The property and development group plans to continue spending on office, retail and residential assets in the Czech Republic and Slovakia and aims to hold properties over the long term
Czech Property Investment (CPI Group) last month paid some €70m for two office buildings in City West office park in Prague 13 from local developer Finep, in one of last year’s biggest central European investment deals. A yield of between 7% and 7.25% was reflected in the transaction.
The asset comprises a ten-floor office building and a separate building, which were completed a year ago. Most of the 25,000 m2 of offices are let to Siemens for its headquarters.
This year CPI plans to spend more than €120m on commercial property in the Czech and Slovak republics after spending a total of €224bn during 2010. In addition, CPI intends to spend a further €40m refurbishing regional hotels that it owns.
The company has been active in the Czech Republic since 1991 in both investment in standing assets and development. The latter activity is presently taking a back seat while the investment side drives the company’s growth until occupational demand looks better.
CPI is also a significant provider of housing in the Republic with a rental portfolio of almost 13,000 units. As well as offices, the company invests in the retail and hotel sectors; but it limits its activities to retail and residential in the Slovak Republic.
CPI’s chief executive Zdenek Havelka says: “If you asked me a year ago whether we wanted to buy prime buildings, I would have said no, because we would encounter too many foreign competitors.
“Now I say yes because we are capable of competing with them. Our competitive advantage is the knowledge of the local environment and thanks to the direct shareholder structure we can also make quick decisions. We can form our own opinion and do not depend on mediated information,” says Havelka.
He prefers to keep CPI’s completed developments in its portfolio for rental income and has no regional preference, requiring only property with stable tenants and long-term prospects.
Havelka says that real estate prices are right for him to enter the market. “At the end of 2009 some sellers were expecting a yield under 6%. The new balanced yield is between 7% and 9.5%, averaging 8%.”
“Everyone has realised that the former boom is not going to return in the next two to three or even the next four to five years. We are not buying with the expectation of rocket-fast yield drops to make profits, but for the long term where the return on equity is based on long-term lease payments from a well-located position,” he adds.
CPI finances its development projects and acquisitions using between 30% and 35% equity and the remainder of the costs are made up by banks loans from Czech institutions.
Acquisitions last year include the IGY shopping centre in the Czech regional city of Ceske Budejovice. CPI paid around €50m to GE Real Estate for the asset. The complex, developed by ING Real Estate, has a mix of local tenants and international names such as Adidas and Yves Rocher.
A yield in the low sevens
The mall includes office space and a cultural centre, and has a total lettable area of 30,000 m2. A yield in the low sevens is reflected in the deal, which has reversionary characteristics.
CPI also bought from Immofinanz Group the Bauhaus Budweis shopping scheme in Budweis, Czech Republic, for €17.2m. The project, which opened in April, was developed by Immofinanz in a joint venture with Vienna-based EYEMAXX Real Estate.
This coming year, as the company grows, Havelka plans to continue refining the process of dividing the company according to sectors and specialisations. Two examples of these are the residential and property management divisions.
www.cpi.cz
