News

Central Europe ripens for Heitman

News

Estates Gazette

02 October 2000

Fund launch signals growing status of the investment markets in Hungary, Poland and Czech Republic

Heitman International has launched the first-ever dedicated fund for central Europe, cementing the region’s status as one of Europe’s core investment markets.

Heitman Central European Property Partners’ $650m vehicle will buy and develop properties in Hungary, Poland and the Czech Republic.

Christopher Merrill, executive vice president of Heitman, said the fund was raised because of the opportunities arising from the three countries moving towards membership of the EU. Institutional investors from Europe, the US and Asia oversubscribed to the fund, which will take advantage of the pipeline of institutional product.

“This specialised vehicle will allow investors to benefit from property cash yields in existence today with the potential of an increase in capital values through yield compression in the next three to five years,” said Merrill. Yields in central Europe for standing investments are 9.5% to 11% and 13% for development yields.

Around 60% of the fund will be invested in Poland. “This is really due to the size of the market. We’re not just targeting Warsaw but large cities with populations over 500,000.” The fund will mainly target office and distribution property.

Standing investments

Merrill also expects 60% to 80% of the fund’s allocation to be in standing investments. “We do see institutional grade property coming on line. We see an arbitration between yields in central Europe and yields in western Europe. The cost of financing is similar.”

The fund will seek opportunity-type returns and will be geared to around 60% to 70%.

Heitman has been active in the region as investor, adviser and asset manager for five years and has participated in $400m of deals.

Merrill said the fund had already identified $275m of properties and Merrill expects the fund to be fully invested within 18 months.

Heitman has an active joint venture with US investors GE Capital. Heitman would not reveal investors in the fund but it is understood that GE is included and that recent transactions by the jv could be transferred to the fund.

The jv has made two more major acquisitions in the area in the past month. In Warsaw, it bought three office buildings within Chelverton International’s Wisniowy Business Park. The transaction is understood to be in excess of $50m. GE and Heitman have bought two buildings of 5,575m2 each, which are fully let, and a 11,150m2 building, which is 80% let. Tenants in the three buildings include IBM, Xerox and Lucent Technologies.

Record for Prague

And in the Czech Republic’s largest-ever investment deal, the jv has bought BB Centrum, two newly-completed office buildings in Prague 4 for over €51m (DM100m). The buildings, bought from Passerinvest and local developer PSJ Invest, have a combined size of 28,810m2 and include tenants such as 3M, Regus and GE Capital.

Paul Betts, head of King Sturge in Prague, which acted for the vendors, said. “The sale shows more signs that the investment market in Prague is maturing and that good quality purchasers are in the market to do the right deals. The scarcity of quality product is being addressed by new development.”

Fund launch signals growing status of the investment markets in Hungary, Poland and Czech Republic Heitman International has launched the first-ever dedicated fund for central Europe, cementing the region’s status as one of Europe’s core investment markets. Heitman Central European Property Partners’ $650m vehicle will buy and develop properties in Hungary, Poland and the Czech Republic. Christopher Merrill, executive vice president of Heitman, said the fund was raised because of the opportunities arising from the three countries moving towards membership of the EU. Institutional investors from Europe, the US and Asia oversubscribed to the fund, which will take advantage of the pipeline of institutional product. “This specialised vehicle will allow investors to benefit from property cash yields in existence today with the potential of an increase in capital values through yield compression in the next three to five years,” said Merrill. Yields in central Europe for standing investments are 9.5% to 11% and 13% for development yields. Around 60% of the fund will be invested in Poland. “This is really due to the size of the market. We’re not just targeting Warsaw but large cities with populations over 500,000.” The fund will mainly target office and distribution property. Standing investments Merrill also expects 60% to 80% of the fund’s allocation to be in standing investments. “We do see institutional grade property coming on line. We see an arbitration between yields in central Europe and yields in western Europe. The cost of financing is similar.” The fund will seek opportunity-type returns and will be geared to around 60% to 70%. Heitman has been active in the region as investor, adviser and asset manager for five years and has participated in $400m of deals. Merrill said the fund had already identified $275m of properties and Merrill expects the fund to be fully invested within 18 months. Heitman has an active joint venture with US investors GE Capital. Heitman would not reveal investors in the fund but it is understood that GE is included and that recent transactions by the jv could be transferred to the fund. The jv has made two more major acquisitions in the area in the past month. In Warsaw, it bought three office buildings within Chelverton International’s Wisniowy Business Park. The transaction is understood to be in excess of $50m. GE and Heitman have bought two buildings of 5,575m2 each, which are fully let, and a 11,150m2 building, which is 80% let. Tenants in the three buildings include IBM, Xerox and Lucent Technologies. Record for Prague And in the Czech Republic’s largest-ever investment deal, the jv has bought BB Centrum, two newly-completed office buildings in Prague 4 for over €51m (DM100m). The buildings, bought from Passerinvest and local developer PSJ Invest, have a combined size of 28,810m2 and include tenants such as 3M, Regus and GE Capital. Paul Betts, head of King Sturge in Prague, which acted for the vendors, said. “The sale shows more signs that the investment market in Prague is maturing and that good quality purchasers are in the market to do the right deals. The scarcity of quality product is being addressed by new development.”