Poland, Czech Republic dominate CE property deals

Poland and the Czech Republic are set to maintain their near-monopoly positions in Central European real estate transactions, PropertyEU’s second investment briefing on the CEE region has heard.

In the first six months of 2012, Poland and the Czech Republic accounted for 90% of the EUR 1.25 bn invested in commercial real estate in the region.

Just over two months later the situation has not changed, Jos Tromp, director, head of CEE Research & Consulting at CBRE, said. Tromp made his remarks in a keynote presentation to the CEE investment briefing which was attended by more than 100 real estate professionals.

The presentation and panel discussion was hosted by CBRE in London on 4 September.

Tromp said shopping centre development has occurred across the region, with a focus on Poland. But office investment in the first eight months of 2012 has by and large been restricted to Warsaw and Prague.

There were a handful of regional deals. In April a local investor acquired the 21,000 m² City Center Èeské Budìjovice in the Czech Republic from German fund manager Hannover Leasing for about EUR 40 mln. In another transaction, a Polish institution bought an office property in Gdansk.

The largest regional transaction recorded by PropertyEU Research took place in Romania, a market that has seen precious little other investment activity this year. NEPI, a South-African-backed investment vehicle, agreed to buy the five-building, City Business Centre under development in Timisoara for a total price believed to be in the region of EUR 80 mln.

‘I think these are exceptions rather than trends in the market,’ Tromp said. Investors are likely to remain focused on the capitals in Central Europe, he added, noting that the yield gap for prime offices is at a level last seen in 2003-4.

Compared with German 10-year government bonds, the real estate risk spread for Central Europe stood at 512 basis points in the second quarter of 2012. The spread for the EU 15 was 362 basis points.

‘The spread between the German bond risk-free rate Central Europe premium real estate indicates how interesting CEE is for institutional real estate investors. We are currently looking at over 500 basis points. Bonds have decreased further in the meantime while yields for the time being remain stable so the gap is actually a bit bigger than this.’

The panellists were Michael Atwell, head of CEE Capital Markets, CBRE; Yann Guen, vice president Mayland Real Estate; Craig Maguire, managing director Poland and Romania at Pointpark Properties, Walter Hampel, head of real estate finance at Deutsche Pfandbriefbank and Daniel Harris, managing director Europe and Central Europe at Tristan Capital Partners.

PropertyEU is publishing further articles from the CEE Investment Briefing in our daily newsletter, on the website and in the October edition of PropertyEU Magazine.