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									Interfax Group in partnership with Estates Gazette

For Russia & the CIS, Poland, the Czech Republic, Romania, Slovakia and Hungary

07 April 2008 Edition 005                                                                                                                

   Published every Monday by Interfax
   Group in Partnership with Estates Gazette.        Wave of real estate IPOs unprecedented in Eastern Europe

                                                     Russia goes public
                                                     More than 30 Russian real estate companies now                      Tashir and RosEvroDevelopment, have their eyes
                                                     planning initial public offerings (IPO)—a stun-                     set on the London Stock Exchange (LSE). Yet this
                                                     ningly high figure that indicates Russian players                   does not appear to be the norm. Russia’s economy
                                                     are seeking alternatives to bank financing in the                   is booming with GDP growth of 7.3% last year and
                                                     face of the western credit crunch.                                  Moscow has more billionaires than any other city
   Featured in this issue:                              “There are at least 30 Russian companies that                    in the world. It would seem logical for Russian
                                                     have announced their intention to access public                     companies to try to obtain capital locally, and even
   AFI expands to Ukraine                        3   capital through completing an IPO in the next                       early IPOs, such as OPEN Investments, the first
   Russian developer AFI has
   announced plans to enter the                      three years,” said Gerald Gaige, partner and real                   Russian real estate company to go public, hit pay-
   Ukrainian market as well as increas-              estate industry sector head at Ernst & Young.                       dirt—the company raised $68.8 million on the
   ing its interests in Moscow.                      “And there are undoubtedly others unannounced                       Russian stock exchange (RTS) in November 2004.
   Interview: Timur Batkin               5           at this point.”                                                         That said, London still has its attractions—the
   The DON-Stroi deputy general direc-                  Perhaps the reaction was predictable, but in a                   main one being big money.
   tor gives his view of the residential
   market and its prospects.
                                                     region where IPOs are relatively few and far                            "The number of investors attracted to the LSE,
                                                     between, the Russian real estate surge is a wave                    including American investors, has increased in
   TriGranit does Moscow retail                  7   that cannot be ignored Poland, which arguably                       comparison to the Russian Stock Exchange
   Hungarian developer TriGranit has
   taken the plunge into Russian retail              has the most active stock market in the region,                     (RTS)," said Victor Szalkay, Head of Investment
   with a 134,000-sqm Moscow mall.                   still sees only between 40 and 50 IPOs a year, with                 Relations Department at PIK Group. “In addition
                                                     real estate IPOs rarely reaching double figures in                  it is quite difficult to access a large amount of pub-
   Poland tackles bureaucracy                   8
   Poland’s Infrastructure Ministry is               a single year. But with the global credit crunch                    lic capital in Russia, as there are not so many
   drafting new procedures to stream-                starting to seep over into Europe and possibly into                 funds that are eager to invest in one company.”
   line planning decisions.
                                                     Russia, it appears that Russians believe that banks                     And indeed OPEN Investments initial public
   Residential margins threatened         12         may no longer be the most reliable institutions to                  offering pales in comparison to Sistema HALS’s
   Analysts have warned that rising                  obtain capital. Instead, they are now going public                  IPO bid ($432 million in November 2006) and
   building costs and tighter mortgage
   criteria may eat into margins, hitting            or searching out private investors.                                 PIKs astounding $1.8 billion in June 2007, which
   smaller players in particular.                       And in Russia, now means now.                                    was then followed by AFI’s $1.4 billion in May
   Hungary still attractive, say analysts 13
   Analysts say the market remains                   Is the west the best?                                                   These are big numbers—and not only is the
   attractive, though things may get                 To put the coming real estate wave in clearer per-                  lure of money real, so is the threat of competition.
   worse before getting better.
                                                     spective, it also pays to consider just how few                     In Russia’s fast-moving real estate market, the
   Orco looks south for new markets             16   Russian companies have gone public in the past.                     perception among some is to get cash now or per-
   Orco has said it is undeterred by                 According to analysts from ReDeal Analytical                        haps miss development or acquisition opportuni-
   the credit crunch and is looking
   for opportunities in new markets.                 Group, 25 IPOs were held by Russian companies                       ties that simply might not come later.
                                                     in 2007, up slightly from 23 in 2006. Russian                           "An actively developing company must obtain
   Casino complex planned for Romania18              stocks grew by 33% or $23.6 billion last year from                  additional sources of financing eventually," said
   Asian investors have dropped plans
   to build a casino project in Russia,              $17.7 billion in 2006.                                              PIK’s Szalkay. “Although completing an IPO is a
   choosing Romania instead                            Some major Russian real estate players, such as                   labor intensive and expensive process, if a compa-

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    Real Estate Report 07 April 2008
 (continued from page 1)                                                                           Eurocement expands production
 ny is eager to expand and to develop, it is       of conducting an IPO, have the advantage         Eurocement, Russia’s top cement pro-
 the only way to access a large amount of          of already having a rich portfolio available    ducer, plans to invest RUB 800 million
 capital in a short period of time.”               as equity. Yazikov added that he thinks         in 2008 on its biggest plant, Maltsovsk
   Szalkay is not alone in his opinion.            more people will find direct investment         Portlandcement, to supply Russian
 According to a survey by Deloitte, 76% of         into Russian real estate more attractive        developers' demand for cement, a
 Russian top managers find that compa-             than stock trading in London and                spokesperson told the Report.
 nies that conducting an IPO is an impor-          America. In the minds of these Russians,         The Maltsovsk facility produced 3.48
 tant tool for developing the company or           the situation is not that volatile in the       million tonnes of cement last year and
 fueling regional expansion.                       Russian economy—although he warned              is expected to increase output by 8% in
                                                   that a number of factors could potentially      2008.
 Sizing up the market...                           affect this situation in Russia such as fluc-    Last year the company spent RUB 492
 But not so fast, say even some of the same        tuations in the price of oil.                   million on capital expenditures on
 experts. A company’s value is largely driv-                                                       equipment upgrades and environmen-
 en by it’s assets, and real estate assets are     No stopping the wave...                         tal projects. Eurocement Group also
 not easily evaluated by public market             Yet despite the doubters, the wave is com-      plans to invest up to RUB 356 million
 investors—and even less so in the murky           ing—although it may not hit quite as soon       in its Nevyansky Cement plant this year.
 Russian market. Moreover, an IPO does             as some think. Many analysts believe the
 not always mean speed or immediate flex-          IPO window is currently closed and that         Mirax Group suffers continued losses
 ibility, especially considering the hard          there is no sense in floating shares before      Mirax Group, a diversified conglomer-
 work and long lead time to a successful           the end of the year. They claim investors do    ate with extensive real-estate interests,
 public offering.                                  not want shares in an IPO that are simply       suffered a 15.62% loss in net profits in
    “When going public, developers face            going to depreciate in value—the case in        2007, in comparison to 2006. Profits
 limitations related to the characteristics        point being PIK's stock taking a 15% dive       dropped to RUB 23.2 mln.
 that make developers successful in a fast         last week to $25.2, according to RBC Daily.      The company has been experiencing
 moving and opaque market like Russia,”               The dip was bad news, coming on the          falling profits since Q1 2007, when it
 said Ernst & Young’s Gaige.                       heels of the daily dose of subprime woes        recorded a loss of RUB 10.9 mln.
    “To be the most successful they should         in the West, and it hardly went unnoticed        In Q2 2007, Mirax Group suffered a
 be able to make decisions quickly, [and]          by the market.                                  loss of RUB 9.5 mln rubles followed by
 take risks that are justified by the reward          “Investors will be paying more and           a RUB 21.7-mln loss in Q3, recovering
 they see.”                                        more attention to the individual character-     in the fourth quarter to a RUB 65.3-mln
    Likewise, the the general public does          istics of Russian developer companies that      profit, 1.5% down the same period of
 not always have a positive mindset to real        are planning initial public offerings this      2006.
 estate companies and potential IPOs.              year,” according to Alexei Kurasov, head of
    “Public investors, having either a nega-       IPO projects at Finam Investment.               Raven gets logistics center loan
 tive perception of the risks in the Russian          Finam’s Kurasov concurred with other          British company Raven Russia has
 real estate market, or having only the feel-      analysts that sooner or later the IPO rush      raised a $170 mln loan from VTB Bank
 ing that it is opaque and not understand-         will be on, yet like more conservative          Europe.The company reported that the
 able tend to err on the conservative side         experts, he also pointed out the risks, say-    money would be used to fund construc-
 and may undervalue companies holding              ing that the smart players will probably        tion of a 200,000 sqm logistics center
 real estate assets,” Gaige said.                  wait until next year. Yes, the pull of big      in Rostov-on-the-Don.
    Another asset-base value issue is the          money—and the fear of missing opportu-           Raven has not disclosed the exact inter-
 dependence on the local real estate mar-          nities—is real, but in the nascent world of     est rate of its seven-year loan, but it did
 ket. Andrei Yazikov, Senior Real Estate           Russian IPOs, a gamble is still a gamble.       say it would cost the company less than
 Analyst at Renaissance Capital told the              “The ones that wanted to break away          7% annually.
 Report that companies that tend to con-           from the crowd (and hold an IPO earlier)         Raven needs to raise a total of $213 mln
 duct IPOs are companies that have their           will not be able to place now and will have     for the Rostov project. Project
 portfolio in the pipeline, such as Mirland        to wait in line behind the others,” Kurasov     Megalogics, a joint venture set up by
 and Sistema-Hals. Yet companies such as           said. “And there still aren’t many worthy       Raven Russia and Russian group
 Mirax and Inteko, which have no intention         assets on the market.”                          Avalon, will build the logistics center.

