up to RUB 356 million investors—and even less so in the murky ing—although it may not hit quite as soon in its Nevyansky Cement plant this year. Russian market. Moreover, an IPO does as some think. Many analysts believe the not always mean speed or immediate flex- IPO window is currently closed and that Mirax Group suffers continued losses ibility, especially considering the hard there is no sense in floating shares before Mirax Group, a diversified conglomer- work and long lead time to a successful the end of the year. They claim investors do ate with extensive real-estate interests, public offering. not want shares in an IPO that are simply suffered a 15.62% loss in net profits in "When going public, developers face going to depreciate in value—the case in 2007, in comparison to 2006. Profits limitations related to the characteristics point being PIK's stock taking a 15% dive dropped to RUB 23.2 mln. that make developers successful in a fast last week to $25.2, according to RBC Daily. The company has been experiencing moving and opaque market like Russia," The dip was bad news, coming on the falling profits since Q1 2007, when it said Ernst & Young's Gaige. heels of the daily dose of subprime woes recorded a loss of RUB 10.9 mln. "To be the most successful they should in the West, and it hardly went unnoticed In Q2 2007, Mirax Group suffered a be able to make decisions quickly, [and] by the market. loss of RUB 9.5 mln rubles followed by take risks that are justified by the reward "Investors will be paying more and a RUB 21.7-mln loss in Q3, recovering they see." more attention to the individual character- in the fourth quarter to a RUB 65.3-mln Likewise, the the general public does istics of Russian developer companies that profit, 1.5% down the same period of not always have a positive mindset to real are planning initial public offerings this 2006. estate companies and potential IPOs. year," according to Alexei Kurasov, head of "Public investors, having either a nega- IPO projects at Finam Investment. Raven gets logistics center loan tive perception of the risks in the Russian Finam's Kurasov concurred with other British company Raven Russia has real estate market, or having only the feel- analysts that sooner or later the IPO rush raised a $170 mln loan from VTB Bank ing that it is opaque and not understand- will be on, yet like more conservative Europe.The company reported that the able tend to err on the conservative side experts, he also pointed out the risks, say- money would be used to fund construc- and may undervalue companies holding ing that the smart players will probably tion of a 200,000 sqm logistics center real estate assets," Gaige said. wait until next year. Yes, the pull of big in Rostov-on-the-Don. Another asset-base value issue is the money—and the fear of missing opportu- Raven has not disclosed the exact inter- dependence on the local real estate mar- nities—is real, but in the nascent world of est rate of its seven-year loan, but it did ket. Andrei Yazikov, Senior Real Estate Russian IPOs, a gamble is still a gamble. say it would cost the company less than Analyst at Renaissance Capital told the "The ones that wanted to break away 7% annually. Report that companies that tend to con- from the crowd (and hold an IPO earlier) Raven needs to raise a total of $213 mln duct IPOs are companies that have their will not be able to place now and will have for the Rostov project. Project portfolio in the pipeline, such as Mirland to wait in line behind the others," Kurasov Megalogics, a joint venture set up by and Sistema-Hals. Yet companies such as said. "And there still aren't many worthy Raven Russia and Russian group Mirax and Inteko, which have no intention assets on the market." Avalon, will build the logistics center. For Russia & the CIS, Poland, the Czech Republic, Romania, Slovakia and Hungary A new, weekly newsletter for the real estate markets of Central and Eastern Europe, Russia and the CIS. Subscribe now Call Arthur Soares on +44 (0)20 7911 1774 or email email@example.com realestatereport.co.uk Real Estate Report 07 April 2008 Russia/CIS Leviev enters Ukraine and expands Moscow interests LSR Group buys Ukrainian Concrete LSR Group, a St. Petersburg based real AFI expands to Ukraine estate development and construction company, is acquiring 97% of Ukraine's Obukhov Aerated Concrete Plant for AFI Development, a real estate firm run ter, situated within the district. The project €30 mln, LSR said in a statement. by Israeli billionaire Lev Leviev, plans to will combine a retail center and hotel with LSR's aerated concrete division, Aeroc enter the Ukrainian market, expand its the same general facade design. International AS, has already received influence in Moskva-Citi and continue to Leviev announced that AFI intends to permission from Ukraine's earn record profits. help fund this project with a $350 million Antimonopoly Committee to acquire "We believe it is absolutely necessary to loan for the Moskva-Citi project. the shares in the plant. enter the Ukrainian real estate market," According to Leviev, negotiations are The deal is expected to be closed in the CEO Alexander Haldei told a press confer- being held now with Sberbank of Russia summer of 2008. LSR said this will be ence. "The Russian realty market has and Vneshtorgbank. its second aerated concrete project in some problems in terms of buying land "The money we get for a credit line will Ukraine. The Russian company is spaces to develop projects. The real estate be invested in construction," said Haldei. building a plant 70 km from Kiev that market in Ukraine has just started to The Moskva-Citi project is situated on a will have the capacity to produce develop." 0.7-hectare land plot and assumes the 400,000 cubic meters of aerated con- AFI Development has already bought construction of a multifunctional com- crete annually. The plant is scheduled 110 hectares of land near Borispol, outside plex. The project is designed to have a to start up this summer. Kiev, in order to build a mixed-use com- hotel, retail gallery and office premises. Aeroc International's total production plex on 400 hectares. The company's The construction works of the project have capacity in Ukraine is expected to top share in the project will total 70%. already begun. It is planned to be deliv- 700,000 cubic meters in 2009. Estimates for the project's completion ered in the 4th quarter of 2009. range from seven to 10 years. Financially 2007 was a good year for Yekaterinburg promotes budget hotels AFI Development is also expanding its AFI. Net income surged 93% from $111.9 The city of Yekaterinburg will develop influence in the Moskva-Citi business dis- million in 2006 to $215.6 million in 2007. budget hotels, the chief analyst at the trict in western Moscow. AFI recently AFI also raised $1.4 billion in an initial city administration's consumer services became partner of a hotel project in the public offering on the London Stock committee, Tatyana Gushchina, told the ambitious Mall of Russia mixed-use cen- Exchange (LSE) in May. Report.A special company will imple- ment a program to build one- and two- star hotels. The management company Victoria to invest $00 million already has the 57-room Uktus hotel and a hotel on Sheikman street that was Russian retail group Victoria, which man- Vlasenko also said the company is cur- formerly a dormitory. ages the Kvartal, Dyoshevo and Victoria rently holding talks on the takeover of some There are plans to increase the num- chains, plans to invest $200 million in smaller retail chains. Victoria has already ber of such facilities in the city, development in 2008, Nikolai Vlasenko, analyzed the companies and signed confi- Gushchina said, and properties are chairman of the Victoria board of direc- dentiality agreements. The retailers have a already being sought among existing tors, said in Moscow on April 1, at a con- turnover of about $200 million per year, he dormitories and other facilities. ference on retail organized by the Adam said without providing any further details. The city administration plans to con- Smith Institute. Victoria is on the road to conducting an vert dormitories on Zavokzalnaya and Victoria plans to increase its chain to 250 IPO and hopes to float in 2010. The compa- Mashinostroitelei streets into hotels stores in 2008 from 194 stores in 2007. In ny is currently preparing a three-year report over the coming few years. The city particular, the company intends to develop under International Financial Reporting currently has 46 hotels and 27 small the cash-and-carry format, as well as enter- Standards (IFRS). hotels. Ten hotels will open this year, ing regional markets with all of its formats. "Right now we are introducing SAP sys- and between eight and nine small At present, Victoria has one store operating tems in investment of $7 million," said hotels open in the city every year. in the cash-and-carry format in Vlasenko, who added that the group could Kaliningrad. have turnover of $1.8 billion in 2008. Sibcement borrows RUB 800 mln Siberian Cement Holding Co has signed a contract with its Sibcement buys Italcementi Tsementspetsstroi division for a loan of RUB416 mln. The Siberian Cement holding company plants and a specialized cement and a bulk Sibcement said the deal, taking into has signed an agreement with Italy's cargo terminal in Ambarli Port, Turkey, account possible interest, is worth RUB Italcementi Group to buy Turkish cement where it also has a grinding center. 468 mln, or 11.2% of assets. holding Italcementi Set Group, a sub- The plants are located in the European Sibcement's assets total RUB 4.17 bln. sidiary of the Italian company. part of Turkey, in Ankara, Trakiya, Afyon Sibcement also entered into a contract Siberian Cement told the Report that and Balikesir, and have the capacity to turn with Intertorg for a loan of RUB 398 the deal is worth €600 million. Some of out five million tonnes of cement a year. mln, also at 12.5% interest. The compa- the money is to be paid in cash and some According to forecasts, Siberian ny did not specify the purpose of this (more than 5%) with Siberian Cement Cement will by 2011 have the production loan, which together with possible shares. Italcementi Set Group includes capacity to turn out more than 18.5 mil- interest will total RUB 447.75 mln, or four cement plants, a chain of concrete lion tonnes per year. 10.7% of assets. Real Estate Report 07 April 2008 Russia/CIS Massive landmark redevelopment costs more and more Spetsstroi- offers bond issue Spetsstroi-2, a construction company Rossiya hotel complex in the Moscow region, plans to place a second bond issue totalling RUB 3 bln, the firm said. The decision to issue the budget may hit €1.5 bln bonds was made by the company's shareholders. The three million three-year bonds Investment in the construction of an In addition, the presidential library might with a face value of RUB 1,000 each entertainment and hotel complex set to be located at the newly developed complex, will be sold in a public offering on the replace the Rossiya Hotel near the though this has not yet formally been decid- MICEX Stock Exchange. Kremlin—formerly the world's largest ed, Chigirinsky said, adding that the time- Spetsstroi-2 placed its debut bond hotel—could increase to $1.5 billion, said line of the project is being bogged down issue of RUB 2 bln on MICEX last May. Shalva Chigirinsky, head of ST group, the because of legal procedures. The three-year bonds have semi-annual developer of the site. "The contract stipulates that the deadline coupons and a put option effective May The dismantling of the hotel has not yet for completing construction is determined 22 this year. The yield on the second been completed, and neither has litigation, after an order for construction is received," will be the same as the first, at 8.59%. Chigirinsky said in an interview with Daily he said. "But we have not yet received the The bonds are backed by the Moscow Izvestia published on March 28. order. One should remember that the prop- Regional Investment Trust Company, Chigirinsky said the costs of the project erty is extremely complex in design and which is 81.25% owned by Spetsstroi-2. had increased from the $830 million that implementation; it has a huge number of machinery firm Stroiserviskomplekt his company stated when it bid in the rede- underwater rocks." owns the other 18.75%. velopment tender in November 2004, due ST Group has invited Norman Foster, to changes in the project's specifications whose architectural firm is experienced in Yaroslavl mulls raising site tax exacerbated by forex factors. designing projects in Russia, to work on the The Yaroslavl region is considering "First of all, the dollar is not what it was," project. The company is helping develop raising the progressive tax rate on the Chigirinsky said. "Secondly, in the design sites such as the New Holland Island in St. lease of land allocated for construction, process it turned out that we are supposed Petersburg and was responsible for the the head of the regional construction to build more cultural facilities than was design that transformed the Pushkin department, Konstantin Ustyugov told planned – about 90,000 square meters Museum. About $200 million has already the Report. instead of 55,000 square meters." been spent on the project. In