Heitman fund to plough EUR 300m in CEE real estate

Heitman plans to invest over EUR 300 mln in Central and Eastern Europe this year as the US private equity group seeks to capitalise on the expected real estate market recovery.

'We can invest our capital in 13 countries across CEE, but we are actively pursuing opportunities in Poland, Czech Republic, Slovakia and Russia, which will be our primary focus, while more opportunistic investments are planned in Hungary, Romania and Croatia where we see positive prospects for recovery,' said Otis Spencer, co-Head of the firm's European operations and portfolio manager of the EUR 505 mln value-added fund Heitman European Property Partners IV (HEPP IV).

The vehicle's first purchase was the acquisition last year of a plot of land in Poland for the development of 900 residential units. In the past few weeks, the Chicago-based company also completed the second and third investment for the fund with the purchase of a 75% stake in the Galeria Malta shopping centre in Poznan from Spanish developer Neinver and the creation of a 50/50 JV with Hungary's Trigranit for the Arena Centar mall in Zagreb, Croatia. HEPP IV has closed and approved investments representing approximately 40% of the fund's equity of EUR 505 mln, and anticipates deploying the remaining capital by year-end 2012. With leverage of up to 65%, HEPP IV has firepower totalling EUR 1.5 bn for CEE opportunities.

Looking forward, Spencer says the fund will focus on retail, residential, offices in capital cities, as well as distribution facilities. 'Compared to our prior funds, we have increased our allocation to development projects. We believe that in cities such as Warsaw or Prague it is more interesting to develop an office tower than buying into existing buildings, given the current trends in pricing.'

Traditionally, Heitman has focused on the CEE countries, but in the past few months the company has started looking at Western Europe as well. Spencer: 'We are expanding our London office because we think that the dislocation in the capital markets is creating opportunities to secure value in Western Europe, and we look forward to grow our footprint in this region.'

In January, the company announced the appointment of Rob Reiskin as co-head of the firm's European operations, and David Brodersen as a Vice President and member of the HEPP IV portfolio management team.