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Real Estate Report 07 April 2008
 Leviev enters Ukraine and expands Moscow interests                                                LSR Group buys Ukrainian Concrete
                                                                                                    LSR Group, a St. Petersburg based real

 AFI expands to Ukraine                                                                            estate development and construction
                                                                                                   company, is acquiring 97% of Ukraine’s
                                                                                                   Obukhov Aerated Concrete Plant for
 AFI Development, a real estate firm run          ter, situated within the district. The project   €30 mln, LSR said in a statement.
 by Israeli billionaire Lev Leviev, plans to      will combine a retail center and hotel with       LSR’s aerated concrete division, Aeroc
 enter the Ukrainian market, expand its           the same general facade design.                  International AS, has already received
 influence in Moskva-Citi and continue to            Leviev announced that AFI intends to          permission from Ukraine’s
 earn record profits.                             help fund this project with a $350 million       Antimonopoly Committee to acquire
    “We believe it is absolutely necessary to     loan for the Moskva-Citi project.                the shares in the plant.
 enter the Ukrainian real estate market,”         According to Leviev, negotiations are             The deal is expected to be closed in the
 CEO Alexander Haldei told a press confer-        being held now with Sberbank of Russia           summer of 2008. LSR said this will be
 ence. “The Russian realty market has             and Vneshtorgbank.                               its second aerated concrete project in
 some problems in terms of buying land               “The money we get for a credit line will      Ukraine. The Russian company is
 spaces to develop projects. The real estate      be invested in construction,” said Haldei.       building a plant 70 km from Kiev that
 market in Ukraine has just started to               The Moskva-Citi project is situated on a      will have the capacity to produce
 develop.”                                        0.7-hectare land plot and assumes the            400,000 cubic meters of aerated con-
    AFI Development has already bought            construction of a multifunctional com-           crete annually. The plant is scheduled
 110 hectares of land near Borispol, outside      plex. The project is designed to have a          to start up this summer.
 Kiev, in order to build a mixed-use com-         hotel, retail gallery and office premises.        Aeroc International’s total production
 plex on 400 hectares. The company’s              The construction works of the project have       capacity in Ukraine is expected to top
 share in the project will total 70%.             already begun. It is planned to be deliv-        700,000 cubic meters in 2009.
 Estimates for the project’s completion           ered in the 4th quarter of 2009.
 range from seven to 10 years.                       Financially 2007 was a good year for          Yekaterinburg promotes budget hotels
    AFI Development is also expanding its         AFI. Net income surged 93% from $111.9            The city of Yekaterinburg will develop
 influence in the Moskva-Citi business dis-       million in 2006 to $215.6 million in 2007.       budget hotels, the chief analyst at the
 trict in western Moscow. AFI recently               AFI also raised $1.4 billion in an initial    city administration’s consumer services
 became partner of a hotel project in the         public offering on the London Stock              committee, Tatyana Gushchina, told the
 ambitious Mall of Russia mixed-use cen-          Exchange (LSE) in May.                           Report.A special company will imple-
                                                                                                   ment a program to build one- and two-
                                                                                                   star hotels. The management company
 Victoria to invest $00 million                                                                   already has the 57-room Uktus hotel
                                                                                                   and a hotel on Sheikman street that was
 Russian retail group Victoria, which man-          Vlasenko also said the company is cur-         formerly a dormitory.
 ages the Kvartal, Dyoshevo and Victoria          rently holding talks on the takeover of some      There are plans to increase the num-
 chains, plans to invest $200 million in          smaller retail chains. Victoria has already      ber of such facilities in the city,
 development in 2008, Nikolai Vlasenko,           analyzed the companies and signed confi-         Gushchina said, and properties are
 chairman of the Victoria board of direc-         dentiality agreements. The retailers have a      already being sought among existing
 tors, said in Moscow on April 1, at a con-       turnover of about $200 million per year, he      dormitories and other facilities.
 ference on retail organized by the Adam          said without providing any further details.       The city administration plans to con-
 Smith Institute.                                   Victoria is on the road to conducting an       vert dormitories on Zavokzalnaya and
    Victoria plans to increase its chain to 250   IPO and hopes to float in 2010. The compa-       Mashinostroitelei streets into hotels
 stores in 2008 from 194 stores in 2007. In       ny is currently preparing a three-year report    over the coming few years. The city
 particular, the company intends to develop       under International Financial Reporting          currently has 46 hotels and 27 small
 the cash-and-carry format, as well as enter-     Standards (IFRS).                                hotels. Ten hotels will open this year,
 ing regional markets with all of its formats.      “Right now we are introducing SAP sys-         and between eight and nine small
 At present, Victoria has one store operating     tems in investment of $7 million," said          hotels open in the city every year.
 in the cash-and-carry format in                  Vlasenko, who added that the group could
 Kaliningrad.                                     have turnover of $1.8 billion in 2008.           Sibcement borrows RUB 800 mln
                                                                                                    Siberian Cement Holding Co has
                                                                                                   signed a contract with its
  Sibcement buys Italcementi                                                                       Tsementspetsstroi division for a loan of
                                                                                                   RUB416 mln.
 The Siberian Cement holding company              plants and a specialized cement and a bulk        Sibcement said the deal, taking into
 has signed an agreement with Italy’s             cargo terminal in Ambarli Port, Turkey,          account possible interest, is worth RUB
 Italcementi Group to buy Turkish cement          where it also has a grinding center.             468 mln, or 11.2% of assets.
 holding Italcementi Set Group, a sub-               The plants are located in the European        Sibcement’s assets total RUB 4.17 bln.
 sidiary of the Italian company.                  part of Turkey, in Ankara, Trakiya, Afyon         Sibcement also entered into a contract
    Siberian Cement told the Report that          and Balikesir, and have the capacity to turn     with Intertorg for a loan of RUB 398
 the deal is worth €600 million. Some of          out five million tonnes of cement a year.        mln, also at 12.5% interest. The compa-
 the money is to be paid in cash and some            According to forecasts, Siberian              ny did not specify the purpose of this
 (more than 5%) with Siberian Cement              Cement will by 2011 have the production          loan, which together with possible
 shares. Italcementi Set Group includes           capacity to turn out more than 18.5 mil-         interest will total RUB 447.75 mln, or
 four cement plants, a chain of concrete          lion tonnes per year.                            10.7% of assets.

Real Estate Report 07 April 2008
 Massive landmark redevelopment costs more and more                                                   Spetsstroi- offers bond issue
                                                                                                       Spetsstroi-2, a construction company

 Rossiya hotel complex                                                                                in the Moscow region, plans to place a
                                                                                                      second bond issue totalling RUB 3 bln,
                                                                                                      the firm said. The decision to issue the

 budget may hit €1.5 bln                                                                              bonds was made by the company’s
                                                                                                       The three million three-year bonds
  Investment in the construction of an                  In addition, the presidential library might   with a face value of RUB 1,000 each
  entertainment and hotel complex set to             be located at the newly developed complex,       will be sold in a public offering on the
  replace the Rossiya Hotel near the                 though this has not yet formally been decid-     MICEX Stock Exchange.
  Kremlin—formerly the world's largest               ed, Chigirinsky said, adding that the time-       Spetsstroi-2 placed its debut bond
  hotel—could increase to $1.5 billion, said         line of the project is being bogged down         issue of RUB 2 bln on MICEX last May.
  Shalva Chigirinsky, head of ST group, the          because of legal procedures.                     The three-year bonds have semi-annual
  developer of the site.                                “The contract stipulates that the deadline    coupons and a put option effective May
    The dismantling of the hotel has not yet         for completing construction is determined        22 this year. The yield on the second
  been completed, and neither has litigation,        after an order for construction is received,”    will be the same as the first, at 8.59%.
  Chigirinsky said in an interview with Daily        he said. “But we have not yet received the        The bonds are backed by the Moscow
  Izvestia published on March 28.                    order. One should remember that the prop-        Regional Investment Trust Company,
    Chigirinsky said the costs of the project        erty is extremely complex in design and          which is 81.25% owned by Spetsstroi-2.
  had increased from the $830 million that           implementation; it has a huge number of          machinery firm Stroiserviskomplekt
  his company stated when it bid in the rede-        underwater rocks.”                               owns the other 18.75%.
  velopment tender in November 2004, due                ST Group has invited Norman Foster,
  to changes in the project's specifications         whose architectural firm is experienced in       Yaroslavl mulls raising site tax
  exacerbated by forex factors.                      designing projects in Russia, to work on the      The Yaroslavl region is considering
    “First of all, the dollar is not what it was,”   project. The company is helping develop          raising the progressive tax rate on the
  Chigirinsky said. “Secondly, in the design         sites such as the New Holland Island in St.      lease of land allocated for construction,
  process it turned out that we are supposed         Petersburg and was responsible for the           the head of the regional construction
  to build more cultural facilities than was         design that transformed the Pushkin              department, Konstantin Ustyugov told
  planned – about 90,000 square meters               Museum. About $200 million has already           the Report.
  instead of 55,000 square meters.”                  been spent on the project.                        In order to meet these targets, it is nec-
                                                                                                      essary to accelerate the development of
                                                                                                      land earmarked for residential construc-
 Uzbekistan liberalizes banking                                                                       tion. The progressive rate currently
                                                                                                      starts working after three years of leas-
  Developers eyeing Uzbekistan’s rough-and-          individuals having to show any documen-          ing the land, Ustyugov said, the author-
  tumble real estate market could benefit            tary evidence that the money came from a         ities are proposing that it go into effect
  from a presidential decree last week, which        lawful source.                                   after one year of leasing to make it eco-
  greatly liberalizes retail banking services—          The decree also forbids law enforce-          nomically beneficial to build more
  but which also permits individuals to keep         ment agencies, tax authorities and other         quickly.
  unlimited amounts of money in banks                services to demand that investors—or the          The department has also proposed a
  without proving the legality of such funds.        banks concerned—produce documentary              50% discount on lease payments for
     While the decree binds banks to accept          proof of the legality of the money or any        builders to develop land on schedule
  unlimited amounts in either Uzbek or for-          other information constituting a bank            and observe deadlines for residential
  eign currency for deposit accounts from            secret. Likewise, the decree also exempts        construction, said Ustyugov. The pro-
  Uzbek citizens—which could feasibly                deposits made between April 1, 2008, and         posed discount is now used in
  speed up investment, it also has a number          April 1, 2009, from all taxes and other          Yaroslavl, but does not apply to residen-
  of controversial aspects, including                levies and prohibits them from audits by         tial construction.
  "payable to bearer" accounts, without such         tax authorities.
                                                                                                      Ministry mulls closed land auctions
                                                                                                       The Economic Development and Trade
 Airline builds Ulyanovsk homes                                                                       Ministry is to consider the possibility of
                                                                                                      holding closed auctions for land ear-
  The Volga-Dnepr airline group plans to             two types of residential buildings: apart-       marked for construction of social hous-
  invest $60 million in a mixed-use com-             ments in mid-rise buildings, primarily for       ing, Minister Elvira Nabiullina said at a
  plex in a spokesman for the Volga-Dnepr            young professionals employed by the              meeting with the public.
  airline told the Report.                           group, and a block of townhouses. There           Responding to concerns that land auc-
     It will mix office and residential space in     are also plans to incorporate a recreational     tions do not make it possible to build
  Ulyanovsk. The cost of the Volga-Dnepr             zone, services, stores and parking.              inexpensive social housing, Nabiullina
  City project “will probably increase,” in             “The project will make it possible to         said the government could not abolish
  the course of its implementation, the              bring together all the airline’s divi-           auctions altogether as it would lead to
  spokesman said.                                    sions,which are currently located in vari-       corruption. The ministry will work fur-
     The new neighborhood will occupy 20-            ous parts of the city,” the spokesman said.      ther on the issue of how to stimulate
  30 hectares, according to preliminary esti-        “It will also resolve the problem of housing     construction of inexpensive housing,
  mates. It will include office buildings and        a training center for flight specialists.”       the minister said.

