The sale last week of the Olympia malls in Teplice and Mladá Boleslav by Union Investment and CA Immo marks the start of what is anticipated to be a busy summer for the Czech retail property market.

The sale last week of the Olympia malls in Teplice and Mladá Boleslav by Union Investment and CA Immo marks the start of what is anticipated to be a busy summer for the Czech retail property market.

With Poland continuing to heat up, investors looking for exposure to Central Europe are shifting their focus to the Czech Republic in search for value, James Chapman, head of Capital Markets at C&W Czech & Slovakia, told PropertyEU.

'This transaction is an encouraging sign that the market is gaining traction, largely as a result of increasing competition in the major Polish markets,' Chapman said. 'As such, we expect the investment momentum to accelerate in the Czech Republic for the rest of the year.'

C&W's Czech arm is involved in roughly EUR 500 mln worth of shopping centre transactions that are expected to close in the next few months, he added.

Chapman: 'The Czech market has traditionally been dominated by international investors, with UK and German parties at the forefront. Although these investors disappeared during 2009 and 2010 mostly to focus on their home market, they are set to make a comeback this year. Poland is becoming increasingly expensive while the Czech Republic still offers good value and fundamentals have remained strong throughout the financial downturn.'

Last week, Austria's CA Immo and Germany's Union Investment signed contracts to sell two regional shopping centres in the Czech cities of Teplice and Mladá Boleslav to private Czech property company CPI for a total of EUR 96 mln, with a yield rumoured to be around 7.5 - 8.0%. The deal - which is expected to close this week - is the first significant shopping centre investment in the country since the start of the credit crisis.

CPI is believed to have emerged ahead of three international bidders including ING REIM from the Netherlands, a UK-based investment manager backed by Middle-Eastern money as well as a private company from Russia. Frank Billand, member of Union's Management Board noted that 'the sales price, which is higher than the expert valuation, emphasises that now is the right time to be disposing of the two properties'. 'But the Czech Republic still remains an attractive investment market for us,' he added.

Although office transactions have been driving the market since the crisis hit, retail is expected to be the big talking point over the next coupe of months, Chapman noted. 'The return to prominence of retail is a major trend in the market given that we have had such a lack of shopping centre transactions during the credit crisis.'

'In particular, we are seeing a number of investment joint ventures and structured deals getting underway as a way to bridge the gap between buyers' and sellers' pricing expectations. These structures give the seller the potential to retain some upside in the future and can also enable the buyer to spread risk and dilute the size of the deal.'

The Olympia shopping malls in Teplice and Mladá Boleslav provide 32,000 m2 and 22,000 m2 of space respectively, and offer rental growth potential given the low level of rents compared to the market average. Anchor tenant in both centres is the international supermarket chain, Ahold. The fully let assets have been held since 2003 in the portfolio of the C1 Fund, in which CA Immo's Europolis subsidiary has a 51% holding and Union Investment Real Estate the remaining 49% via its Uniimmo: Europa open-ended real estate fund.