A lack of commercial property at acceptable prices is forcing some of the largest Czech investment funds to seek better deals abroad. The leading Czech real estate fund ČS Nemovitostní Fond bought an office building in Warsaw for more than 116 million euros early in August 2017, and in September acquired Galeria Słoneczna, a shopping centre in Radom, for 164 million euros. The ČS Nemovitostní Fond, which is the oldest and largest shared fund in the country, has also been buying up property in neighbouring countries in recent months.
“There is a lack of prime real estate on the Czech market,” said Guy Barker, director of Arcona Capital, which manages real estate funds in the Central European region and has bought 12 properties over the last six months.
“We don’t see any suitable investment properties in Prague, while in Poland we have a lot to choose from,” said Tomáš Jandík, investment director of Reico Investment Company, part of the Czech Savings Bank (Reico Investiční Společnost České Spořitelny). The fund bought a property in Bratislava in recent months for similar reasons.
“More attractive yields can be achieved in Hungary and Romania,” says Gijs Klomp, investment director of NEPI, a commercial real estate investor which recently bought a property in Bulgaria.
“We are looking for added value, and the Czech Republic is not currently a place to find it,” said Paul Betts, managing director of the British company M7 Real Estate in Central Europe. “We will not buy a property just for the sake of buying it.” Betts believes Prague properties to have been expensive for the past two years and does not expect anything to change over the next 12 to 18 months.
The Czech Republic is also a place where many managers, entrepreneurs and institutions are looking for other opportunities to capitalise on the market. The Arcona Property Fund will offer its shares on the Prague Stock Exchange by the end of the year. The company’s shares are already listed on the Amsterdam Stock Exchange.
“There is a lot of money on the Czech market. Bonds which were issued by real estate companies such as the CPI or Passerinvest Group demonstrate clear evidence of enormous demand,” said Guy Barker. Arcona’s real estate purchases are currently financed mainly by Western European investors, but Barker would like to diversify more. “Our goal is to offer a relatively high dividend yield; we are targeting 6 per cent,” he said. “We would not go to the Prague Stock Exchange if we thought the boom was ending.”
Many investors in the Czech Republic have over the past few years emerged from a group of entrepreneurs close to retirement age and wondering where to spend their money. “They are able to invest in property with anything from one to 40 million euros,” said Jan Hospodář, a partner at consulting firm 108 Investment Advisory.
Source: Hospodářské noviny