order to meet these targets, it is nec- essary to accelerate the development of land earmarked for residential construc- Uzbekistan liberalizes banking tion. The progressive rate currently starts working after three years of leas- Developers eyeing Uzbekistan's rough-and- individuals having to show any documen- ing the land, Ustyugov said, the author- tumble real estate market could benefit tary evidence that the money came from a ities are proposing that it go into effect from a presidential decree last week, which lawful source. after one year of leasing to make it eco- greatly liberalizes retail banking services— The decree also forbids law enforce- nomically beneficial to build more but which also permits individuals to keep ment agencies, tax authorities and other quickly. unlimited amounts of money in banks services to demand that investors—or the The department has also proposed a without proving the legality of such funds. banks concerned—produce documentary 50% discount on lease payments for While the decree binds banks to accept proof of the legality of the money or any builders to develop land on schedule unlimited amounts in either Uzbek or for- other information constituting a bank and observe deadlines for residential eign currency for deposit accounts from secret. Likewise, the decree also exempts construction, said Ustyugov. The pro- Uzbek citizens—which could feasibly deposits made between April 1, 2008, and posed discount is now used in speed up investment, it also has a number April 1, 2009, from all taxes and other Yaroslavl, but does not apply to residen- of controversial aspects, including levies and prohibits them from audits by tial construction. "payable to bearer" accounts, without such tax authorities. Ministry mulls closed land auctions The Economic Development and Trade Airline builds Ulyanovsk homes Ministry is to consider the possibility of holding closed auctions for land ear- The Volga-Dnepr airline group plans to two types of residential buildings: apart- marked for construction of social hous- invest $60 million in a mixed-use com- ments in mid-rise buildings, primarily for ing, Minister Elvira Nabiullina said at a plex in a spokesman for the Volga-Dnepr young professionals employed by the meeting with the public. airline told the Report. group, and a block of townhouses. There Responding to concerns that land auc- It will mix office and residential space in are also plans to incorporate a recreational tions do not make it possible to build Ulyanovsk. The cost of the Volga-Dnepr zone, services, stores and parking. inexpensive social housing, Nabiullina City project "will probably increase," in "The project will make it possible to said the government could not abolish the course of its implementation, the bring together all the airline's divi- auctions altogether as it would lead to spokesman said. sions,which are currently located in vari- corruption. The ministry will work fur- The new neighborhood will occupy 20- ous parts of the city," the spokesman said. ther on the issue of how to stimulate 30 hectares, according to preliminary esti- "It will also resolve the problem of housing construction of inexpensive housing, mates. It will include office buildings and a training center for flight specialists." the minister said. Real Estate Report 07 April 2008 Russia/CIS 5 Developer DON-Stroi on second phase of resi market Kiev housing land gains 0.7% in week Land prices for detached home con- Stability breeds success struction rose by 0.7% in the Kiev region between March 24 and March 30, to $6,155 per 100 sqm. In an exclusive interview, Timur Batkin, benchmark when selecting a home, and Land prices in all districts of the Kiev deputy general director of developer DON- this is not only the class and location of region rose over the same period, Kiev- Stroi talks with the Report about the latest the property, but also the individual con- based SV Development reported. The developments in the residential sector, cept. steepest increase was 1.53% in the and their projects—and how a phase of Fastovsky district, where the average relative calm has helped developers The Report: What are the specifications of price for 100 sqm is $1,165. regroup and plan for the future. the Losiny Ostrov development? The highest price per 100 sqm in the This is a complex of seven buildings with last week of March was $9,795 in the The Report: What do you consider to be the total area of more than 200,000 square Kiev-Svyatoshinsky district and the low- most important events of last year for the meters, on 5 hectares. est price was $1,122 in the Baryshevsky real estate market in 008? Housing makes up 100,000 square district. The largest number of lots in The most important thing was that the meters of this, office space is about 10,000 the period were offered in the market settled into relative stability. It gave square meters and the rest is infrastruc- Makarovsky district, which accounted both developers and buyers a break after ture facilities. for 38% of the total number on the mar- the crazy price increases of previous years. Three underground levels will be for park- ket, while the lowest number was in the It became possible to objectively assess ing. The underground part has already Fastovsky district, which accounted for the current market situation, calmly put been built out, and concrete work is being just 0.3%. new properties up for sale and work out done at the level of the fifth to seventh future projects. floors. We plan to complete construction Banks refuse 5% of Moscow mortgages Already, since the end of 2007, we have at the end of 2009. Banks in the Moscow region refuse 5% been seeing the market return to a state of of applications for apartment mort- active growth. Deferred demand, accumu- The Report: Are potential buyers showing gages, Mikhail Romanov, head of the lated in the first half of the year, is also hav- interest in the project? mortgage company of the MGSN hold- ing an impact, and after the New Year holi- Interest is very strong, due to the shortage ing, told the Report. days prices again rose confidently. of modern housing in the area, the quality The refusal rate has increased from of the project and the relatively low price about 3% previously, primarily because The Report: Last year there was a great typical for the initial stage of construction. of the subprime mortgage crisis in the deal of talk about the residential market The first phase of sales has been com- United States, Romanov said at the Real becoming stratified. Is that true? pleted. Now we are beginning sales in the Estate – 2008 fair. Banks have become The segmentation of the housing market new buildings of the complex – there will more cautious about lending to so-called has just begun. It has already become be a big selection, including very in- borderline borrowers, whose creditwor- clear to most that it is better all round to demand small executive-class apartments thiness is on the threshold of meeting live in a new concrete building than in a from 42 square meters upwards. requirements. Romanov added that the five- or nine-storey prefab panel building. In terms of cost, for new buildings, a review period for mortgage applications Therefore, the prices for them cannot be square meter goes for upwards of $3,600, at a number of banks has increased in the same. and the average price is about $4,200. some cases from two weeks to four. I think it will take another three to five years for consumer behavior to change The Report: Why did you choose the ING lends $5 mln to RTM subsidiary completely. Eastern district for this project? How do ING Bank extended a loan of $35 mln At the same time, the concept of "aver- you see the prospects for the district? to a subsidiary of the RTM real estate age price" will gradually lose relevance. The Eastern district has been in the shad- development group, RTM reported. Each segment will have its own price indi- ows until recently – developers much pre- On April 1, RTM shareholders approved cators, and in the end prices will become ferred the Central, Western, South- and a guarantee agreement to back the loan fairer and the mechanism of price forma- Northwestern districts of the capital, so a for Marta Vermgensberatungs GmbH, a tion more comprehensible. shortage of quality housing has emerged subsidiary wholly owned by RTM . in the Eastern Administrative District. RTM and ING entered into a loan The Report: Lets move on to your projects. However, at this stage it is one of the most agreement at the end of 2007. The loan You call your Losiny Ostrov project an environmentally comfortable. was extended for nine months at an "environmental project." What does that Just think: two-thirds of the districts are interest rate of Libor + 3 for the first six mean? covered by parks and protected green months and Libor + 3.5% for the last The residential complex is being built on zones. three months. Fees for providing and the edge of the Losiny Ostrov national This is a unique phenomenon for a supporting the loan amount to 0.75% of park. Therefore, the theme of the new large city, and it would be stupid not to the loan amount and 0.25% per annum complex became the living environment, take advantage of such a favorable situa- charged on the principal after six which by the way is a very fashionable tion for residential construction. months have passed from the contract global trend. We are confident that the popularity of signing. RTM general director Eduard Eco projects are being implemented in the Eastern district will sharply increase in Vyrypayev now owns 71.4% of the hold- the United States, Britain, France, United the near future—new projects will ing, after buying out a 35.7% stake in Arab Emirates, and China. Generally, we emerge, so for us it was important to be February from Georgy Trefilov , founder think that the buyer should always have a one of the first to enter the district. of Marta group. Real Estate Report 07 April 2008 5 Russia/CIS Russian bank announces foreign expansion plan Ikea to build mall in Tomsk Investment in the construction of Sberbank targets 0 Swedish furniture giant IKEA's Mega shopping and entertainment center in Tomsk could total RUB 4 bln, acting new markets in 5 yrs Mayor Nikolai Nikolaichuk said. A final decision on the selection of the site and the start of construction has One of Russia's largest banks, Sberbank, more extensive one than the team of con- not been made yet, Nikolaichuk told a plans broad expansion on foreign markets sultants," he said, adding that Sberbank city legislature meeting, adding that over the next five years. plans to get another independent director IKEA is considering two options: one "We are planning to enter around 20 elected to its supervisory board. near the village of Novy and the second markets in the next five years," said "We've made a conscious effort to scale on vacant land near the Tomsk Sberbank Chairman German Gref said on management's role down," he said, adding Instrument Plant. the sidelines of a business forum organ- that this was a "step towards openness." The center is expected to have more ized by Troika Dialog in Singapore. Talks with the potential independent direc- than 140,000 sqm of retail space. "Prices have practically halved," he con- tor are under way, Gref said, without nam- The Tomsk regional and city adminis- tinued, adding that this presented the ing names. trations signed a framework agreement bank with a "golden" opportunity for "We're not looking for a big name so with IKEA in January to cooperate in acquisitions. much as a meaningful one," said Denis the area of investment and on the con- Denis Bugrov, the bank's senior vice Bugrov. struction of the shopping center and president, said Sberbank was targeting the Gref said the independent director office real estate. biggest CIS markets, other rapidly emerg- would replace Alla Aleshkina, the former ing markets, Eastern Europe and potential- first deputy chair of Sberbank, on the Britain's NERP to buy in St. Petersburg ly Africa. supervisory board. Britain's Northern European Properties "We're not ruling out acquisitions [in The board already has three independent (NERP) is buying four new properties these regions]," Bugrov said. directors: Mstislav Afanasiyev, who is prin- in St. Petersburg, RBC Daily reported. German Gref, for his part, said Sberbank cipal of the Finance Ministry's Budget and NERP has decided to actively expand had chosen McKinsey and Bain as strategic Treasury Academy; Anton Danilov- on the Russian commercial real estate consultants to draft its five-year program. Danilian, chief analyst at OJSC OPK market, and is even changing its name "McKinsey will deal with the general Oboronprom; and Boris Fyodorov, doctor to Nordic & Russia Properties to strategy and the bank's philosophy, and of economic sciences. emphasize the importance of this mar- Bain will focus on specific areas like IT, Sberbank has also expanded its control ket, the paper said. operating activity, back-office strategy, and of the mortgage market in Russia. Two of the deals – the purchase of the the central regions, Moscow and St. Sberbank's share of home mortgages in Holiday Club hotel at Birzhevoi Petersburg," Gref said. "They'll have the North Caucasus near doubled in 2007 Pereulok 4 and a K-Rauta DIY store at around half a year [to draft the strategy to to RUB 6.2 billion or about 72% of the Ulitsa Rustaveli 59 – will be closed in 2014]." market in that region. the second quarter of 2008. The return Gref said Sberbank was in the process of Sberbank had a net profit of approxi- on these assets will be 8%, the paper signing contracts with both consultancies. mately RUB 100 billion according to said. Another two deals involve office Sberbank itself will soon play a more active International Financial Reporting real estate, but their particulars have role in drafting the strategy, Gref added. Standards (IFRS) in 2007 which is a 21% not been disclosed yet. "An internal office is being set up, a gain last year (RUB 82.8 billion). Rigla chain to double outlets by 010 Russia's Rigla pharmacy chain, part of X5 Retail eyes Formata Holding the Protek group of companies, plans to have 600 stores by the end of 2008 Shareholders in X5 Retail Group N.V., Should X5 Retail decide to proceed with and 800 by the end of 2009. which manages the Pyaterochka and the acquisition, it anticipates raising equi- By 2010 the company intends to have Perekrestok retail chains, will hold an ty financing of approximately $1 billion in 1,100 pharmacies, compared to the cur- extraordinary general meeting on April 21 the first half of this year. rent 405.The retailer also plans to to consider granting the supervisory board The main shareholder in Karusel is achieve turnover of $1 billion in 2010, and executive committee authority to pass Pyaterochka founder Andrei Rogachev. He said Sergei Grachev, the chain's com- a decision on financing the purchase of also owns a roughly 11% stake in X5 Retail mercial director. Formata Holdings B.V., which manages Grou, which he received as the result of The company will develop through the Karusel hypermarket chain. the merger between Pyaterochka and internal growth as well as through X5 Retail Group released a statement Perekrestok. mergers and acquisitions, with a prefer- saying that the financing structure for the Karusel increased sales under ence given to mergers and acquisitions, potential acquisition of Formata is still International Financial Reporting Grachev said. being determined with different forms of Standards (IFRS) by 180% to $343.2 mil- Turnover was $316 million in 2007 equity financing currently under consider- lion in the first half of 2007. Gross rev- and is forecast to reach $500 million ation, including the possibility of granting enue increased 203% to $83.7 million, in 2008 and $750 million in 2009, existing Global Depositary Receipt (GDR) operating profit surged 217.1% to $17.5 mil- Grachev said, speaking at the Russian holders rights to subscribe for additional lion and EBITDA went up 201% to $28.2 Retail Trade conference, organized by GDRs on a pro rata pre-emptive basis. million. the Adam Smith Institute. Real Estate Report 07 April 2008 Russia/CIS 7 Major Hungarian player enters Moscow mall market Cadence, Sumitomo build auto plant The Czech Republic's Cadence TriGranit develops first Innovations and Japan's Sumitomo plan to build a production plant outside St. Petersburg to produce plastic auto- Russian retail building motive parts, the St. Petersburg invest- ment and strategic projects committee told the Report. Hungary-based property development currently includes 1.6 million. Cadence and Sumitomo have set up a company TriGranit announced plans last The TriGranit-OST Group develop- company in Russia called Plastimat.ru week to build its first Russian retail proj- ment team is in advanced negotiations to carry out the project. ect, the Mozaica Shopping Center, in the with international anchor tenants secur- Investment in the plant will total about capital Moscow. ing pre-leases at the current stage of con- $60 mln. The companies have been "Moscow is a huge capital with more struction. allotted a 71,348-sqm site in the than ten million inhabitants, and there is Koncza also said that TriGranit is cur- Shushary industrial zone outside the still a lack of supply in terms of retail rently evaluating various project plans of city and the authorities passed a decree centers, especially in the southeastern OST, which mostly include retail projects on April 1 on carrying out survey work section of the city where we plan to build in Moscow and elsewhere in Russia, and at the site within 11 months. Mozaica," TriGranit Communications may decide to join these as a develop- Director Erno Koncz told the Report. ment partner. Ukrainian reconstruction bill Koncz said TriGranit and its local TriGranit entered the Russian market A bill to amend the law governing development partner OST Group have as a partner of Gazprombank-Invest in comprehensive reconstruction of old agreed to keep the cost of the project con- January 2007, announcing its plans to residential neighborhoods should be fidential, but noted that the project is invest €5 billion in Russia. submitted to Ukraine's parliament this included in TriGranit's earlier In September 2007, TriGranit pur- week, Regional Development and announced plans to invest €5 billion in chased a 50% stake in Torgoviy Kvartal, a Construction Minister Vasily Kuibida Russia over the coming years. well-known Russian retail developer. told a press conference. "Mozaica is a unique opportunity to This partnership is expected to result in He also said pilot cities have tentatively secure our first retail flagship project in more than €1 billion-worth of new proj- been chosen for reconstruction of old Moscow," Koncz said. "It is located in a ects in Russia. housing. These cities are Kyiv, Lutsk, very visible location, where consumers "Since entering the Russian market, Chernivtsi, Vinnitsa, Khmelnitsky, will get to experience what it is like when TriGranit has been continuously looking Kharkiv, Chernihiv, Sumy, Nikolayev, TriGranit builds a shopping center, in for prominent business opportunities," Poltava, Donetsk and Dnipropetrovsk. terms of services and tenant mix." commented Sandor Demjan, the chair- The total area of neighborhoods subject He added that the location, at the inter- man of TriGranit. "Mozaica provides to reconstruction will be about 5.6 mil- section of the Third Transport Ring and TriGranit with exactly the kind of plat- lion square meters, Kuibida said. Yuzhnoportovaya and Velozavodskaya form for expansion in Russia that we are streets, is still a relatively virgin area looking for." Kala Capital raises Tbilisi project funds where few modern shopping centers Besides the Mozaica project, TriGranit Kala Capital plans to raise $1.5 bln for exist, although many developments are has a number of additional projects in the construction of a multifunctional in the pipeline, all around Moscow. the pipeline in Russia. complex in the Georgian capital of Opening is planned for the fourth Together with Gazprombank-Invest it Tbilisi, company executive director quarter of 2009, or early 2010 at the lat- plans to develop a project in Krasnodar Zviad Kharebava said. est, with the three-level shopping com- with an estimated value of over €2 bil- The company has already acquired plex to have gross built-in area of 134,000 lion. almost 80 hectares of land in Tbilisi for square meters (sqm) and gross leasable The company is further working on $38 mln at an auction. The land was area of 64,000 sqm. The center will fea- two projects in St. Petersburg – the occupied by a military base and the ture a hypermarket, electronics stores, a Badajevszkiy shopping and exhibition Arsenal plant. The business plan calls nine-screen multiplex, a food court, and a center and the Vasiljev Island Project, for building a large multifunctional parking lot for 2,500 vehicles. where the former Telefabrika complex complex on the land over a ten-year TriGranit said the center will have a will be transformed into a large-scale period, Kharebava said. rapidly growing catchment area, which media center. Smolensk halts municipal privatization The Smolensk city council has refused Patterson may face buy-out Supermarket chain Patterson, founded in Kiev back in 2005, and only two more to discuss the privatization of 19 out of 21 municipal properties proposed for sale. The administration tabled 21 non- 1997, is rumored to be the subject of a have appeared ,although initially the com- residential properties for discussion by planned buy-out soon by Alpha-Group and pany had promised to open 30 more shops the city council, all of which were to be Semoi Kontinent for $600 million, within two years. privatized through auctions, a source according to national daily Kommersant. About $100 million is expected to be from the city administration told the The company's expansion plans, espe- invested in the chain between 2007-2009. Report. The refusal to privatize munici- cially in Ukraine, have been in a bit of a However this may be too little to pal properties will require a review of lull. increase the company's profits to its fore- the Smolensk administration's tax and Patterson opened its first supermarket in cast RUB 21 billion by 2009. financial policy, the source said. Real Estate Report 07 April 2008 7 Poland 8 Administrative bottlenecks to be tackled by new bill Pro-Urba starts Warsaw resi project Development company Pro-Urba Ministry to speed up plans to start construction of the first stage of its Artown housing estate in the second half of 2008, the company planning procedures announced in a statement. The company has received the con- struction conditions for the plot, locat- Poland's Infrastructure Ministry is draft- much earlier at the stage of the concept ed near Warsaw's city center in the for- ing a radical spatial planning reform, when the potential investor does not yet mer industrial area of Wola, and will planned for implementation for January own the land." apply for the building permit in April. 2009 and designed to eliminate two vital Dziekonski refuted the possibility that The first stage will include two apart- stages of administrative procedure that are the changes could lead to under-the-table ment buildings, one of four-storeys and currently delaying the building permit deals and corruption between developers a 10-storey building. The two buildings process, Deputy Minister of Infrastructure and public officials. The deputy minister will have a total of around 260 apart- Olgierd Dziekonski told the Report. believes the new procedure will leave little ments, ranging from 30 sqm to 115 "We want to eliminate planning deci- room for corruption because of the trans- sqm, as well as around 15 lettable sions and replace them with the adminis- parency of the process. spaces for commercial services. tration's approval of plans to be drafted by "Someone could say that this leaves In total, Artown will be built in six investors," Dziekonski said. "What we are space for corruption," Dziekonski com- stages with a total of 1,500 apartments. also proposing is resignation from build- mented. "I think that there is not so much ing permits issued as an administrative space for corruption if it takes place with a TUP sells residential project decision. We want to replace those admin- totally open curtain and thus by making Polish developer TUP signed a prelimi- istrative decisions with a registration." this decision publicly [...], so that it nary deal to sell a real-estate project Zoning plans in large Polish agglomera- appears on the Internet site of the author- worth PLN 65.5 mln to real-estate reno- tions lost their validity in 2004, which ity and everyone can read it, there exists a vation company Opal Property forces investors to gain planning deci- possibility of a court complaint—in this Developments, TUP announced. sions. Under the current law, for areas not case for everyone who took part in the The residential project is located at the covered by a zoning plan—most land in process, not only for the neighbors." site of a former clothes factory in Poland—investors must obtain a planning The new regulations will differentiate Poznan. A preliminary deal was also decision from the local administration. between small and large real-estate proj- signed concerning the sale of real-estate Decisions of this type stipulate the size, ects in order to provide simpler rules for (valued at PLN 65.6 mln) on which the architectural conditions and the use of the former. A small residential project will project will be built, TUP announced in properties that can be developed on a be defined as a project with that total area a press release. The real-estate con- given plot, and are the basis for the prepa- under 400 square metes (sqm). A com- cerned has an area of 21,000 sqm. A ration of a building project, which is sub- mercial project with a total cubature of up deal finalizing the acquisition is expect- mitted to the local authorities along with to 1,000 cubic meters will also fall into the ed to be signed April 30, 2008. the application for a building permit. category of a small investment. The government's plan to change the Projects will have to adhere to the local Military Property Agency may close building permits procedure also means gmina urbanization parameters defined Prime Minister Donald Tusk has that investors will no longer have to face by the type of real-estate or countryside in declared his willingness to dissolve the appeals by neighbors and public organiza- the vicinity of the planned