Economy/ Growing popularity of real estate investment funds

21 June. Warsaw (PAP) - Investments in real estate funds in Central Europe become increasingly popular. Compared to investments in shares or money market instruments, investments in real estate funds are long-term, but at the same time, more stable - said Patric Berger, analyst from CA IB Financial Advisers during the conference on Wednesday.

Berger emphasised that popularity of these funds is related to good situation in the real estate market in Central Europe. In his opinion, profits of real estate investment funds in the region are comparable.

The analyst participated in the "FLOAT YOUR REAL ESTATE" conference organised in Warsaw, regarding the situation in the Polish real estate market and methods of financing this market. The conference was organised by Roadshow Polska in cooperation with, inter alia CA IB Financial Advisers, Cushman & Wakefield and Linklaters. The event was sponsored by Bank Millennium (main sponsor)and KBC TFI.

According to the materials of Cushman & Wakefield (professional partner of the conference; the company provides services related to commercial real estate) presented during the conference, Western investors looking for investment opportunities on markets of the Central Europe took into account first of all investments in real estate in Warsaw, Prague and Budapest.

According to Cushman & Wakefield, in 2005, the rent for office space in Warsaw achieved about EUR 17.5 for 1 sq.m. and about EUR 18.5 for 1 sq.m. in Budapest and Prague.

Materials presented during the conference indicated that the value of investments in the office real estate market accumulated from 1998 in Hungary and Czech is comparable - it equals EUR 1.49 billion and EUR 1.40 billion respectively, while in Poland it is much higher - about EUR 2.5 billion.

In 2005, the total value of investments in the office real estate market in Central Europe amounted to about EUR 1.7 billion, which means a growth by 51% vs. the previous year, estimated Cushman & Wakefield.

At the same time, taking into account the retail market, the value of investments accumulated from 1998 equalled EUR 3.5 billion in Poland, about EUR 1.5 billion in Czech and about EUR 1.1 billion in Hungary. In 2005, the total value of investments on the retail (housing) market in Central Europe amounted to about EUR 2.8 billion, which translates to 79% growth vs. 2004.

Investment funds invest in real estate mainly through special purpose vehicles in form of a limited liability company, joint-stock company or joint-stock limited partnership - explained Paweł Gieryński, president of Copernicus Capital TFI. Their tasks include financing the project, its implementation and then repayment of liabilities incurred for the implementation of the investment from profits from the real estate. He added that the form of the special purpose vehicle ensures minimisation of the investment risk, is transparent and allows for better management of the real estate.

One of conditions imposed on these funds by the law and the Securities and Exchange Commission is minimising the operating risk by differentiation of the investment portfolio - said Paweł Gieryński. As he explained, during 36 months of activities, a maximum share of one investment in the portfolio of a fund can equal 20% (which means that the fund has to invest in minimum 5 projects). (PAP)

Source: PAP