Real Estate Report 07 April 2008
                                                                                                      Russia/CIS                              5
 Developer DON-Stroi on second phase of resi market                                                   Kiev housing land gains 0.7% in week
                                                                                                       Land prices for detached home con-

 Stability breeds success                                                                             struction rose by 0.7% in the Kiev
                                                                                                      region between March 24 and March
                                                                                                      30, to $6,155 per 100 sqm.
 In an exclusive interview, Timur Batkin,            benchmark when selecting a home, and              Land prices in all districts of the Kiev
 deputy general director of developer DON-           this is not only the class and location of       region rose over the same period, Kiev-
 Stroi talks with the Report about the latest        the property, but also the individual con-       based SV Development reported. The
 developments in the residential sector,             cept.                                            steepest increase was 1.53% in the
 and their projects—and how a phase of                                                                Fastovsky district, where the average
 relative calm has helped developers                 The Report: What are the specifications of       price for 100 sqm is $1,165.
 regroup and plan for the future.                    the Losiny Ostrov development?                    The highest price per 100 sqm in the
                                                     This is a complex of seven buildings with        last week of March was $9,795 in the
 The Report: What do you consider to be the          total area of more than 200,000 square           Kiev-Svyatoshinsky district and the low-
 most important events of last year for the          meters, on 5 hectares.                           est price was $1,122 in the Baryshevsky
 real estate market in 008?                         Housing makes up 100,000 square                  district. The largest number of lots in
 The most important thing was that the               meters of this, office space is about 10,000     the period were offered in the
 market settled into relative stability. It gave     square meters and the rest is infrastruc-        Makarovsky district, which accounted
 both developers and buyers a break after            ture facilities.                                 for 38% of the total number on the mar-
 the crazy price increases of previous years.        Three underground levels will be for park-       ket, while the lowest number was in the
    It became possible to objectively assess         ing. The underground part has already            Fastovsky district, which accounted for
 the current market situation, calmly put            been built out, and concrete work is being       just 0.3%.
 new properties up for sale and work out             done at the level of the fifth to seventh
 future projects.                                    floors. We plan to complete construction         Banks refuse 5% of Moscow mortgages
    Already, since the end of 2007, we have          at the end of 2009.                               Banks in the Moscow region refuse 5%
 been seeing the market return to a state of                                                          of applications for apartment mort-
 active growth. Deferred demand, accumu-             The Report: Are potential buyers showing         gages, Mikhail Romanov, head of the
 lated in the first half of the year, is also hav-   interest in the project?                         mortgage company of the MGSN hold-
 ing an impact, and after the New Year holi-         Interest is very strong, due to the shortage     ing, told the Report.
 days prices again rose confidently.                 of modern housing in the area, the quality        The refusal rate has increased from
                                                     of the project and the relatively low price      about 3% previously, primarily because
 The Report: Last year there was a great             typical for the initial stage of construction.   of the subprime mortgage crisis in the
 deal of talk about the residential market             The first phase of sales has been com-         United States, Romanov said at the Real
 becoming stratified. Is that true?                  pleted. Now we are beginning sales in the        Estate – 2008 fair. Banks have become
 The segmentation of the housing market              new buildings of the complex – there will        more cautious about lending to so-called
 has just begun. It has already become               be a big selection, including very in-           borderline borrowers, whose creditwor-
 clear to most that it is better all round to        demand small executive-class apartments          thiness is on the threshold of meeting
 live in a new concrete building than in a           from 42 square meters upwards.                   requirements. Romanov added that the
 five- or nine-storey prefab panel building.           In terms of cost, for new buildings, a         review period for mortgage applications
 Therefore, the prices for them cannot be            square meter goes for upwards of $3,600,         at a number of banks has increased in
 the same.                                           and the average price is about $4,200.           some cases from two weeks to four.
    I think it will take another three to five
 years for consumer behavior to change               The Report: Why did you choose the               ING lends $5 mln to RTM subsidiary
 completely.                                         Eastern district for this project? How do         ING Bank extended a loan of $35 mln
    At the same time, the concept of “aver-          you see the prospects for the district?          to a subsidiary of the RTM real estate
 age price” will gradually lose relevance.           The Eastern district has been in the shad-       development group, RTM reported.
 Each segment will have its own price indi-          ows until recently – developers much pre-         On April 1, RTM shareholders approved
 cators, and in the end prices will become           ferred the Central, Western, South- and          a guarantee agreement to back the loan
 fairer and the mechanism of price forma-            Northwestern districts of the capital, so a      for Marta Vermgensberatungs GmbH, a
 tion more comprehensible.                           shortage of quality housing has emerged          subsidiary wholly owned by RTM .
                                                     in the Eastern Administrative District.           RTM and ING entered into a loan
 The Report: Lets move on to your projects.          However, at this stage it is one of the most     agreement at the end of 2007. The loan
 You call your Losiny Ostrov project an              environmentally comfortable.                     was extended for nine months at an
 “environmental project.” What does that                Just think: two-thirds of the districts are   interest rate of Libor + 3 for the first six
 mean?                                               covered by parks and protected green             months and Libor + 3.5% for the last
 The residential complex is being built on           zones.                                           three months. Fees for providing and
 the edge of the Losiny Ostrov national                 This is a unique phenomenon for a             supporting the loan amount to 0.75% of
 park. Therefore, the theme of the new               large city, and it would be stupid not to        the loan amount and 0.25% per annum
 complex became the living environment,              take advantage of such a favorable situa-        charged on the principal after six
 which by the way is a very fashionable              tion for residential construction.               months have passed from the contract
 global trend.                                          We are confident that the popularity of       signing. RTM general director Eduard
   Eco projects are being implemented in             the Eastern district will sharply increase in    Vyrypayev now owns 71.4% of the hold-
 the United States, Britain, France, United          the near future—new projects will                ing, after buying out a 35.7% stake in
 Arab Emirates, and China. Generally, we             emerge, so for us it was important to be         February from Georgy Trefilov , founder
 think that the buyer should always have a           one of the first to enter the district.          of Marta group.

Real Estate Report 07 April 2008
 Russian bank announces foreign expansion plan                                                   Ikea to build mall in Tomsk
                                                                                                  Investment in the construction of

 Sberbank targets 0                                                                             Swedish furniture giant IKEA’s Mega
                                                                                                 shopping and entertainment center in
                                                                                                 Tomsk could total RUB 4 bln, acting