project. Military Property Agency (AMW), the tions that under the current law delay con- "This is a rationalization of the invest- state agency responsible for selling off struction starts. ment process," Dziekonski summarized. military land and other assets, accord- "Registrations are not part of the admin- "A rationalization, which means getting ing to unofficial sources. istrative procedure, but are administrative rid of those elements of the law which are The agency is said to end its existence deeds," Dziekonski said. "This means that unnecessary while at the same time stipu- within nine months, and the govern- there are no parties, no appeals and no lating defining and changing those ele- ment would create the Armament delays in the investment process at the ments of the law which are ineffectual, Agency to replace it. Some of the assets moment when the project is prepared and wrongly interpreted or function badly." currently in the possession of the the whole process is at an advanced stage." Dziekonski expects public consultations AMW would be taken over by the The deputy minister explained that on the changes proposed by the ministry Treasury and regional governments. protests would be reviewed during a peri- to begin at the end of April and the pro- od of time between the publication of the posal is expected to be discussed in Polnord plans expansion building concept filed by the investor and Parliament in the autumn. The first ele- Developer Polnord wants to expand to the registration of the project by the local ments of the reform are expected to be Romania, Bulgaria and Ukraine, with authority that will permit the start of con- enforced starting January 1, 2009. Russia as a strategic market, CEO struction works. "The plan is for the changes to be dis- Wojciech Ciurzynski said in an inter- "The point is for the whole investment cussed in Parliament, as legal changes, in view with national daily process [...] not to suddenly be halted as a the Autumn of this year with a possibility Rzeczpospolita. Ciurzynski also said result of a protest, for example, from an for them to be publicized January 1 [2009] that Polnord expects to raise a gross individual who has a justified legal and come to life successively in accor- profit of PLN 200 mln in 2008, and grounds," the deputy minister said. dance with, lets say, vacatio legis, which is plans to build approximately 250,000- "Questions linked with protests [to the a bit longer for some [laws] and a bit short- 300,000 sqm per year abroad in three planned investment] will be revealed er for others," Dziekonski said. years time. Real Estate Report 07 April 2008 8 For once, why not get ahead of your diary? The EuroProperty Investment Summit 2008 will be next year's premier opportunity to learn about new developments in the European commercial property business. A select audience of senior professionals will have the chance to discover new trends, assets and strategies to boost returns, and an unrivalled chance to network with the heavyweights of the European property industry. Topics will include: • Hot spots: which cities, countries and regions will offer the best returns in 2008/9? • Counter-cyclical investments: how and where to find value when property has hit or gone past its peak • Pushing the boundaries of Europe: new opportunities in Russia, Ukraine and beyond • The REIT stuff? Has the growth of REITs across Europe actually been a benefit to investors and the companies themselves? • Financial engineering: after the growth of CMBS, CDOs and property derivatives, what will be the next innovation from the rocket For further information, please contact scientists of property finance? Jane Cartwright: +44 208 652 3659 Save the date: EuroProperty Investment Summit, 24/25 June 2008, Lisbon, Portugal Previous attendees include: Poland 10 Polish capital going vertical with skyscraper boom Trakcja Polska up 1.5% in debut Railway infrastructure and construc- Warsaw high-rise resi tion company Trakcja Polska debuted at PLN 4.50 on the Warsaw Stock Exchange April 1, up 12.5% on its PLN looks to be new trend 4.00 initial public offering (IPO) price. The company raised PLN 120 mln from its IPO. As one of the few European cities with Katarzyna Lubas, a consultant from The company sold 1 mln existing both the demand and the legal leeway to Reas Consulting, told the Report that the shares and 3 mln new shares to individ- build city-center high-rise residential, eastern part Warsaw's Wola district, locat- ual investors. Some 9 mln existing Warsaw will soon see its skyline change ed close to the CBD, is likely to become shares and 27 mln new shares were dramatically in favor of 20-storey-plus lux- rich in residential skyscrapers. sold to institutional investors. ury projects. "More than a dozen high-rise projects The company aims to invest approxi- "We already know about a few planned have been planned there," she said. mately PLN 200 mln in the next two investments in the Wola district that will But it's not only Warsaw that is drawing years. It wants to invest some PLN 80 be over 20 storeys tall," Marcin high rise skyscrapers. mln on road construction, PLN 65 mln Golebiowski a real estate market analyst "Warsaw always sets the trends which on renewable energy as well as PLN 55 from the Rednet Consulting told the are then repeated in other Polish cities," mln on rail infrastructure. Report. Rednet's Golebiowski said. "There will be a number of such invest- Lubas agreed. "Developers are planning J.W. banks on German technology ments [upscale high rise apartment build- building more and more high-rise apart- Developer J.W. Construction ings] in Warsaw in the coming years," ment buildings in Gdansk, Wroclaw, announced that it will be applying Orco Property Group is currently build- Poznan, Szczecin and Katowice," Lubas German building technology at its pro- ing its much-publicized 192-meter Zlota said. duction facility. The company hopes the 44 tower, designed by renowned architect Wroclaw and Gdansk are home to two new technology will allow it to cut costs. Daniel Lebeskind, offering 251 apartments renowned projects. Komfort is building It may launch construction of its mas- in downtown Warsaw. the double-tower Sea Towers project in the sive residential project in Ozarow Meanwhile, Atlas Estates is building its Baltic coastal town of Gdynia. The towers, Mazowiecki on the outskirts of Warsaw Platinum Towers project, which will see of 28 and 36 storeys, will house a total of in June. Apartment prices in the 383 apartments build in two 22-storey tow- 276 apartments. The project is scheduled Ozarow project could be below PLN ers. In addition, Spanish developer Pro for completion at the end of February 6,000 per sqm. Urba recently announced that a 170-meter 2009. tower in western Warsaw's Wola district In Wroclaw, southwestern Poland, Jones Lang lead agent for EDC (see story p. 11) while Polish tycoon Jan Polish tycoon Leszek Czarnecki's LC Corp Europa Distribution Center (EDC), the Kulczyk's Chmielna Development plans to will build the 56-storey Sky Tower with a behind the Europa Park distribution build a hotel and apartment building total of 844 apartments for $400 million. and light-industrial center near Warsaw reaching 280 meters. Another developer, Rednet's Golebiowski believes that only appointed real estate advisory company Marvipol, also plans to erect a 20-storey Krakow may see a limited number of Jones Lang LaSalle as agents for the building in Wola, which will house only apartment skyscrapers, due to the city's project. 40 apartments. architecture. This year EDC plans to extend the development with phases two and three of the project destined to make site one Swiss franc mortgages to be of the country's largest, at 60,000 sqm. more attractive by end of year Developers fear crisis Developers in large cities are choosing The competitiveness of Polish mortgages denominated monthly mortgage payment, to wait with construction, and are even taken out in Swiss francs (CHF) will likely the report reads. selling land to larger players, for fear of further increase against Polish zloty (PLN)- The three-month Warsaw Interbank not being able to complete construc- based loans toward the end of this year as Offered Rate (WIBOR), together with an tion, the Wall Street Journal Polska the countries' interest rates diverge, approximate 1% interest on a loan, results reported, citing unnamed analysts. according to a joint report by financial con- in approximately 7.05% interest on PLN- The paper quoted the Polish Real sultants Open Finance and internet-based denominated monthly mortgage pay- Estate Federation (PREF) management residential property service oferty.net. ments. board member Tomasz Lebiedz as say- "The rates of [mortgage] loans in CHF In March, Poland's Monetary Policy ing that developers are either withhold continue to be lower than the rates of Council rate-setting body hiked rates by 25 construction or selling projects, leading loans [granted] in PLN," the report reads. basis points. Rates are expected to rise to a surge of such offers on the market. "What is more, the disproportion grows, again later this year, according to analysts. Experts warn that with increasing benefiting loans in the Swiss franc." Meanwhile, the Swiss National Bank's interest rates and rising volume of At present, the three-month London rate-setting body is expected to slightly offers, some developers may face prob- Interbank Offered Rate (LIBOR) in CHF reduce interest rates at the end of the year lems with financing. stands at almost 2.84%, while a bank's and keep them flat until that time, further According to some analysts, these interest rate on a loan comes to 1.3%, giv- widening the gap between PLN- and CHF- could be symptoms of a more serious ing an average 4.15% interest on a CHF- denominated mortgages. crisis. Real Estate Report 07 April 2008 10 Poland 11 Business leaders want Warsaw to build technopark NTT System builds own storage Computer maker NTT System Chamber calls for new announced plans to build its own logis- tic center. The center, valued at PLN 20 mln, will be located in Duchnow, a vil- technology incubator lage in Mazowieckie region. Construction work on the facility is scheduled to begin in the fourth quarter The Polish Chamber of Commerce has The Warsaw Technology Park was origi- of the year. appealed to the Ministry for Regional nally part of 350 investments identified by After launching the centre the compa- Development and the President of Warsaw the government as key projects for the ny will be able to lease storage space to Hanna Gronkiewicz-Waltz for measures to development of Polish culture and econo- IT components manufacturers and dis- be taken to ensure that a long-anticipated my, which are in line for EU co-funding. tributors. The investment is intended to Warsaw Technology Park project is realized. The list was reduced to 226 projects by the cut the company's costs. The technology park is estimated to cost Ministry for Regional Development in approximately €350 million and may be early February. The Warsaw Technology J.W. Construction changes structure completed in 2015, and Poland is aiming Park was placed on a reserve list. The shareholders at Polish developer to get €146.24 billion in EU funding for its The Chamber of Commerce warned J.W. Construction Holding decided to key projects. It will contain laboratories, that if Poland does not want its scientists change the group's internal structure office space, conference halls, service to carry out their work abroad then a and create three subsidiaries, which will points and a technological infrastructure. Warsaw technology facility must be built. be 100% owned by the developer, the The park promises multiple opportuni- The project would secure jobs, allowing company announced in a press release. ties for developers, as companies on the scientists to develop professionally and The change of structure is intended to reserve list are expected to receive €27.61 work together with international compa- increase transparency and improve cost billion from the EU. nies. control, the head of J.W. Construction "We are appealing to the President of The project was to be realized by special- Holding Jerzy Zdrzalka said, as quoted Warsaw Hanna Gronkiewicz-Waltz to take ist company, TechnoPort, created for the by the release, adding that it would measures together with the Ministry for development of the project, and planned to ease possible future acquisitions in the Regional Development geared toward the be built on a 44.6 hectares near the upper- building sector. creation of a Technology Park in Warsaw," south Warsaw district of Mokotow, with Under the new structure, J.W. Projekt the Chamber of Commerce wrote in a 300,000 square meters of space would be will be an engineering, advisory and press release. built in two phases. architecture company and J.W. Construction will perform construction work while JWCH Produkcja Pro Urba reveals plans for twin Budowlana will manufacture construc- tion materials. tower urban residential complex Top apartment could cost PLN 7 mln Development company Pro Urba plans to The two towers will house apartments A 670-square-meter (sqm) apartment build a two tower Kaleidoscope residential of various sizes ranging from studios to building in the Sky Tower high-rise complex in central