Vienna-listed central and eastern European property company Immofinanz Group is looking for more opportunities in Warsaw commercial real estate to complement its holdings in the Polish capital and the surrounding region.
The developer is about to start work on a 22,000 m2 office project called Nimbus. Immofinanz acquired the remaining 49% of the prime office building from Equator last summer along with the adjoining office development project, Nimbus, from its former partner on the project, developer Karimpol.
Full control of jv projects
In exchange, Karimpol acquired 51% of the adjacent Cirrus development project from Immofinanz. According to Manfred Wiltschnigg, who is a member of Immofinanz’s executive board, the deal was part of a strategy to take over full control of joint venture projects to boost targeted development returns into the “double digits.”
In September the company bought another Warsaw asset, the Park Postepu, from Polish company Echo Investment for €102m, in what was its largest acquisition for three years. The asset is fully let, comprises 33,826 m2 and is located in the city’s Mokotow district.
Completed in 2010, it is now part of Immofinanz’s international office portfolio, which forms 12.6% of its total standing investments. The company part-funded the deal with debt from Austria’s Erste Bank.
Last summer the group moved slightly up the risk curve in Poland with the purchase of a 29,297 m2 development plot in provincial Lublin where Immofinanz will develop a shopping centre to be known as Galeria Zamek. Previously the farthest afield it had ventured from Warsaw was its purchase of the Silesia Shopping Center in Katowice in 2005.
Recently, German banks Helaba and pbb Deutsche Pfandbriefbank provided a €210m refinancing and development facility for the prime shopping centre.
At the turn of this year, Immofinanz posted second-quarter net profit of €236.9m, 74% up on the first quarter of the 2011-12 financial year and five times the second-quarter result in the preceding year.
Rental income at €283.7m and income from asset management at €229.3m were both about 2% ahead but income from property sales, at €24.1m, was nearly 80% up on the same period in the preceding year.
The figures were helped by operational improvements, positive valuations, beneficial foreign exchange movements and lower amortisation and depreciation costs. Net asset value per share rose by €0.10 to €5.47.
Presently, Immofinanz has €8.7bn of standing and indirect investments and a development portfolio of some €9.5bn.It runs a combination of a holding strategy, and a development and trading platform, focused on Germany, Austria, Poland, the Czech Republic, Slovakia, Romania and Russia.
Geographically, its assets are split 53.5% in western Europe and 46.6% in central and eastern Europe; it holds 31 office properties, 27 retail, nine logistics, 30.5 residential and the rest hotels and storage. The return on the €8.7bn of investments is around 6.5%, and 6.7% for the overall group.
Development pipeline
According to Wiltschnigg: “We are trying to sell €2.5bn of real estate over the next four to five years in order to focus on a development pipeline of €1.6bn.”
He is negotiating with two separate buyers for some Czech, Hungarian and Romanian property that the company is selling in separate cross-border deals but he cannot release details yet.
During the crisis of the past three years, Immofinanz’s strongest market has been Russia. “We own four Moscow shopping centres and they are doing great,” says Wiltschnigg.
“Since 2008 there has been no vacancy in our Moscow centres, no rent reductions, while turnovers have been increasing. For this reason we are working on another development called Good Zone.
“It will comprise 67,000 m2 of gross lettable area and will be hopefully completed by the end of this year. Our returns in Russia are more than 10% for standing investments and I’m very happy to own those centres,” he says.
Last November, Immofinanz obtained a €55m long-term debt facility for one of the company’s Moscow shopping centres. ZAO Raffeisenbank International provided the facility for the Fifth Avenue Shopping Mall in north-west Moscow. Immofinanz has owned the 21,200 m2 Fifth Avenue mall since 2006.
Meanwhile, the company is pressing on with its STOP.SHOP brand of retail parks across central Europe. These regional shopping centres are located in prime locations with catchment areas of 30,000 to 150,000 people.