 new markets in 5 yrs                                                                            Mayor Nikolai Nikolaichuk said.
                                                                                                  A final decision on the selection of the
                                                                                                 site and the start of construction has
 One of Russia’s largest banks, Sberbank,        more extensive one than the team of con-        not been made yet, Nikolaichuk told a
 plans broad expansion on foreign markets        sultants,” he said, adding that Sberbank        city legislature meeting, adding that
 over the next five years.                       plans to get another independent director       IKEA is considering two options: one
    “We are planning to enter around 20          elected to its supervisory board.               near the village of Novy and the second
 markets in the next five years,” said              “We've made a conscious effort to scale      on vacant land near the Tomsk
 Sberbank Chairman German Gref said on           management's role down,” he said, adding        Instrument Plant.
 the sidelines of a business forum organ-        that this was a “step towards openness.”         The center is expected to have more
 ized by Troika Dialog in Singapore.             Talks with the potential independent direc-     than 140,000 sqm of retail space.
 “Prices have practically halved,” he con-       tor are under way, Gref said, without nam-       The Tomsk regional and city adminis-
 tinued, adding that this presented the          ing names.                                      trations signed a framework agreement
 bank with a “golden” opportunity for               “We're not looking for a big name so         with IKEA in January to cooperate in
 acquisitions.                                   much as a meaningful one,” said Denis           the area of investment and on the con-
    Denis Bugrov, the bank's senior vice         Bugrov.                                         struction of the shopping center and
 president, said Sberbank was targeting the         Gref said the independent director           office real estate.
 biggest CIS markets, other rapidly emerg-       would replace Alla Aleshkina, the former
 ing markets, Eastern Europe and potential-      first deputy chair of Sberbank, on the          Britain’s NERP to buy in St. Petersburg
 ly Africa.                                      supervisory board.                               Britain’s Northern European Properties
    “We're not ruling out acquisitions [in          The board already has three independent      (NERP) is buying four new properties
 these regions],” Bugrov said.                   directors: Mstislav Afanasiyev, who is prin-    in St. Petersburg, RBC Daily reported.
    German Gref, for his part, said Sberbank     cipal of the Finance Ministry's Budget and       NERP has decided to actively expand
 had chosen McKinsey and Bain as strategic       Treasury Academy; Anton Danilov-                on the Russian commercial real estate
 consultants to draft its five-year program.     Danilian, chief analyst at OJSC OPK             market, and is even changing its name
    “McKinsey will deal with the general         Oboronprom; and Boris Fyodorov, doctor          to Nordic & Russia Properties to
 strategy and the bank's philosophy, and         of economic sciences.                           emphasize the importance of this mar-
 Bain will focus on specific areas like IT,         Sberbank has also expanded its control       ket, the paper said.
 operating activity, back-office strategy, and   of the mortgage market in Russia.                Two of the deals – the purchase of the
 the central regions, Moscow and St.             Sberbank’s share of home mortgages in           Holiday Club hotel at Birzhevoi
 Petersburg,” Gref said. “They'll have           the North Caucasus near doubled in 2007         Pereulok 4 and a K-Rauta DIY store at
 around half a year [to draft the strategy to    to RUB 6.2 billion or about 72% of the          Ulitsa Rustaveli 59 – will be closed in
 2014].”                                         market in that region.                          the second quarter of 2008. The return
    Gref said Sberbank was in the process of        Sberbank had a net profit of approxi-        on these assets will be 8%, the paper
 signing contracts with both consultancies.      mately RUB 100 billion according to             said. Another two deals involve office
 Sberbank itself will soon play a more active    International      Financial      Reporting     real estate, but their particulars have
 role in drafting the strategy, Gref added.      Standards (IFRS) in 2007 which is a 21%         not been disclosed yet.
    “An internal office is being set up, a       gain last year (RUB 82.8 billion).
                                                                                                 Rigla chain to double outlets by 010
                                                                                                  Russia's Rigla pharmacy chain, part of
 X5 Retail eyes Formata Holding                                                                  the Protek group of companies, plans to
                                                                                                 have 600 stores by the end of 2008
 Shareholders in X5 Retail Group N.V.,              Should X5 Retail decide to proceed with      and 800 by the end of 2009.
 which manages the Pyaterochka and               the acquisition, it anticipates raising equi-    By 2010 the company intends to have
 Perekrestok retail chains, will hold an         ty financing of approximately $1 billion in     1,100 pharmacies, compared to the cur-
 extraordinary general meeting on April 21       the first half of this year.                    rent 405.The retailer also plans to
 to consider granting the supervisory board         The main shareholder in Karusel is           achieve turnover of $1 billion in 2010,
 and executive committee authority to pass       Pyaterochka founder Andrei Rogachev. He         said Sergei Grachev, the chain's com-
 a decision on financing the purchase of         also owns a roughly 11% stake in X5 Retail      mercial director.
 Formata Holdings B.V., which manages            Grou, which he received as the result of         The company will develop through
 the Karusel hypermarket chain.                  the merger between Pyaterochka and              internal growth as well as through
    X5 Retail Group released a statement         Perekrestok.                                    mergers and acquisitions, with a prefer-
 saying that the financing structure for the        Karusel increased         sales     under    ence given to mergers and acquisitions,
 potential acquisition of Formata is still       International       Financial     Reporting     Grachev said.
 being determined with different forms of        Standards (IFRS) by 180% to $343.2 mil-          Turnover was $316 million in 2007
 equity financing currently under consider-      lion in the first half of 2007. Gross rev-      and is forecast to reach $500 million
 ation, including the possibility of granting    enue increased 203% to $83.7 million,           in 2008 and $750 million in 2009,
 existing Global Depositary Receipt (GDR)        operating profit surged 217.1% to $17.5 mil-    Grachev said, speaking at the Russian
 holders rights to subscribe for additional      lion and EBITDA went up 201% to $28.2           Retail Trade conference, organized by
 GDRs on a pro rata pre-emptive basis.           million.                                        the Adam Smith Institute.

Real Estate Report 07 April 2008
                                                                                              Russia/CIS                              7
 Major Hungarian player enters Moscow mall market                                             Cadence, Sumitomo build auto plant
                                                                                               The Czech Republic's Cadence

 TriGranit develops first                                                                     Innovations and Japan's Sumitomo
                                                                                              plan to build a production plant outside
                                                                                              St. Petersburg to produce plastic auto-

 Russian retail building                                                                      motive parts, the St. Petersburg invest-
                                                                                              ment and strategic projects committee
                                                                                              told the Report.
 Hungary-based property development             currently includes 1.6 million.                Cadence and Sumitomo have set up a
 company TriGranit announced plans last            The TriGranit-OST Group develop-           company in Russia called
 week to build its first Russian retail proj-   ment team is in advanced negotiations         to carry out the project.
 ect, the Mozaica Shopping Center, in the       with international anchor tenants secur-       Investment in the plant will total about
 capital Moscow.                                ing pre-leases at the current stage of con-   $60 mln. The companies have been
    “Moscow is a huge capital with more         struction.                                    allotted a 71,348-sqm site in the
 than ten million inhabitants, and there is        Koncza also said that TriGranit is cur-    Shushary industrial zone outside the
 still a lack of supply in terms of retail      rently evaluating various project plans of    city and the authorities passed a decree
 centers, especially in the southeastern        OST, which mostly include retail projects     on April 1 on carrying out survey work
 section of the city where we plan to build     in Moscow and elsewhere in Russia, and        at the site within 11 months.
 Mozaica,” TriGranit Communications             may decide to join these as a develop-
 Director Erno Koncz told the Report.           ment partner.                                 Ukrainian reconstruction bill
    Koncz said TriGranit and its local             TriGranit entered the Russian market        A bill to amend the law governing
 development partner OST Group have             as a partner of Gazprombank-Invest in         comprehensive reconstruction of old
 agreed to keep the cost of the project con-    January 2007, announcing its plans to         residential neighborhoods should be
 fidential, but noted that the project is       invest €5 billion in Russia.                  submitted to Ukraine’s parliament this
 included      in     TriGranit's     earlier      In September 2007, TriGranit pur-          week, Regional Development and
 announced plans to invest €5 billion in        chased a 50% stake in Torgoviy Kvartal, a     Construction Minister Vasily Kuibida
 Russia over the coming years.                  well-known Russian retail developer.          told a press conference.
    “Mozaica is a unique opportunity to         This partnership is expected to result in      He also said pilot cities have tentatively
 secure our first retail flagship project in    more than €1 billion-worth of new proj-       been chosen for reconstruction of old
 Moscow,” Koncz said. “It is located in a       ects in Russia.                               housing. These cities are Kyiv, Lutsk,
 very visible location, where consumers            “Since entering the Russian market,        Chernivtsi, Vinnitsa, Khmelnitsky,
 will get to experience what it is like when    TriGranit has been continuously looking       Kharkiv, Chernihiv, Sumy, Nikolayev,
 TriGranit builds a shopping center, in         for prominent business opportunities,”        Poltava, Donetsk and Dnipropetrovsk.
 terms of services and tenant mix.”             commented Sandor Demjan, the chair-           The total area of neighborhoods subject
    He added that the location, at the inter-   man of TriGranit. “Mozaica provides           to reconstruction will be about 5.6 mil-
 section of the Third Transport Ring and        TriGranit with exactly the kind of plat-      lion square meters, Kuibida said.
 Yuzhnoportovaya and Velozavodskaya             form for expansion in Russia that we are
 streets, is still a relatively virgin area     looking for.”                                 Kala Capital raises Tbilisi project funds
 where few modern shopping centers                 Besides the Mozaica project, TriGranit      Kala Capital plans to raise $1.5 bln for
 exist, although many developments are          has a number of additional projects in        the construction of a multifunctional
 in the pipeline, all around Moscow.            the pipeline in Russia.                       complex in the Georgian capital of
    Opening is planned for the fourth              Together with Gazprombank-Invest it        Tbilisi, company executive director
 quarter of 2009, or early 2010 at the lat-     plans to develop a project in Krasnodar       Zviad Kharebava said.
 est, with the three-level shopping com-        with an estimated value of over €2 bil-        The company has already acquired
 plex to have gross built-in area of 134,000    lion.                                         almost 80 hectares of land in Tbilisi for
 square meters (sqm) and gross leasable            The company is further working on          $38 mln at an auction. The land was
 area of 64,000 sqm. The center will fea-       two projects in St. Petersburg – the          occupied by a military base and the
 ture a hypermarket, electronics stores, a      Badajevszkiy shopping and exhibition          Arsenal plant. The business plan calls
 nine-screen multiplex, a food court, and a     center and the Vasiljev Island Project,       for building a large multifunctional
 parking lot for 2,500 vehicles.                where the former Telefabrika complex          complex on the land over a ten-year
    TriGranit said the center will have a       will be transformed into a large-scale        period, Kharebava said.
 rapidly growing catchment area, which          media center.
                                                                                              Smolensk halts municipal privatization
                                                                                               The Smolensk city council has refused

 Patterson may face buy-out
 Supermarket chain Patterson, founded in        Kiev back in 2005, and only two more
                                                                                              to discuss the privatization of 19 out of
                                                                                              21 municipal properties proposed for
                                                                                              sale. The administration tabled 21 non-
 1997, is rumored to be the subject of a        have appeared ,although initially the com-    residential properties for discussion by
 planned buy-out soon by Alpha-Group and        pany had promised to open 30 more shops       the city council, all of which were to be
 Semoi Kontinent for $600 million,              within two years.                             privatized through auctions, a source
 according to national daily Kommersant.           About $100 million is expected to be       from the city administration told the
   The company’s expansion plans, espe-         invested in the chain between 2007-2009.      Report. The refusal to privatize munici-
 cially in Ukraine, have been in a bit of a       However this may be too little to           pal properties will require a review of
 lull.                                          increase the company’s profits to its fore-   the Smolensk administration’s tax and
  Patterson opened its first supermarket in     cast RUB 21 billion by 2009.                  financial policy, the source said.