Warsaw, including one two-level penthouses on the top floors. upscale residential building in Wroclaw, of 170 meters, the company announced in Pro Urba is currently working out the southwestern Poland, could cost close a statement. details of the project with architectural to PLN 27 million, the project's press "One of the towers will reach 53 floors, bureau AMC and declined to disclose officer, told the Report. while the second will be 23 storeys high," when it intends to apply for a building per- Apartment prices in Sky Tower range the statement reads. mit, though it hinted that it should take from PLN 14,500 to PLN 40,000 per The two towers will have a usable space place this year. sqm, he said. This puts the building's of 60,000 square meters, both residential Construction of the towers is expected largest apartment at up to PLN 26.8 and commercial. to take around two years. Pro-Urba is a million. The lower floors and the part joining the development company owned by Spanish The apartment is located on the 54th two towers will house commercial services capital groups active in the construction and 55th floor of the building, which including restaurants and shops. t and development sectors. offers a view of the Sudetes Mountains, approximately 50 km from the city. The apartment also has its own 15-meter- Re-sale apartment prices stable swimming pool. The company declined to reveal Prices for used residential properties in with prices increasing by 0.3% during whether someone has bought the apart- Poland's largest cities remained mostly January and February 2008. Prices for ment. Sky Tower is being built by unchanged in February 2008, according 50-sqm apartments in the northern Polish tycoon Leszek Czarnecki's LC to a joint report by internet property firm Tricity (Gdynia, Sopot, Gdansk) area are Corp. oferty.net and financial consultant Open oscillating between PLN 300,000 and The $400-million investment will have Finance. PLN 500,000, with slight price increases a total usable area of 300,000 sqm. The The average price for a 50-sqm apart- (circa. 2%) seen in Sopot and Gdynia project is expected to be completed in ment in Warsaw reached some PLN and price decreases of 2.8% seen in the fourth quarter of 2010 or in the first 500,000 in the first two months of 2008 Gdansk in January and February. quarter of 2011. Real Estate Report 07 April 2008 11 Poland 1 Building costs and credit tightening threaten profits Land use law may change The government's "Friendly State" Residential developer commission has submitted an amend- ment to the Protection of Agricultural and Forest Areas Act. According to the margins likely to fall amendment, the low quality agricultur- al land that lies within the city borders would be exempt from the Act, thus Polish residential developer margins may building in the center of Warsaw, which will allowing the owners of the low-quality decrease by 3-5 percentage points in 2008, contain eight luxury apartments of between farmland to omit some of the costs according to internet finance consultant 33 and 106 square meters. associated with today's formal change Open Finance's Analyst Emil Szweda. While assuming that the decrease in of land status from agricultural to resi- "I expect developer margins to decrease developer margins will not be a significant dential. Changing the status of the land by 3-5 percentage points this year," Emil one, Open Finance's Szweda noted that does not automatically mean real estate Szweda told the Report. The main reason though rising construction costs are unlike- investment could take place there, how- given for the decrease is increasing build- ly to affect larger market players, smaller ever. The last word on the issue would ing costs, which analysts estimate to take developers may suffer due to the costs of still belong to the local authorities. up some 30% of total development costs. financing. While these increase, residential prices When looking at developer margins, due Griffin to invest in Poland are at a relative standstill and developers to the variety of companies on the market, Mezzanine fund Griffin Property are forced to add incentives to residential projects should be treated individually, but Finance (GPF) announced that it wants offers such as free parking spaces, fitted broadly speaking developer margins— to invest in the Polish real-estate sector. kitchens or free balcony space. which reached approximately 30-35% in GPF Senior Partner Helmut Fischer "This increases the costs of projects and 2007 - will fall to some 30% in 2008, DM said the fund is interested in industrial, affects margins negatively," DM PKO BP PKO BP's Sztabler added. residential and commercial market with analyst Michal Sztabler wrote in a com- Sven von der Heyden is in agreement the exclusion of hotels. The company mentary. "A strategy, which is being used by that large developers, which have good liq- has signed a letter of intent with devel- some developers, centering on the sale of uidity, are likely to survive the tightening of opers for €100-150 mln, Fisher added. turnkey apartments, seems well placed but credit conditions by banks, which is a result It fund did not reveal the projects cov- only in certain segments of the market, this of the situation in the banking sector fol- ered by the letter of intent but said that being the market for apartments [...] of a lowing the U.S. credit crunch. the developers in question are not list- higher standard." "We should also not forget about tighten- ed. The total amount GPF wants to High-end residential developers such as ing credit conditions imposed by banks, invest in Central and Eastern Europe Von Der Heyden Group recognize that which [mean that] only good locations and comes to €250 mln. margins are likely to come under pressure, the fittest developers survive," Sven von der but remain optimistic as to continuing Heyden commented. "This all together is Energy certificates lack experts demand for luxury residential property. certainly not the dreamland scenario for us The real-estate sector could come to a "Margins of developers will unfortunate- real estate developers." standstill in 2009 as there may be not ly come under pressure for various rea- Residential prices in Warsaw reached enough specialists eligible to allocate sons," Von Der Heyden Group Chairman PLN 8,847 per square meter (sqm) in energy certificates. From January 1, Sven von der Heyden commented for the January 2008, up 2% from December 2009, a certificate will have to be Report. "Mainly because of the cooling prices, and remained at the same level acquired for every building sold or down of the market, however on a high throughout February, according to internet given up for use. The Infrastructure level [luxury residential] we remain cau- property agency Rednet Property Group, Ministry has not yet issued a directive tiously positive, also in light of our success- cited by DM PKO BP in its report. on the content of such certificates and ful progress in selling flats in our small Residential prices in the southern city of as a consequence, schools are unable to Warsaw residential projects." Krakow reached PLN 7,504 per sqm in educate specialists on issuing the docu- Von Der Heyden Group is currently near- November last year with little or no change ments. The Ministry's directive will be ing the completion of a luxury residential being seen so far in 2008. ready around mid-May, according to business daily Parkiet . Szczecin home prices may rise No chance of price cuts says J.W.C There is no chance of a general price The seaport town of Szczecin is likely to The needs of young people for moder- cut on new residential properties in see a rise in residential real estate prices ately-priced flats will be the base of 2008, according to developer J.W. due to growing demand for flats and the demand in the residential real estate mar- Construction's CEO Jozef city's improving economic situation, ket in upcoming years, Ciesla wrote. Wojciechowski. according to residential real-estate consul- Apartment prices per square meter in "I do not question the fact that the tancy Reas analyst Jan Ciesla. Szczecin usually do not exceed PLN insane gallopade of prices form previ- "There is an assumption that the con- 6,000, the report reads. ous years is a history by now, but— tinuing improvement of the city's eco- Residential cooperatives account for when it comes to new flats—there is no nomic situation and the demographic sit- 30% of the market, according to the docu- way we will deal with rapid price cuts in uation will contribute to a general boost in ment. The number of completed flats in 2008," he said. Price decreases could demand and determine its structure," Szczecin stood at 2,015 in 2007, up 125% however be possible in unattractive Ciesla wrote in a report out in March. year-on-year. locations, Wojciechowski said. Real Estate Report 07 April 2008 1 Hungary 1 Experts see slowdown continuing before recovery Pecs Tower tender fails The latest in the sequence of many Market still attractive attempts at selling a long abandoned 25-storey tower building in southern Hungary's Pecs has once again brought despite uncertainties no result, as the only bidder, a sub- sidiary of real estate developer Wallis could not meet all requirements. Investment in Hungarian property has "For institutional investors, there is no The company could only guarantee the remained an attractive choice for institu- effective alternative between real estate completion of its investment in 2011, tional investors even following the recent and equity markets, because they are while the local government set an earli- U.S. sub-prime crisis, experts agreed dur- already specialized to invest in one seg- er date. Furthermore, Wallis stipulated ing a panel discussion on real estate, bond ment or the other," he said. it would only make a binding offer if it and equity markets. Although the real estate market in could lease out 10,000 square meters in "[In Hungary], property is a good invest- Hungary managed to escape the full- the provisional complex in advance, a ment medium at the time of uncertain- blown effects of the U.S. sub-prime cri- demand that was deemed unacceptable ties," Charles Taylor, managing director of sis—thanks to its low or non-existent by the municipality. Pecs will now the local office of real estate consultants exposure to the segment—it has neverthe- announce another procedure to find a Cushman and Wakefield (C&W) said at less felt the secondary effects of an new owner, this time with a lower start- the event. "The credit crunch has not had increasingly uncertain market mood, ing price of HUF 410 mln. such a great effect in Hungary as in according to C&W's Taylor. Western European countries, and "The credit crunch has left its footprint Casino project gains momentum investors have continued to transact in on the market, with a property's funda- The Economy Ministry and the Budapest." mentals gaining an essential role versus its investor behind Eurovegas, a casino According to participants, investing in cash-flow productivity," he said. "For the project in Bezenye, western Hungary, real estate in Hungary—and in other last seven years, property investment funds have reached an agreement on allowing Central and Eastern European countries— were buying, buying and buying; now they the company to use parts of the M15 currently carries lower risk than investing are looking at the assets they bought a few motorway in the area to transport con- in other assets, such as stocks or bonds. years ago and are re-pricing them." struction materials to the site. As stock markets are expected to remain Although experts anticipate a lower vol- Reports say Eurovegas Hungary Kft volatile, risk-averse investors tend to pre- ume of property transactions in Hungary was willing to pay the amount demand- fer property investments, or real estate this year than in 2007, indicating a tem- ed by the ministry, so construction investment funds. porary slowdown in acquisitions, property works may now continue with greater "This is not the end of the story yet, and investors seem willing to continue buying intensity. investors are remaining on the sidelines to on Hungarian markets. The Eurovegas complex to be built on see which way stock markets will continue "There are still significant players on the a 240-hectare plot is estimated to cost their path," Peter Duronelly, investment sidelines, waiting for the best buying €400–600 mln and eventually provide director at fund manager Budapest opportunity," said Taylor. Also as a result jobs for 3,000 to 3,500 people. Alapkezelo said. of the sub-prime crisis, institutional buy- "Meanwhile, dynamic real estate devel- ers became dominant, and while they are Private prison opens opments are set to continue, so it is worth not expected to abandon the market, they A consortium led by real estate devel- considering investing in property for are likely to shift focus within their asset oper KESZ Zrt has officially opened a those who prefer lower volatility and stable portfolios. prison complex in Tiszalok, northeast gains." "Prime yields in Hungary decreased Hungary. The operation of the correc- At the same time, the chairman of the gradually in retail, office and industrial to tional facility with a capacity of 700 Budapest Stock Exchange, Attila Szalay- around 6-7%, approximating yields in convicts will be supervised by a KESZ Berzeviczy, noted that in reality capital Western European countries," Taylor said. subsidiary. Under the public-private markets are not competitors to the real "As asset values are easing back, investors partnership arrangement of establish- estate market, due to the degree of spe- are moving into new property classes, ing the prison, KESZ will retain opera- cialization. readjusting their positions." tion for 15 years, to receive a maximum of HUF 1.5 bln in annual rental fees TriGranit to build holiday resort from the state. Hungarian real estate giant TriGranit, led resort complex with private vacation Pecs to sell off property package by property magnate Sandor Demjan, is homes and luxury hotels, while its value is The municipality of southern planning to launch a large-scale holiday estimated at several billion euros. Hungary's Pecs is to sell off a package resort project in Montenegro, the daily Tourism and infrastructure develop- of real estate assets worth HUF 5 bln, Napi Gazdasag reported. ment is in line with Montenegrin govern- town hall officials confirmed. The company is currently waiting for ment strategy to attract foreign investment The city's management announced the Montenegrin government to capital to the underdeveloped, but also still the privatization with more advanta- announce an international tender to uti- undisturbed coastal area, which is owned geous terms than in the case of earlier lize a beachfront location on the Adriatic by the state and the local government. similar efforts, as it is badly pressed Sea, which could be followed by drawing Although the country is not yet part of for funds needed for investments in up concrete plans. TriGranit's project the euro-zone, its official currency has preparation for being the 2010 would feature a several-thousand-hectare been the euro since 2003. European Capital of Culture. Real Estate Report 07 April 2008 1 Hungary 1 Local player shifts focus to enter industrial market Agents launch sales guarantee service Two property dealers, Otthon Centrum Ablon enters logistics and Duna House, hope to up their respective market shares through intro- ducing fairly similar benefits to clients. Hungary-based CEE property develop- the area; therefore any kind of new devel- Under the new arrangements, if the ment firm Ablon Group has launched a opment is expected to meet with a warm dealer fails to sell a commissioned asset new logistics center project, Airport City, welcome." for a given duration, and the customer to be built in eight separate phases, the "We expect Ablon's Airport City Park to succeeds in sealing the deal unassisted company said at an event. be a great success, as an overwhelming within three months of the term expir- The completed logistics park, located on demand will meet its supply here," he ing, the agency pledges to pay approxi- the boundary of Hungarian capital city added. mately 2% of the asset's worth. Budapest and neighboring Vecses, will Homonnai said the phasing of the com- altogether have some 66,000 square plex, as well as the office-warehouse ratio, Zuglo authorities approve 1,00 flats meters of built-in area, mainly containing will be demand driven. The municipality of the Zuglo district warehouse and also some offices. "There will be two buildings solely offer- in Budapest has approved design plans The project is the company's first foray ing office space and six with mixed ware- for the Mogyoros Kert investment, after into the industrial market, as so far it has house and office space, with the ratio to be the first round of the procedure ended been involved mainly in office, hotel, retail changed on demand," he said, adding that in failure. Real estate developer and residential projects. The value of the the company is already in talks with possi- EuroIngatlan Kft may now commence investment was not disclosed by the firm. ble tenants. construction of a residential and recre- "The current project is Ablon's first Ablon will complete the first phase of ational complex accommodating 1,200 logistics investment, and aims to attract the project, the 10,300 sqm building "C" apartments, as well as several sporting logistics firms and retailers who need in the summer of 2008. The company and cultural facilities. access to the nearby Ferihegy [internation- plans to start the next one, the 10,300 sqm al airport] and the city center," marketing building "D" this year, while construction Airport hotel to be completed in June manager Zsuzsanna Makkai said at the is expected to take around one year. Real estate investor De La Rosa Kft is event. Regarding Ablon's further plans in the to open its four-star Airport-Hotel in "Ablon decided on developing this logis- logistics market, Homonnai said the com- central Hungary's Vecses in June. The tics property because of the dynamic pany is open to any favorable opportuni- 112-room building was built for HUF 2.5 growth of the local logistics market, and ties depending on demand. bln, said Robert Saller, CEO of the oper- within that in Budapest especially," The logistics plans came the same week ating firm Airport-Hotel Kft. Communications Director Gabor as Ablon released its 2007 financial Saller pointed out that the company Homonnai told the Report. results. The company recorded net profit also owns the adjacent 2.5-hectare plot, "Airport City will build on the proximity of €40.8 million in 2007, up 14% on the so if necessary, the complex could be of both the airport and nearby major year (y/y), while the company's net asset expanded. roads, while planned developments at the value (NAV) was up 85% y/y to €506.6 airport itself and in the area's infrastruc- million, according to the company's latest Szeged scraps airport development plan ture will also have a positive effect on the financial statement. The municipality of Szeged (southern project," said Homonnai. The company portfolio was valued at Hungary) has decided to suspend a Analysts also said demand for logistics €617.4 million by independent valuation planned HUF 4 bln upgrade to its local services is very high in the airport region, firm King Sturge at the end of 2007, up airport, which would have enabled the so projects there have good potential. from €421.5 million in the previous year. facility to receive large passenger craft. "The airport logistics market is current- Ablon shares are traded in London on Szeged Deputy Mayor Sandor Nagy ly driven by demand, as there is only one the Alternative Investment Market (AIM). said the decision was made as other completed logistics project there, which is Ablon has ten completed projects in cities similar in size to Szeged show already fully leased," Domonkos Joo, an Budapest and seven under development, that provincial towns cannot make a analyst at real estate consultants DTZ said. but is also active on the Czech, Romanian profit from scheduled flights. "There is no modern logistics facility in and Polish markets. Sio Ingatlan builds in Siofok Hungarian development company Sio Arrests delay Sopron project Ingatlan Invest plans to build a shop- ping and entertainment center in west- A brown-field project in northwest and underground parking for 360 cars. ern Hungary's Siofok, a popular resort Hungary's Sopron, originally planned to However, plans to complete the project town on the shores of Lake Balaton. be launched at the beginning of the year, is by the end of 2008 were ditched when the Construction of the 7,000-sqm, two- seen suffering delays as the managers of managers of the development company storey Sio Plaza is expected to start in the development company are being held were arrested for crimes not linked to the autumn 2008, following the demolition by police on suspicion of fraud, the online project, according to the report. of a disused residential building and an version of local daily Kisalfold reported. The development of the property project old shopping center, press reported. The planned residential and office com- has not been abandoned, as another com- The developer bought the land and the plex, to be built at the 9,000-square-meter pany, which the daily did not name, has buildings from the local government site of a former textile factory, was to cost purchased the land and the project. for HUF 360 mln, and has already around HUF 8 billion, and to contain 440 Further details of the completion schedule started leasing space, according to the flats, an office building, a services center were not available at press time. Sio Plaza web site. 1 Real Estate Report 07 April 2008 Hungary 15 Developer seeks spa investors Developer to build with or without new metro line Hungarian developer Gyulai Futureal reveals city Termalpark is seeking investors to build the first, HUF 17-bln phase of a thermal spa and hotel complex in Gyula, eastern center Budapest plan Hungarian real estate development group Etele Square is planned to be one of the Hungary, local dailies Bekes Megyei Hirlap and Hir6 reported. Under the first phase of the project, a thermal spa, a three-and a four-star hotel with a total Futureal plans to build a large mixed-use end stations of the new metro line 4, 1,500 rooms, a concert hall, as well as city center project, as well as an office planned for completion by 2010-2011, rehabilitation and conference centers complex in the Hungarian capital city which is expected to jump-start develop- are planned to be built on around 25 Budapest in the next few years, Futureal ment in the area. However, Tatar said that hectares of the 52-ha development plot. CEO Tibor Tatar told the Report on the Futureal will start the construction of its sidelines of a press conference. planned projects regardless of when the Europolis expands business park "We are currently working on several metro 4 line is completed. The Hungarian arm of Austrian-owned plans, one of them is an urban develop- Meanwhile, preliminary planning of development company Europolis plans ment project in Budapest's Kelenfold dis- Futureal's other large-scale office proj- to expand its M1 Business Park in trict," Tatar said. "The other one is really ect—which has no project name yet—is Biatorbagy, close to Hungarian capital new, an office complex in northern expected to start soon. The 40,000-sqm Budapest, in a €100 million investment, Budapest's Robert Karoly ring road." office complex in (northern Budapest's) the daily Vilaggazdasag reported. Futureal, a major player on the Budapest Robert Karoly ring road is planned to be The company, part of Austria's development market, is currently develop- completed in three phases. Volksbank group, recently decided to ing projects worth about €1.5 billion, includ- "If all goes well, we will kick off con- extend its activity from investment ing the large-scale Corvin Promenade struction of the first phase this year, and management to property development urban development project in Budapest and start further phases depending on in order to cope with the difficulties other ongoing developments. demand," Tatar said. "Project costs have posed by the market. Under the expan- The company's several-hundred-mil- not been finalized yet in this stage of plan- sion project at M1 Business Park— lion-euro Kelenfold project, dubbed Etele ning." which currently includes 70,000 square Varoskozpont, is planned to involve a The CEO expects strong interest from meters of logistics and distribution retail center of around 45,000–50,000 possible tenants, despite the fact that the warehouse space—the company plans square meters (sqm) and an 80,000-sqm main focus of the market is currently on to build mainly office and warehouse office park, to be built on a combined 4.2 office developments on the Vaci Ut busi- space in several phases, but shops will hectares of land, Tatar said. ness corridor, close to the location on also be added. "Preliminary planning is now underway, Robert Karoly. and we are expecting the local government "We think that we will be able to build Lafayette mulls Budapest mall purchase to finalize the zoning plan of the district, as an exceptionally cost-efficient office com- France's Lafayette retail chain is inter- well as the municipality of Budapest to plex," Tatar said. "In terms of costs per ested in purchasing the Divatcsarnok approve the raising of a 100-120-meter person, we are calculating with very low shopping center in Budapest, according high-rise in the area," Tatar said. management costs and rents." to media reports. The center is current- ly being refurbished by property devel- oper Orco, which spent HUF 3 bln on Biggeorge's eyes up Romania buying the complex and is to spend some HUF 2 bln on the makeover. Hungarian property holding Biggeorge's Centrum property agency franchise to Although market insiders confirmed has started market research in Romania, Romania, while entering the market news of the possible involvement of with a view to entering the Romanian real through cooperation with other Romanian Lafayette, Orco declined to publish estate market, the holding's board mem- companies is also not ruled out. details of ongoing talks. ber Andras Kondor told the Report. According to Kondor, there is huge Kondor noted that a final decision on potential in the Romanian market, but Turks to launch castle makeover the company's expansion, which will be Biggeorge's also