Real Estate Report 07 April 2008
                                                                                                  Poland                               8
 Administrative bottlenecks to be tackled by new bill                                            Pro-Urba starts Warsaw resi project
                                                                                                  Development company Pro-Urba

 Ministry to speed up                                                                            plans to start construction of the first
                                                                                                 stage of its Artown housing estate in
                                                                                                 the second half of 2008, the company

 planning procedures                                                                             announced in a statement.
                                                                                                  The company has received the con-
                                                                                                 struction conditions for the plot, locat-
 Poland's Infrastructure Ministry is draft-      much earlier at the stage of the concept        ed near Warsaw's city center in the for-
 ing a radical spatial planning reform,          when the potential investor does not yet        mer industrial area of Wola, and will
 planned for implementation for January          own the land.”                                  apply for the building permit in April.
 2009 and designed to eliminate two vital           Dziekonski refuted the possibility that       The first stage will include two apart-
 stages of administrative procedure that are     the changes could lead to under-the-table       ment buildings, one of four-storeys and
 currently delaying the building permit          deals and corruption between developers         a 10-storey building. The two buildings
 process, Deputy Minister of Infrastructure      and public officials. The deputy minister       will have a total of around 260 apart-
 Olgierd Dziekonski told the Report.             believes the new procedure will leave little    ments, ranging from 30 sqm to 115
    “We want to eliminate planning deci-         room for corruption because of the trans-       sqm, as well as around 15 lettable
 sions and replace them with the adminis-        parency of the process.                         spaces for commercial services.
 tration's approval of plans to be drafted by       “Someone could say that this leaves           In total, Artown will be built in six
 investors,” Dziekonski said. “What we are       space for corruption,” Dziekonski com-          stages with a total of 1,500 apartments.
 also proposing is resignation from build-       mented. “I think that there is not so much
 ing permits issued as an administrative         space for corruption if it takes place with a   TUP sells residential project
 decision. We want to replace those admin-       totally open curtain and thus by making          Polish developer TUP signed a prelimi-
 istrative decisions with a registration.”       this decision publicly [...], so that it        nary deal to sell a real-estate project
    Zoning plans in large Polish agglomera-      appears on the Internet site of the author-     worth PLN 65.5 mln to real-estate reno-
 tions lost their validity in 2004, which        ity and everyone can read it, there exists a    vation company Opal Property
 forces investors to gain planning deci-         possibility of a court complaint—in this        Developments, TUP announced.
 sions. Under the current law, for areas not     case for everyone who took part in the           The residential project is located at the
 covered by a zoning plan—most land in           process, not only for the neighbors.”           site of a former clothes factory in
 Poland—investors must obtain a planning            The new regulations will differentiate       Poznan. A preliminary deal was also
 decision from the local administration.         between small and large real-estate proj-       signed concerning the sale of real-estate
    Decisions of this type stipulate the size,   ects in order to provide simpler rules for      (valued at PLN 65.6 mln) on which the
 architectural conditions and the use of         the former. A small residential project will    project will be built, TUP announced in
 properties that can be developed on a           be defined as a project with that total area    a press release. The real-estate con-
 given plot, and are the basis for the prepa-    under 400 square metes (sqm). A com-            cerned has an area of 21,000 sqm. A
 ration of a building project, which is sub-     mercial project with a total cubature of up     deal finalizing the acquisition is expect-
 mitted to the local authorities along with      to 1,000 cubic meters will also fall into the   ed to be signed April 30, 2008.
 the application for a building permit.          category of a small investment.
    The government's plan to change the             Projects will have to adhere to the local    Military Property Agency may close
 building permits procedure also means           gmina urbanization parameters defined            Prime Minister Donald Tusk has
 that investors will no longer have to face      by the type of real-estate or countryside in    declared his willingness to dissolve the
 appeals by neighbors and public organiza-       the vicinity of the planned project.            Military Property Agency (AMW), the
 tions that under the current law delay con-        “This is a rationalization of the invest-    state agency responsible for selling off
 struction starts.                               ment process,” Dziekonski summarized.           military land and other assets, accord-
    “Registrations are not part of the admin-    “A rationalization, which means getting         ing to unofficial sources.
 istrative procedure, but are administrative     rid of those elements of the law which are       The agency is said to end its existence
 deeds,” Dziekonski said. “This means that       unnecessary while at the same time stipu-       within nine months, and the govern-
 there are no parties, no appeals and no         lating defining and changing those ele-         ment would create the Armament
 delays in the investment process at the         ments of the law which are ineffectual,         Agency to replace it. Some of the assets
 moment when the project is prepared and         wrongly interpreted or function badly.”         currently in the possession of the
 the whole process is at an advanced stage.”        Dziekonski expects public consultations      AMW would be taken over by the
    The deputy minister explained that           on the changes proposed by the ministry         Treasury and regional governments.
 protests would be reviewed during a peri-       to begin at the end of April and the pro-
 od of time between the publication of the       posal is expected to be discussed in            Polnord plans expansion
 building concept filed by the investor and      Parliament in the autumn. The first ele-         Developer Polnord wants to expand to
 the registration of the project by the local    ments of the reform are expected to be          Romania, Bulgaria and Ukraine, with
 authority that will permit the start of con-    enforced starting January 1, 2009.              Russia as a strategic market, CEO
 struction works.                                   “The plan is for the changes to be dis-      Wojciech Ciurzynski said in an inter-
    “The point is for the whole investment       cussed in Parliament, as legal changes, in      view with national daily
 process [...] not to suddenly be halted as a    the Autumn of this year with a possibility      Rzeczpospolita. Ciurzynski also said
 result of a protest, for example, from an       for them to be publicized January 1 [2009]      that Polnord expects to raise a gross
 individual who has a justified legal            and come to life successively in accor-         profit of PLN 200 mln in 2008, and
 grounds,” the deputy minister said.             dance with, lets say, vacatio legis, which is   plans to build approximately 250,000-
 “Questions linked with protests [to the         a bit longer for some [laws] and a bit short-   300,000 sqm per year abroad in three
 planned investment] will be revealed            er for others,” Dziekonski said.                years time.

Real Estate Report 07 April 2008
   For once, why
   not get ahead
   of your diary?
   The EuroProperty Investment
   Summit 2008 will be next year’s
   premier opportunity to learn
   about new developments in the
   European commercial property
   business. A select audience of
   senior professionals will have the
   chance to discover new trends,
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   returns, and an unrivalled chance
   to network with the heavyweights
   of the European property industry.
   Topics will include:
   •   Hot spots: which cities, countries and regions
       will offer the best returns in 2008/9?
   •   Counter-cyclical investments: how and where
       to find value when property has hit or gone
       past its peak
   •   Pushing the boundaries of Europe: new
       opportunities in Russia, Ukraine and beyond
   •   The REIT stuff? Has the growth of REITs
       across Europe actually been a benefit to
       investors and the companies themselves?
   •   Financial engineering: after the growth of
       CMBS, CDOs and property derivatives, what
       will be the next innovation from the rocket
                                                        For further information, please contact
       scientists of property finance?                   Jane Cartwright: +44 208 652 3659

Save the date: EuroProperty Investment Summit, 24/25 June 2008, Lisbon, Portugal

 Previous attendees include:
                                                                                                 Poland                               10
 Polish capital going vertical with skyscraper boom                                              Trakcja Polska up 1.5% in debut
                                                                                                  Railway infrastructure and construc-

  Warsaw high-rise resi                                                                          tion company Trakcja Polska debuted at
                                                                                                 PLN 4.50 on the Warsaw Stock
                                                                                                 Exchange April 1, up 12.5% on its PLN

  looks to be new trend                                                                          4.00 initial public offering (IPO) price.
                                                                                                  The company raised PLN 120 mln
                                                                                                 from its IPO.
  As one of the few European cities with            Katarzyna Lubas, a consultant from            The company sold 1 mln existing
  both the demand and the legal leeway to        Reas Consulting, told the Report that the       shares and 3 mln new shares to individ-
  build city-center high-rise residential,       eastern part Warsaw's Wola district, locat-     ual investors. Some 9 mln existing
  Warsaw will soon see its skyline change        ed close to the CBD, is likely to become        shares and 27 mln new shares were
  dramatically in favor of 20-storey-plus lux-   rich in residential skyscrapers.                sold to institutional investors.
  ury projects.                                     “More than a dozen high-rise projects         The company aims to invest approxi-
    “We already know about a few planned         have been planned there,” she said.             mately PLN 200 mln in the next two
  investments in the Wola district that will        But it's not only Warsaw that is drawing     years. It wants to invest some PLN 80
  be over 20 storeys tall,” Marcin               high rise skyscrapers.                          mln on road construction, PLN 65 mln
  Golebiowski a real estate market analyst          “Warsaw always sets the trends which         on renewable energy as well as PLN 55
  from the Rednet Consulting told the            are then repeated in other Polish cities,”      mln on rail infrastructure.
  Report.                                        Rednet's Golebiowski said.
    “There will be a number of such invest-         Lubas agreed. “Developers are planning       J.W. banks on German technology
  ments [upscale high rise apartment build-      building more and more high-rise apart-          Developer J.W. Construction
  ings] in Warsaw in the coming years,”          ment buildings in Gdansk, Wroclaw,              announced that it will be applying
    Orco Property Group is currently build-      Poznan, Szczecin and Katowice,” Lubas           German building technology at its pro-
  ing its much-publicized 192-meter Zlota        said.                                           duction facility. The company hopes the
  44 tower, designed by renowned architect          Wroclaw and Gdansk are home to two           new technology will allow it to cut costs.
  Daniel Lebeskind, offering 251 apartments      renowned projects. Komfort is building           It may launch construction of its mas-
  in downtown Warsaw.                            the double-tower Sea Towers project in the      sive residential project in Ozarow
    Meanwhile, Atlas Estates is building its     Baltic coastal town of Gdynia. The towers,      Mazowiecki on the outskirts of Warsaw
  Platinum Towers project, which will see        of 28 and 36 storeys, will house a total of     in June. Apartment prices in the
  383 apartments build in two 22-storey tow-     276 apartments. The project is scheduled        Ozarow project could be below PLN
  ers. In addition, Spanish developer Pro        for completion at the end of February           6,000 per sqm.
  Urba recently announced that a 170-meter       2009.
  tower in western Warsaw's Wola district           In Wroclaw, southwestern Poland,             Jones Lang lead agent for EDC
  (see story p. 11) while Polish tycoon Jan      Polish tycoon Leszek Czarnecki's LC Corp         Europa Distribution Center (EDC), the
  Kulczyk's Chmielna Development plans to        will build the 56-storey Sky Tower with a       behind the Europa Park distribution
  build a hotel and apartment building           total of 844 apartments for $400 million.       and light-industrial center near Warsaw
  reaching 280 meters. Another developer,           Rednet's Golebiowski believes that only      appointed real estate advisory company
  Marvipol, also plans to erect a 20-storey      Krakow may see a limited number of              Jones Lang LaSalle as agents for the
  building in Wola, which will house only        apartment skyscrapers, due to the city's        project.
  40 apartments.                                 architecture.                                    This year EDC plans to extend the
                                                                                                 development with phases two and three
                                                                                                 of the project destined to make site one
 Swiss franc mortgages to be                                                                     of the country's largest, at 60,000 sqm.