needs to consider that the Turkish investors are to launch the based on the results of research started in market there operates very differently HUF 1 bln refurbishment of the February, is expected to be made this sum- from Hungary's. Szigetvar castle in southwestern mer. He added that Biggeorge's plans to "We have noticed that it is very easy to Hungary, almost 500 years after it was enter Romania with its "project consulting sell real estate in Romania; it only takes ruined—by the Turks. The organiza- division," which deals with new-home days or weeks to sell, therefore owners tions hope to use the building as a cul- sales. may not necessarily want to hire property tural and religious center. According to Kondor, the development companies to sell their apartments, so the of new homes in Romania saw a boom in market is rather chaotic there," he said. Budapest seeks parking operator recent years, while another reason for Kondor added that not many mid-sized The municipality of Budapest's expansion is that many of the company's foreign property companies have entered Ferencvaros district is seeking an developer partners have already entered the Romanian market to date, therefore investor to realize, and then operate for the Romanian market. there is little experience in how foreign 30 years, a three-level, 250-car under- Kondor added that the company is also companies manage to integrate into the ground parking lot at a busy junction in considering expanding its Otthon market. the area. Real Estate Report 07 April 2008 15 Czech/Slovakia 1 Undeterred by the credit crunch, Orco looks to expand CzechInvest offers real estate subsidies Entrepreneurs can apply between Orco looks at newer April 1 and December 31 this year for subsidies with the state agency for business development CzechInvest markets to the South within its Nemovitosti (Real Estate) program. Entrepreneurs can receive subsidies mainly for planned industrial Prague-listed developer Orco Property While banks began to distinguish zones, technology centers, and proper- Group (Orco) has not felt any negative between strong and weak developers, Orco ty reconstruction. impact from the global credit crunch and has secured financing for its projects this The goal of the Nemovitosti program is eyeing new markets for residential year, Vobruba told the Report. is to support projects within prepara- development including Romania, Bulgaria "We'll certainly not build on a specula- tion, construction, development and and Croatia, company senior vice presi- tive basis," he said. "We have secured reconstruction of real estate with an dent Ales Vobruba told the Report. cash-flow for 2008." emphasis on property reconstruction, "We're monitoring the markets in The company has up to €700 million for CzechInvest said. Subsidies are also Romania and Bulgaria for residential investment for 2008, of which €190 mil- available to cover part of the purchase development," Vobruba said on the side- lion can be postponed if sufficient pre- price and demolition of disused build- lines of a presentation on 2007 results. release of Orco's office project in Budapest ings. CzechInvest has a total CZK 2 "In Croatia [the top summer foreign holi- is not secured, for example, Vobruba said, bln in subsidies with a maximum of day destination for Czechs] we're consid- but any postponement in investment will CZK 500 mln for a single project. ering building second-home apartments not be related to the U.S. crisis, he added. The Nemovitosti program is part of by the seaside for Czech and other "There's been a lack of quality housing the Operational Program Enterprise tourists." in Central and Eastern Europe for a long and Innovations (OPPI) 2007-2013 of Vobruba said that residential develop- time and many developers will have work the Ministry of Industry and Trade. ment continues to be the main source of in the coming years," Vobruba said, cash-flow for the company. Last year, Orco adding that Hungary is among the lagging Lukoil first tenant in Galleries Louvre delivered 1,503 units and in 2008 the markets, even taking into account the The Czech subsidiary of Russian oil developer expects revenues from apart- country's macroeconomic situation. company Lukoil has leased almost ment sales at €197 million, he said. Orco nearly doubled the value of assets 1,600 sqm of the total 4,515 sqm of The vice president said Orco had not last year to €2.4 billion. Net profit reached office space at the Galleries Louvre been influenced by either the U.S. credit €87.5 million in 2007, down 9.5% year-on- building in Prague 5, the office build- crisis or the rise in value added tax (VAT) year (y/y), and below market expectations ing's leasing agent Cushman & from 5% to 9% on construction as of 2008 of €100-112 million. Orco's net asset value Wakefield said. Developer Mayfield in the Czech Republic as a result of EU (NAV) per share was at €106 last year, up Radlice East-group, a member of the regulations. 6% y/y on 2006. UK-based Fordgate Group, launched He added that the company's new resi- The company is considering selling its construction of the office building in dential development Citadela in Prague 4 logistics projects and mature office proj- spring 2007 and expects to complete it is already 40% pre-sold—although sales ects this year to its Endurance Fund, in June this year. Lukoil Czech were only launched in March this year. Vobruba said. Republic plans to move into the com- plex in September. Ruling party proposes bringing Bank tightens mortgage lending Czech bank Ceska sporitelna (CS), forward rent deregulation date which has nearly a 30% share in the Czech mortgage market, announced it The ruling Civic Democrats (ODS), may square meter (sqm), or one-third the mar- will toughen its mortgage approval bring forward the abolition of rent con- ket rent, said Jiri Pacal, director of Central conditions, saying it fears the U.S. trols ahead of the current 2011 phase-out Europe Holding, which owns and rents mortgage crisis might spill into the date, which would likely result in average out 15 apartment buildings in the Czech Czech Republic. rental prices for Prague apartments falling capital. "There are similar symptoms [here] as from CZK 150 to CZK 80 per square meter After rent deregulation, market rents in the United States," CS retail execu- (sqm), daily Mlada fronta Dnes (MfD) would drop from CZK 150 to CZK 80 per tive Jiri Skorvaga said in an interview reported. square meter in the Czech capital, Pacal for the business daily E15. "We have "We would end the past system when said. decided we will no longer participate in contracts were not signed freely [i.e. under Under the new proposal, a court would this mob madness around mortgages." communism]," ODS deputy Zdenka decide on the market rental rate if the CS is a subsidiary of Austrian lender Hornikova said, as cited by MfD. landlord and tenant are unable to come to Erste Bank. ODS is to propose canceling the current an agreement, ODS deputy Hornikova law, according to which rents should be told MfD. PSJ to reconstruct port in La Goulette completely deregulated as of January 2011, Some 800,000 of the four million Czech construction company PSJ has and adopting a new one that would speed apartments available for rent in the Czech become a general supplier which up the process, MfD said. Republic are subject to rent control. Nearly should modernize a port in Tunisia's Prague apartments subject to rent con- half of the country's apartments are in the capital of La Goulette for €25 mln, the trol are currently let for about CZK 55 per hands of private companies. company announced in a press release. Real Estate Report 07 April 2008 1 We share the bigger vision To guarantee future success you need to depend upon having the right knowledge. By subscribing to EuroProperty you will profit from essential property information from across Europe; analysis, research, company profiles and the latest surveys. In addition, enjoy free access to europroperty.com and one-to-one loyalty care with EuroProperty Customer Services. Call +44 (0) 20 7911 1780 or email firstname.lastname@example.com Quote code AD206 we share the same vision by looking at the bigger picture Romania 18 Mivan to reconsider malls Investors choose Romania over Russia for leisure park U.K.-based property development com- Asian investors in talks pany Mivan Development is reconsider- ing plans to build a mall in the western Romanian city of Arad due to a saturat- to build €1.5 bln casino ed market, Romanian national daily Ziarul Financiar reported. According to the daily, companies Romanian businessman Eduard Ursescu own more than 100 hectares of the announced the development of five and two other individual investors are planned site and are also in the process of commercial centers in Arad during the negotiating with a large Asian casino buying the remaining plot. past 18 months, with the construction development group to build a €1.5-billion The land is estimated to be worth be up of two malls of 30,000 and 33,000 hotel and casino resort in the to €24 million, as prices in the area vary square meters already officially Southeastern Romanian town of Nuci, between €4 and €12 per sqm, the news site launched. having decided against Russia, as original- added. Mivan announced in September 2007 ly planned. The project is planned to include six its plans to build 10 shopping centers Ursescu told the Report that the Asian hotels with 800-1,200 rooms each and six by 2011 in Romania in a total €700 mln investors of the casino project were initial- themed casinos, which are to be operated investment. The malls, under the Tiago ly planning to carry out the development by the Asian investor. The development brand, were planned to be built across in Russia, but eventually picked Romania will also include a retail park, a water park Romania in cities with over 100,000 cit- because it has a more stable legislative and a 60-hectare zoo, which is to be final- izens, such as Arad. environment and is more accessible for ized after the rest of the development is Mivan also recently announced plans future customers. completed. to enter the Romanian office building "The Romanian destination can be Ursescu expects the project to be com- and logistics center market in 2008 by reached easier by the potential Western pleted three years after the start of con- investing €400 mln in two projects in European, Chinese and Israeli gamblers," struction, while permits are expected to be Romanian capital Bucharest. Ursescu told the Report. "The local legis- received by April next year. lation concerning casinos is also clearer, The businessman believes that the Only ten small cities left without malls while in Russia it is changing every two, investment should be recovered in 30 There are only ten cities in Romania three or five months according to the years, but that also depends on the con- with a population of more than 50,000 interest of an investor, who maybe wants struction of the highway connecting capi- that do not have a modern mall yet, to build a larger casino." tal Bucharest to the central Romanian city national daily Ziarul Financiar reported. Romanian news site businessreview.ro of Brasov. The daily said that of the 45 Romanian reported earlier that the Romanian He also expects the project to benefit cities which have population in excess investors plan to become the minority from the proximity of a recently of 50,000, the size considered neces- shareholders in the project, which is to be announced Formula One motor racing cir- sary to justify a mall development, ten developed on 200 hectares of land. cuit planned for development in Snagov have not yet had any mall construction According to Ursescu, the unnamed lake area along with a planned golf resort announced. Asian company will finance the project, and other leisure facilities in the area. There are currently over 20 malls in while the Romanian partners will provide Ursescu has invested in various resi- the finalization stage in Romania, with the land and will also carry out the devel- dential projects in Bucharest, with the 13 being developed in large cities, the opment, for which they will receive a 20% total value of investments reaching €20 daily noted. stake in the project company. Ursescu million, according to the businessre- noted that he and his Romanian partners view.ro news site. Noble House builds residential projects Romanian construction company Noble House is planning to invest €8.1 Tagor Capital, Patron to double mln in three residential projects com- prising 83 apartments, which will be investments by end of this year developed with the technology of Australia's House Factory franchise, Israel-based, listed real estate investment Patron, under which the companies have Romanian news site dailybusiness.ro and development company Tagor Capital already developed several property projects reported. plans to double the value of its property in five Romanian cities in 2007, including According to the news site, the compa- investments in Romania in 2008, working the capital Bucharest. ny's first project, which is nearly fully in a joint venture with U.K.