 more attractive by end of year                                                                  Developers fear crisis
                                                                                                  Developers in large cities are choosing
 The competitiveness of Polish mortgages         denominated monthly mortgage payment,           to wait with construction, and are even
 taken out in Swiss francs (CHF) will likely     the report reads.                               selling land to larger players, for fear of
 further increase against Polish zloty (PLN)-      The three-month Warsaw Interbank              not being able to complete construc-
 based loans toward the end of this year as      Offered Rate (WIBOR), together with an          tion, the Wall Street Journal Polska
 the countries' interest rates diverge,          approximate 1% interest on a loan, results      reported, citing unnamed analysts.
 according to a joint report by financial con-   in approximately 7.05% interest on PLN-          The paper quoted the Polish Real
 sultants Open Finance and internet-based        denominated monthly mortgage pay-               Estate Federation (PREF) management
 residential property service        ments.                                          board member Tomasz Lebiedz as say-
   "The rates of [mortgage] loans in CHF           In March, Poland's Monetary Policy            ing that developers are either withhold
 continue to be lower than the rates of          Council rate-setting body hiked rates by 25     construction or selling projects, leading
 loans [granted] in PLN," the report reads.      basis points. Rates are expected to rise        to a surge of such offers on the market.
 "What is more, the disproportion grows,         again later this year, according to analysts.    Experts warn that with increasing
 benefiting loans in the Swiss franc."             Meanwhile, the Swiss National Bank's          interest rates and rising volume of
   At present, the three-month London            rate-setting body is expected to slightly       offers, some developers may face prob-
 Interbank Offered Rate (LIBOR) in CHF           reduce interest rates at the end of the year    lems with financing.
 stands at almost 2.84%, while a bank's          and keep them flat until that time, further      According to some analysts, these
 interest rate on a loan comes to 1.3%, giv-     widening the gap between PLN- and CHF-          could be symptoms of a more serious
 ing an average 4.15% interest on a CHF-         denominated mortgages.                          crisis.

Real Estate Report 07 April 2008
                                                                                                Poland                               11
 Business leaders want Warsaw to build technopark                                               NTT System builds own storage
                                                                                                 Computer maker NTT System

 Chamber calls for new                                                                          announced plans to build its own logis-
                                                                                                tic center. The center, valued at PLN 20
                                                                                                mln, will be located in Duchnow, a vil-

 technology incubator                                                                           lage in Mazowieckie region.
                                                                                                Construction work on the facility is
                                                                                                scheduled to begin in the fourth quarter
 The Polish Chamber of Commerce has                The Warsaw Technology Park was origi-        of the year.
 appealed to the Ministry for Regional          nally part of 350 investments identified by      After launching the centre the compa-
 Development and the President of Warsaw        the government as key projects for the          ny will be able to lease storage space to
 Hanna Gronkiewicz-Waltz for measures to        development of Polish culture and econo-        IT components manufacturers and dis-
 be taken to ensure that a long-anticipated     my, which are in line for EU co-funding.        tributors. The investment is intended to
 Warsaw Technology Park project is realized.    The list was reduced to 226 projects by the     cut the company's costs.
    The technology park is estimated to cost    Ministry for Regional Development in
 approximately €350 million and may be          early February. The Warsaw Technology           J.W. Construction changes structure
 completed in 2015, and Poland is aiming        Park was placed on a reserve list.               The shareholders at Polish developer
 to get €146.24 billion in EU funding for its      The Chamber of Commerce warned               J.W. Construction Holding decided to
 key projects. It will contain laboratories,    that if Poland does not want its scientists     change the group's internal structure
 office space, conference halls, service        to carry out their work abroad then a           and create three subsidiaries, which will
 points and a technological infrastructure.     Warsaw technology facility must be built.       be 100% owned by the developer, the
    The park promises multiple opportuni-       The project would secure jobs, allowing         company announced in a press release.
 ties for developers, as companies on the       scientists to develop professionally and         The change of structure is intended to
 reserve list are expected to receive €27.61    work together with international compa-         increase transparency and improve cost
 billion from the EU.                           nies.                                           control, the head of J.W. Construction
    “We are appealing to the President of          The project was to be realized by special-   Holding Jerzy Zdrzalka said, as quoted
 Warsaw Hanna Gronkiewicz-Waltz to take         ist company, TechnoPort, created for the        by the release, adding that it would
 measures together with the Ministry for        development of the project, and planned to      ease possible future acquisitions in the
 Regional Development geared toward the         be built on a 44.6 hectares near the upper-     building sector.
 creation of a Technology Park in Warsaw,”      south Warsaw district of Mokotow, with           Under the new structure, J.W. Projekt
 the Chamber of Commerce wrote in a             300,000 square meters of space would be         will be an engineering, advisory and
 press release.                                 built in two phases.                            architecture company and J.W.
                                                                                                Construction will perform construction
                                                                                                work while JWCH Produkcja
 Pro Urba reveals plans for twin                                                                Budowlana will manufacture construc-
                                                                                                tion materials.
 tower urban residential complex                                                                Top apartment could cost PLN 7 mln
 Development company Pro Urba plans to            The two towers will house apartments           A 670-square-meter (sqm) apartment
 build a two tower Kaleidoscope residential     of various sizes ranging from studios to        building in the Sky Tower high-rise
 complex in central Warsaw, including one       two-level penthouses on the top floors.         upscale residential building in Wroclaw,
 of 170 meters, the company announced in          Pro Urba is currently working out the         southwestern Poland, could cost close
 a statement.                                   details of the project with architectural       to PLN 27 million, the project's press
    “One of the towers will reach 53 floors,    bureau AMC and declined to disclose             officer, told the Report.
 while the second will be 23 storeys high,”     when it intends to apply for a building per-     Apartment prices in Sky Tower range
 the statement reads.                           mit, though it hinted that it should take       from PLN 14,500 to PLN 40,000 per
    The two towers will have a usable space     place this year.                                sqm, he said. This puts the building's
 of 60,000 square meters, both residential        Construction of the towers is expected        largest apartment at up to PLN 26.8
 and commercial.                                to take around two years. Pro-Urba is a         million.
    The lower floors and the part joining the   development company owned by Spanish             The apartment is located on the 54th
 two towers will house commercial services      capital groups active in the construction       and 55th floor of the building, which
 including restaurants and shops. t             and development sectors.                        offers a view of the Sudetes Mountains,
                                                                                                approximately 50 km from the city. The
                                                                                                apartment also has its own 15-meter-
 Re-sale apartment prices stable                                                                swimming pool.
                                                                                                 The company declined to reveal
 Prices for used residential properties in      with prices increasing by 0.3% during           whether someone has bought the apart-
 Poland's largest cities remained mostly        January and February 2008. Prices for           ment. Sky Tower is being built by
 unchanged in February 2008, according          50-sqm apartments in the northern               Polish tycoon Leszek Czarnecki's LC
 to a joint report by internet property firm    Tricity (Gdynia, Sopot, Gdansk) area are        Corp. and financial consultant Open       oscillating between PLN 300,000 and              The $400-million investment will have
 Finance.                                       PLN 500,000, with slight price increases        a total usable area of 300,000 sqm. The
   The average price for a 50-sqm apart-        (circa. 2%) seen in Sopot and Gdynia            project is expected to be completed in
  ment in Warsaw reached some PLN               and price decreases of 2.8% seen in             the fourth quarter of 2010 or in the first
  500,000 in the first two months of 2008       Gdansk in January and February.                 quarter of 2011.

Real Estate Report 07 April 2008
                                                                                                      Poland                               1
 Building costs and credit tightening threaten profits                                                 Land use law may change
                                                                                                       The government's "Friendly State"

 Residential developer                                                                                commission has submitted an amend-
                                                                                                      ment to the Protection of Agricultural
                                                                                                      and Forest Areas Act. According to the

 margins likely to fall                                                                               amendment, the low quality agricultur-
                                                                                                      al land that lies within the city borders
                                                                                                      would be exempt from the Act, thus
  Polish residential developer margins may          building in the center of Warsaw, which will      allowing the owners of the low-quality
  decrease by 3-5 percentage points in 2008,        contain eight luxury apartments of between        farmland to omit some of the costs
  according to internet finance consultant          33 and 106 square meters.                         associated with today's formal change
  Open Finance's Analyst Emil Szweda.                  While assuming that the decrease in            of land status from agricultural to resi-
     “I expect developer margins to decrease        developer margins will not be a significant       dential. Changing the status of the land
  by 3-5 percentage points this year,” Emil         one, Open Finance's Szweda noted that             does not automatically mean real estate
  Szweda told the Report. The main reason           though rising construction costs are unlike-      investment could take place there, how-
  given for the decrease is increasing build-       ly to affect larger market players, smaller       ever. The last word on the issue would
  ing costs, which analysts estimate to take        developers may suffer due to the costs of         still belong to the local authorities.
  up some 30% of total development costs.           financing.
     While these increase, residential prices          When looking at developer margins, due         Griffin to invest in Poland
  are at a relative standstill and developers       to the variety of companies on the market,         Mezzanine fund Griffin Property
  are forced to add incentives to residential       projects should be treated individually, but      Finance (GPF) announced that it wants
  offers such as free parking spaces, fitted        broadly speaking developer margins—               to invest in the Polish real-estate sector.
  kitchens or free balcony space.                   which reached approximately 30-35% in             GPF Senior Partner Helmut Fischer
     “This increases the costs of projects and      2007 - will fall to some 30% in 2008, DM          said the fund is interested in industrial,
  affects margins negatively,” DM PKO BP            PKO BP's Sztabler added.                          residential and commercial market with
  analyst Michal Sztabler wrote in a com-              Sven von der Heyden is in agreement            the exclusion of hotels. The company
  mentary. “A strategy, which is being used by      that large developers, which have good liq-       has signed a letter of intent with devel-
  some developers, centering on the sale of         uidity, are likely to survive the tightening of   opers for €100-150 mln, Fisher added.
  turnkey apartments, seems well placed but         credit conditions by banks, which is a result      It fund did not reveal the projects cov-
  only in certain segments of the market, this      of the situation in the banking sector fol-       ered by the letter of intent but said that
  being the market for apartments [...] of a        lowing the U.S. credit crunch.                    the developers in question are not list-
  higher standard.”                                    “We should also not forget about tighten-      ed. The total amount GPF wants to
     High-end residential developers such as        ing credit conditions imposed by banks,           invest in Central and Eastern Europe
  Von Der Heyden Group recognize that               which [mean that] only good locations and         comes to €250 mln.
  margins are likely to come under pressure,        the fittest developers survive,” Sven von der
  but remain optimistic as to continuing            Heyden commented. “This all together is           Energy certificates lack experts
  demand for luxury residential property.           certainly not the dreamland scenario for us        The real-estate sector could come to a
     “Margins of developers will unfortunate-       real estate developers.”                          standstill in 2009 as there may be not
  ly come under pressure for various rea-              Residential prices in Warsaw reached           enough specialists eligible to allocate
  sons,” Von Der Heyden Group Chairman              PLN 8,847 per square meter (sqm) in               energy certificates. From January 1,
  Sven von der Heyden commented for the             January 2008, up 2% from December                 2009, a certificate will have to be
  Report. “Mainly because of the cooling            prices, and remained at the same level            acquired for every building sold or
  down of the market, however on a high             throughout February, according to internet        given up for use. The Infrastructure
  level [luxury residential] we remain cau-         property agency Rednet Property Group,            Ministry has not yet issued a directive
  tiously positive, also in light of our success-   cited by DM PKO BP in its report.                 on the content of such certificates and
  ful progress in selling flats in our small        Residential prices in the southern city of        as a consequence, schools are unable to
  Warsaw residential projects.”                     Krakow reached PLN 7,504 per sqm in               educate specialists on issuing the docu-
     Von Der Heyden Group is currently near-        November last year with little or no change       ments. The Ministry's directive will be
  ing the completion of a luxury residential        being seen so far in 2008.                        ready around mid-May, according to
                                                                                                      business daily Parkiet .

 Szczecin home prices may rise                                                                        No chance of price cuts says J.W.C
                                                                                                       There is no chance of a general price
  The seaport town of Szczecin is likely to           The needs of young people for moder-            cut on new residential properties in
  see a rise in residential real estate prices      ately-priced flats will be the base of            2008, according to developer J.W.
  due to growing demand for flats and the           demand in the residential real estate mar-        Construction's CEO Jozef
  city's improving economic situation,              ket in upcoming years, Ciesla wrote.              Wojciechowski.
  according to residential real-estate consul-        Apartment prices per square meter in             "I do not question the fact that the
  tancy Reas analyst Jan Ciesla.                    Szczecin usually do not exceed PLN                insane gallopade of prices form previ-
     "There is an assumption that the con-          6,000, the report reads.                          ous years is a history by now, but—
  tinuing improvement of the city's eco-              Residential cooperatives account for            when it comes to new flats—there is no
  nomic situation and the demographic sit-          30% of the market, according to the docu-         way we will deal with rapid price cuts in
  uation will contribute to a general boost in      ment. The number of completed flats in            2008," he said. Price decreases could
  demand and determine its structure,"              Szczecin stood at 2,015 in 2007, up 125%          however be possible in unattractive
  Ciesla wrote in a report out in March.            year-on-year.                                     locations, Wojciechowski said.

Real Estate Report 07 April 2008
                                                                                                   Hungary                            1
 Experts see slowdown continuing before recovery                                                   Pecs Tower tender fails
                                                                                                    The latest in the sequence of many

 Market still attractive                                                                           attempts at selling a long abandoned
                                                                                                   25-storey tower building in southern
                                                                                                   Hungary’s Pecs has once again brought

 despite uncertainties                                                                             no result, as the only bidder, a sub-
                                                                                                   sidiary of real estate developer Wallis
                                                                                                   could not meet all requirements.
  Investment in Hungarian property has               “For institutional investors, there is no      The company could only guarantee the
  remained an attractive choice for institu-      effective alternative between real estate        completion of its investment in 2011,
  tional investors even following the recent      and equity markets, because they are             while the local government set an earli-
  U.S. sub-prime crisis, experts agreed dur-      already specialized to invest in one seg-        er date. Furthermore, Wallis stipulated
  ing a panel discussion on real estate, bond     ment or the other,” he said.                     it would only make a binding offer if it
  and equity markets.                                Although the real estate market in            could lease out 10,000 square meters in
     “[In Hungary], property is a good invest-    Hungary managed to escape the full-              the provisional complex in advance, a
  ment medium at the time of uncertain-           blown effects of the U.S. sub-prime cri-         demand that was deemed unacceptable
  ties,” Charles Taylor, managing director of     sis—thanks to its low or non-existent            by the municipality. Pecs will now
  the local office of real estate consultants     exposure to the segment—it has neverthe-         announce another procedure to find a
  Cushman and Wakefield (C&W) said at             less felt the secondary effects of an            new owner, this time with a lower start-
  the event. “The credit crunch has not had       increasingly uncertain market mood,              ing price of HUF 410 mln.
  such a great effect in Hungary as in            according to C&W’s Taylor.
  Western European countries, and                    “The credit crunch has left its footprint     Casino project gains momentum
  investors have continued to transact in         on the market, with a property's funda-           The Economy Ministry and the
  Budapest.”                                      mentals gaining an essential role versus its     investor behind Eurovegas, a casino
     According to participants, investing in      cash-flow productivity,” he said. “For the       project in Bezenye, western Hungary,
  real estate in Hungary—and in other             last seven years, property investment funds      have reached an agreement on allowing
  Central and Eastern European countries—         were buying, buying and buying; now they         the company to use parts of the M15
  currently carries lower risk than investing     are looking at the assets they bought a few      motorway in the area to transport con-
  in other assets, such as stocks or bonds.       years ago and are re-pricing them.”              struction materials to the site.
  As stock markets are expected to remain            Although experts anticipate a lower vol-       Reports say Eurovegas Hungary Kft
  volatile, risk-averse investors tend to pre-    ume of property transactions in Hungary          was willing to pay the amount demand-
  fer property investments, or real estate        this year than in 2007, indicating a tem-        ed by the ministry, so construction
  investment funds.                               porary slowdown in acquisitions, property        works may now continue with greater
     “This is not the end of the story yet, and   investors seem willing to continue buying        intensity.
  investors are remaining on the sidelines to     on Hungarian markets.                             The Eurovegas complex to be built on
  see which way stock markets will continue          “There are still significant players on the   a 240-hectare plot is estimated to cost
  their path,” Peter Duronelly, investment        sidelines, waiting for the best buying           €400–600 mln and eventually provide
  director at fund manager Budapest               opportunity,” said Taylor. Also as a result      jobs for 3,000 to 3,500 people.
  Alapkezelo said.                                of the sub-prime crisis, institutional buy-
     “Meanwhile, dynamic real estate devel-       ers became dominant, and while they are          Private prison opens
  opments are set to continue, so it is worth     not expected to abandon the market, they          A consortium led by real estate devel-
  considering investing in property for           are likely to shift focus within their asset     oper KESZ Zrt has officially opened a
  those who prefer lower volatility and stable    portfolios.                                      prison complex in Tiszalok, northeast
  gains.”                                            “Prime yields in Hungary decreased            Hungary. The operation of the correc-
     At the same time, the chairman of the        gradually in retail, office and industrial to    tional facility with a capacity of 700
  Budapest Stock Exchange, Attila Szalay-         around 6-7%, approximating yields in             convicts will be supervised by a KESZ
  Berzeviczy, noted that in reality capital       Western European countries,” Taylor said.        subsidiary. Under the public-private
  markets are not competitors to the real         “As asset values are easing back, investors      partnership arrangement of establish-
  estate market, due to the degree of spe-        are moving into new property classes,            ing the prison, KESZ will retain opera-
  cialization.                                    readjusting their positions.”                    tion for 15 years, to receive a maximum
                                                                                                   of HUF 1.5 bln in annual rental fees

 TriGranit to build holiday resort                                                                 from the state.

 Hungarian real estate giant TriGranit, led       resort complex with private vacation             Pecs to sell off property package
 by property magnate Sandor Demjan, is            homes and luxury hotels, while its value is       The municipality of southern
 planning to launch a large-scale holiday         estimated at several billion euros.              Hungary’s Pecs is to sell off a package
 resort project in Montenegro, the daily            Tourism and infrastructure develop-            of real estate assets worth HUF 5 bln,
 Napi Gazdasag reported.                          ment is in line with Montenegrin govern-         town hall officials confirmed.
    The company is currently waiting for          ment strategy to attract foreign investment       The city’s management announced
 the Montenegrin government to                    capital to the underdeveloped, but also still    the privatization with more advanta-
 announce an international tender to uti-         undisturbed coastal area, which is owned         geous terms than in the case of earlier
 lize a beachfront location on the Adriatic       by the state and the local government.           similar efforts, as it is badly pressed
 Sea, which could be followed by drawing             Although the country is not yet part of       for funds needed for investments in
 up concrete plans. TriGranit's project           the euro-zone, its official currency has         preparation for being the 2010
 would feature a several-thousand-hectare         been the euro since 2003.                        European Capital of Culture.

Real Estate Report 07 April 2008
                                                                                                 Hungary                             1
 Local player shifts focus to enter industrial market                                            Agents launch sales guarantee service
                                                                                                  Two property dealers, Otthon Centrum