-based proper- Lieberson, who manages Tagor's pre-sold, will include 28 apartments in ty fund Patron Capital, Controlling Partner Romanian operations, noted that Tagor a €2.4 mln development expected to be of Tagor Capital Ofer Lieberson told the Capital expects demand to remain strong in finalized in mid-2008. Report. the coming period in Romania, as econom- Noble House has started the construc- "We are planning to double our property ic fundamentals are stable and wages are tion of another residential project in a investments in Romania from €56 million expected to continue rising. €1.7-mln investment, which will com- to €112 million by the end of 2008, mainly He added that the company mostly uses prise 15 homes, while it is also planning through residential projects," Lieberson its own sources for its Romanian develop- to start a development comprising 40 said. ments, but it is also considering bank loans apartments in an investment valued at According to Lieberson, Tagor will con- in the future, as Tagor Capital has further €4 mln, which is scheduled to be com- tinue an ongoing financial cooperation with development plans in the pipeline. pleted by the end of 2008. Real Estate Report 07 April 2008 18 Romania 1 Italian real estate firm buys 15 centers in megadeal Romania lures Hungarian workers Romanian labor authorities have set up IGD buys Winmarkt Italian listed retail real estate company rent and increase future rents through the rallying agencies along the Hungarian border, hoping to fill the country's labor shortage with Hungarians. Romanian companies, particularly con- Immobiliare Grande Distribuzione (IGD) optimization of the commercial offer and struction firms, are faced with an has acquired Romanian retailer property enhancement." increasingly troubling lack of workers, Winmarkt, which owns 15 commercial IGD added that it also expects "adequate which they hope to solve by capitalizing centers, as well as another property, for a portfolio management" to increase the on the high rate of unemployment in total €182.5 million. Romanian portfolio's value by 10% eastern Hungary. "Today IGD S.p.A. signed a preliminary through exploitation of the non-commer- agreement for the purchase of a real estate cial potential of the properties, as well as Westhouse builds flats in Constanta portfolio in Romania comprised of 15 the sale of assets which IGD considers Romanian property developer Winmarkt brand commercial centers for a non-core. Westhouse, controlled by Oslo-listed, total of 147,000 square meters (sqm), as The company said that the investment, Norwegian-owned developer RomReal, well as commercial property leased in its expected to be finalized by the end of has started the construction of 409 entirety to a bank," said a statement. April, will be carried out with Inpartner apartments in the Black Sea port of Winmarkt is owned by U.S. private Spa, an Italian company specialized in the Constanta. equity company New Century Holdings management and development of real- The project is being built on a 27,000- (NCH), one of the largest retail real estate estate fund portfolios, which will have a sqm plot, of which 8,000 sqm has been owners on the Central and Eastern minority stake in the Romanian portfolio. set aside for parks, playgrounds, tennis European market. IGD also signed a preliminary pur- courts and a promenade. The project IGD said that according to the existing chase agreement of another commercial will include ten buildings, while the contracts, the total annual rent of the 16 center in the central Romanian resort of apartments will range between 48–180 properties in the Winmarkt portfolio will Sinaia for €16.24 million. According to the sqm in size. amount to €19.138 million in 2008. company, once acquired, the center is Westhouse earlier announced plans to According to the statement, the average expected to bring rents of around €1.35 invest €1.5 bln in residential projects in leasable area of the acquired commercial million. Romania by 2014. centers, which are located in major The company's real estate portfolio, squares in 14 large Romanian cities, is which consists of 10 malls, 14 hypermar- Gigant Construct builds 1,500 homes around 9,000 sqm. kets, three further properties yet to be Romanian-Icelandic property develop- IGD CEO Filippo Carbonari said the developed, and two commercial centers ment company Gigant Construct plans company will invest a further €23 million owned through joint ventures, was valued to build 1,500 apartments in a €150 mln in Romania in order to "stabilize the cur- at €1 billion at the end of 2007. investment, Romanian national daily Ziarul Financiar reported. Futureal pushes €100 mln According to the daily, the company has acquired three plots of a total 42,000 square meters in the Titan dis- investment, waits on office trict of Romanian capital Bucharest for a combined €8 mln, where it intends to Hungarian real estate developer Futureal Futureal is also looking at other retail build the homes by 2012. The daily said announced that it will invest approximate- opportunities, with a special focus on that the company has another three ly €100 million in a major project in favorable location. ongoing residential developments in northern Romania's Baia Mare. "We are in talks about a mixed retail, the Titan district. "We received the building permit two office, and residential project in weeks ago for the shopping center, and we Bucharest," Tatar said. "This could be a Price of reinforced concrete up expect construction to start within about a development similar to our Corvin The average producer price of rein- month," Futureal CEO Tibor Tatar told the Promenade [urban development project in forced concrete has increased by 10% in Report. Hungarian capital Budapest], although Romania over the past year to €490 per The investment is being developed in there are no details yet." tonne and it is expected to rise further, cooperation with Austrian real estate fund Although Hungarian real estate devel- Romanian national daily Ziarul Immoeast. It will be 15% financed from oper Futureal is interested in building Financiar reported. the developers' own sources, as well as by office projects in Romania, it has decided According to the daily, the end-user a Hungarian bank that Tatar declined to to remain on the sidelines for the time price construction firms pay for rein- name. being and launch retail projects instead, . forced concrete is currently around As part of the cooperation agreement, "We would be more than happy to build €750 per tonne, which is expected to Futureal will build and manage the offices in Romania, especially in capital increase further in the second quarter planned shopping center, dubbed Gold city, Bucharest," Tatar said. but is seen stabilizing by the second Plaza, while investment firm Immoeast "However, it is currently impossible to part of the year. will be the project's owner, Tatar said. start a project at reasonable prices due to The daily noted that the price of iron The shopping center will include skyrocketing land prices. We are looking and steel products is influenced by the 30,000 square meters (sqm) of gross at a lot of projects, but we have decided to currency exchange rate, the volume of leasable area, which is already around wait until the market calms down some- investments, and the structure of 30% pre-leased. what." imports. Real Estate Report 07 April 2008 1 Romania 0 Equest Balkan gets project financing Two major players form joint venture for residential Equest Balkan Properties Plc, a UK- based property investment company Plaza Centers, Dutch focused on commercial, retail and industrial property in South Eastern Europe, announced that it has secured BAS invest €0 mln €25.675 mln of development financing for its Equest Logistics Centre project in Bucharest. The financing was agreed at Israeli property developer Plaza Centers acquired four sites in Romania last year. normal market rates on a five-year term and Netherlands-based BAS Development The Timisoara project will include 41,000 with Raiffeisen Zentralbank AG, the plan to invest a total of €290.4 million in sqm of leasable retail space and 30,000 firm said in a statement. seven residential and office projects in sqm of office space. Equest Logistics Centre consists of 11 Romania, with a potential sales value of The project in Miercurea Ciuc will cover hectares of land situated within the almost €411 million, Plaza Centers said in 14,000 sqm of built-in retail area. The Iasi Bucharest West Logistics Park develop- its latest financial report. project will build 41,000 sqm of shopping ment. The first of the project's three The company said that it set up a joint space and 30,000 sqm of office space, buildings opened in February, with the venture partnership last year named while the project in Slatina will have second scheduled for completion in Plaza-BAS, in which it has a 50.1% stake, 21,000 sqm of built-in shopping area. The August of this year. to develop seven residential and office company noted that it has acquired two projects in three of Romania's largest further plots for mall development since Bucharest luxury sales to double cities—the capital Bucharest, Brasov and the end of 2007. The luxury apartment market of Ploiesti. A 20,000-sqm project will be built on Romanian capital Bucharest amounted The joint venture plans to develop five the acquired site in Hunedoara and a to €65–70 mln in 2007, and is expected residential projects, covering a total of 30,000-sqm shopping center is expected to double this year, according to a 237,000 square meters (sqm) of built-in to be constructed in Targu Mures. report by real estate consultant Atisreal area, with the largest one, the Boiana Plaza Centers is also involved in a pub- Romania, part of French group BNP Brasov project, to contain 130,000 sqm of lic-private-partnership project with the Paribas, Romanian news site business- homes in a €155-million development. Romanian government. The company has standard.ro reported. The company will also develop two a 75% stake in the $1-billion Casa Radio According to the report, around 2,000 10,000-sqm office projects; one in the cen- project, which is currently developing a apartments were completed in the capi- tral Romanian city of Brasov and one in mixed-use retail, leisure, residential and tal last year, including around 100 pent- Ploiesti in the southeast, in a total €36 mil- office complex. The project, which has houses, of which some 90% were lion investment, the company said. 360,000 sqm of gross built area, is expect- already sold. The average price of luxu- Plaza Centers added that the joint ven- ed to be completed by 2012. ry apartments is around €800,000, the ture expects to receive €410.6 million from To date, Plaza has developed 30 news site said. the sale of the seven projects. schemes in nine countries, of which seven According to the report, Plaza Centers are located in Romania. Bucharest flat prices stagnate The price of apartments in Romanian capital Bucharest slowed to a mere 1% Delhaize acquires La Fourumi in the January-March period of 2008, the smallest increase in the last three Bucharest supermarket chain years, Romanian national daily Ziarul Financiar reported. Belgian food retailer Delhaize Group has Some 90% of La Fourmi, the first According to the daily's survey of acquired Romanian supermarket chain La supermarket chain opened after the fall of three-bedroom apartments built Fourmi, which operates 14 supermarkets communism in 1992, was taken over in between 1980 and 1990, Bucharest in Bucharest, for €18.6 million, the com- 2005 by Global Finance, a Greek private home prices have tripled over the last pany announced in a statement issued to equity fund, while the remaining 10% three years in to an average €2,050 per the press. belonged to private investors. sqm. The deceleration comes after "Delhaize Group [...] has entered into an Delhaize Group expects revenues of the almost a whole year during which agreement to acquire La Fourmi, which 14 stores, which have a size of 350-500 prices rose by 4–5% a month. On the operates 14 supermarkets in Bucharest, square meters each, to come in at around year, apartment prices in Bucharest through its fully-owned subsidiary Mega €30 million in 2007, the announcement were up by 40% from €1,430 per sqm Image," the company said. stated. in March 2007. According to John Kyritsis, general According to Delhaize's plans, the manager of Mega Image, the acquisition is newly acquired stores will join the Mega Neim Maki invests in residential expected to strengthen the company's Image supermarket chain, which already Romanian businessman Neim Maki store network and to bring, "sizable sales has 22 outlets in Romania. plans to invest €1.5 mln in the 20-home opportunities and buying synergies." Delhaize Group, which is listed on Brown Apartments project in Romanian The company said the acquisition is Euronext Brussels and the New York Stock capital Bucharest, Romanian news site subject to customary conditions, including Exchange and operates 2,545 stores in dailybusiness.ro reported. The project, approval by Romanian antitrust authori- seven countries, noted €19 billion rev- which includes studios, two-, and three- ties. The transaction is expected to be enues in 2007, while its profit came to bedroom apartments and parking, is finalized in the second quarter of 2008. €410 million. expected to be completed in August. Real Estate Report 07 April 2008 0
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