 Ablon enters logistics                                                                          and Duna House, hope to up their
                                                                                                 respective market shares through intro-
                                                                                                 ducing fairly similar benefits to clients.
 Hungary-based CEE property develop-             the area; therefore any kind of new devel-      Under the new arrangements, if the
 ment firm Ablon Group has launched a            opment is expected to meet with a warm          dealer fails to sell a commissioned asset
 new logistics center project, Airport City,     welcome.”                                       for a given duration, and the customer
 to be built in eight separate phases, the          “We expect Ablon's Airport City Park to      succeeds in sealing the deal unassisted
 company said at an event.                       be a great success, as an overwhelming          within three months of the term expir-
    The completed logistics park, located on     demand will meet its supply here,” he           ing, the agency pledges to pay approxi-
 the boundary of Hungarian capital city          added.                                          mately 2% of the asset’s worth.
 Budapest and neighboring Vecses, will              Homonnai said the phasing of the com-
 altogether have some 66,000 square              plex, as well as the office-warehouse ratio,    Zuglo authorities approve 1,00 flats
 meters of built-in area, mainly containing      will be demand driven.                           The municipality of the Zuglo district
 warehouse and also some offices.                   “There will be two buildings solely offer-   in Budapest has approved design plans
    The project is the company’s first foray     ing office space and six with mixed ware-       for the Mogyoros Kert investment, after
 into the industrial market, as so far it has    house and office space, with the ratio to be    the first round of the procedure ended
 been involved mainly in office, hotel, retail   changed on demand,” he said, adding that        in failure. Real estate developer
 and residential projects. The value of the      the company is already in talks with possi-     EuroIngatlan Kft may now commence
 investment was not disclosed by the firm.       ble tenants.                                    construction of a residential and recre-
    “The current project is Ablon's first           Ablon will complete the first phase of       ational complex accommodating 1,200
 logistics investment, and aims to attract       the project, the 10,300 sqm building “C”        apartments, as well as several sporting
 logistics firms and retailers who need          in the summer of 2008. The company              and cultural facilities.
 access to the nearby Ferihegy [internation-     plans to start the next one, the 10,300 sqm
 al airport] and the city center,” marketing     building “D” this year, while construction      Airport hotel to be completed in June
 manager Zsuzsanna Makkai said at the            is expected to take around one year.             Real estate investor De La Rosa Kft is
 event.                                             Regarding Ablon's further plans in the       to open its four-star Airport-Hotel in
    “Ablon decided on developing this logis-     logistics market, Homonnai said the com-        central Hungary’s Vecses in June. The
 tics property because of the dynamic            pany is open to any favorable opportuni-        112-room building was built for HUF 2.5
 growth of the local logistics market, and       ties depending on demand.                       bln, said Robert Saller, CEO of the oper-
 within that in Budapest especially,”               The logistics plans came the same week       ating firm Airport-Hotel Kft.
 Communications           Director     Gabor     as Ablon released its 2007 financial             Saller pointed out that the company
 Homonnai told the Report.                       results. The company recorded net profit        also owns the adjacent 2.5-hectare plot,
    “Airport City will build on the proximity    of €40.8 million in 2007, up 14% on the         so if necessary, the complex could be
 of both the airport and nearby major            year (y/y), while the company's net asset       expanded.
 roads, while planned developments at the        value (NAV) was up 85% y/y to €506.6
 airport itself and in the area's infrastruc-    million, according to the company's latest      Szeged scraps airport development plan
 ture will also have a positive effect on the    financial statement.                             The municipality of Szeged (southern
 project,” said Homonnai.                           The company portfolio was valued at          Hungary) has decided to suspend a
    Analysts also said demand for logistics      €617.4 million by independent valuation         planned HUF 4 bln upgrade to its local
 services is very high in the airport region,    firm King Sturge at the end of 2007, up         airport, which would have enabled the
 so projects there have good potential.          from €421.5 million in the previous year.       facility to receive large passenger craft.
    “The airport logistics market is current-       Ablon shares are traded in London on          Szeged Deputy Mayor Sandor Nagy
 ly driven by demand, as there is only one       the Alternative Investment Market (AIM).        said the decision was made as other
 completed logistics project there, which is     Ablon has ten completed projects in             cities similar in size to Szeged show
 already fully leased,” Domonkos Joo, an         Budapest and seven under development,           that provincial towns cannot make a
 analyst at real estate consultants DTZ said.    but is also active on the Czech, Romanian       profit from scheduled flights.
 “There is no modern logistics facility in       and Polish markets.
                                                                                                 Sio Ingatlan builds in Siofok
                                                                                                  Hungarian development company Sio
 Arrests delay Sopron project                                                                    Ingatlan Invest plans to build a shop-
                                                                                                 ping and entertainment center in west-
 A brown-field project in northwest              and underground parking for 360 cars.           ern Hungary's Siofok, a popular resort
 Hungary's Sopron, originally planned to           However, plans to complete the project        town on the shores of Lake Balaton.
 be launched at the beginning of the year, is    by the end of 2008 were ditched when the         Construction of the 7,000-sqm, two-
 seen suffering delays as the managers of        managers of the development company             storey Sio Plaza is expected to start in
 the development company are being held          were arrested for crimes not linked to the      autumn 2008, following the demolition
 by police on suspicion of fraud, the online     project, according to the report.               of a disused residential building and an
 version of local daily Kisalfold reported.        The development of the property project       old shopping center, press reported.
    The planned residential and office com-      has not been abandoned, as another com-          The developer bought the land and the
 plex, to be built at the 9,000-square-meter     pany, which the daily did not name, has         buildings from the local government
 site of a former textile factory, was to cost   purchased the land and the project.             for HUF 360 mln, and has already
 around HUF 8 billion, and to contain 440        Further details of the completion schedule      started leasing space, according to the
 flats, an office building, a services center    were not available at press time.               Sio Plaza web site.

Real Estate Report 07 April 2008
                                                                                                    Hungary                              15
                                                                                                    Developer seeks spa investors
 Developer to build with or without new metro line                                                   Hungarian developer Gyulai

 Futureal reveals city                                                                              Termalpark is seeking investors to build
                                                                                                    the first, HUF 17-bln phase of a thermal
                                                                                                    spa and hotel complex in Gyula, eastern

 center Budapest plan
  Hungarian real estate development group              Etele Square is planned to be one of the
                                                                                                    Hungary, local dailies Bekes Megyei
                                                                                                    Hirlap and Hir6 reported. Under the
                                                                                                    first phase of the project, a thermal spa,
                                                                                                    a three-and a four-star hotel with a total
  Futureal plans to build a large mixed-use         end stations of the new metro line 4,           1,500 rooms, a concert hall, as well as
  city center project, as well as an office         planned for completion by 2010-2011,            rehabilitation and conference centers
  complex in the Hungarian capital city             which is expected to jump-start develop-        are planned to be built on around 25
  Budapest in the next few years, Futureal          ment in the area. However, Tatar said that      hectares of the 52-ha development plot.
  CEO Tibor Tatar told the Report on the            Futureal will start the construction of its
  sidelines of a press conference.                  planned projects regardless of when the         Europolis expands business park
     “We are currently working on several           metro 4 line is completed.                       The Hungarian arm of Austrian-owned
  plans, one of them is an urban develop-              Meanwhile, preliminary planning of           development company Europolis plans
  ment project in Budapest's Kelenfold dis-         Futureal's other large-scale office proj-       to expand its M1 Business Park in
  trict,” Tatar said. “The other one is really      ect—which has no project name yet—is            Biatorbagy, close to Hungarian capital
  new, an office complex in northern                expected to start soon. The 40,000-sqm          Budapest, in a €100 million investment,
  Budapest's Robert Karoly ring road.”              office complex in (northern Budapest's)         the daily Vilaggazdasag reported.
     Futureal, a major player on the Budapest       Robert Karoly ring road is planned to be         The company, part of Austria's
  development market, is currently develop-         completed in three phases.                      Volksbank group, recently decided to
  ing projects worth about €1.5 billion, includ-       “If all goes well, we will kick off con-     extend its activity from investment
  ing the large-scale Corvin Promenade              struction of the first phase this year, and     management to property development
  urban development project in Budapest and         start further phases depending on               in order to cope with the difficulties
  other ongoing developments.                       demand,” Tatar said. “Project costs have        posed by the market. Under the expan-
     The company's several-hundred-mil-             not been finalized yet in this stage of plan-   sion project at M1 Business Park—
  lion-euro Kelenfold project, dubbed Etele         ning.”                                          which currently includes 70,000 square
  Varoskozpont, is planned to involve a                The CEO expects strong interest from         meters of logistics and distribution
  retail center of around 45,000–50,000             possible tenants, despite the fact that the     warehouse space—the company plans
  square meters (sqm) and an 80,000-sqm             main focus of the market is currently on        to build mainly office and warehouse
  office park, to be built on a combined 4.2        office developments on the Vaci Ut busi-        space in several phases, but shops will
  hectares of land, Tatar said.                     ness corridor, close to the location on         also be added.
     “Preliminary planning is now underway,         Robert Karoly.
  and we are expecting the local government            “We think that we will be able to build      Lafayette mulls Budapest mall purchase
  to finalize the zoning plan of the district, as   an exceptionally cost-efficient office com-      France's Lafayette retail chain is inter-
  well as the municipality of Budapest to           plex,” Tatar said. “In terms of costs per       ested in purchasing the Divatcsarnok
  approve the raising of a 100-120-meter            person, we are calculating with very low        shopping center in Budapest, according
  high-rise in the area,” Tatar said.               management costs and rents.”                    to media reports. The center is current-
                                                                                                    ly being refurbished by property devel-
                                                                                                    oper Orco, which spent HUF 3 bln on
 Biggeorge's eyes up Romania                                                                        buying the complex and is to spend
                                                                                                    some HUF 2 bln on the makeover.
  Hungarian property holding Biggeorge's            Centrum property agency franchise to            Although market insiders confirmed
  has started market research in Romania,           Romania, while entering the market              news of the possible involvement of
  with a view to entering the Romanian real         through cooperation with other Romanian         Lafayette, Orco declined to publish
  estate market, the holding's board mem-           companies is also not ruled out.                details of ongoing talks.
  ber Andras Kondor told the Report.                  According to Kondor, there is huge
    Kondor noted that a final decision on           potential in the Romanian market, but           Turks to launch castle makeover
  the company's expansion, which will be            Biggeorge's also needs to consider that the      Turkish investors are to launch the
  based on the results of research started in       market there operates very differently          HUF 1 bln refurbishment of the
  February, is expected to be made this sum-        from Hungary's.                                 Szigetvar castle in southwestern
  mer. He added that Biggeorge's plans to             “We have noticed that it is very easy to      Hungary, almost 500 years after it was
  enter Romania with its “project consulting        sell real estate in Romania; it only takes      ruined—by the Turks. The organiza-
  division,” which deals with new-home              days or weeks to sell, therefore owners         tions hope to use the building as a cul-
  sales.                                            may not necessarily want to hire property       tural and religious center.
    According to Kondor, the development            companies to sell their apartments, so the
  of new homes in Romania saw a boom in             market is rather chaotic there,” he said.       Budapest seeks parking operator
  recent years, while another reason for              Kondor added that not many mid-sized           The municipality of Budapest’s
  expansion is that many of the company's           foreign property companies have entered         Ferencvaros district is seeking an
  developer partners have already entered           the Romanian market to date, therefore          investor to realize, and then operate for
  the Romanian market.                              there is little experience in how foreign       30 years, a three-level, 250-car under-
    Kondor added that the company is also           companies manage to integrate into the          ground parking lot at a busy junction in
  considering expanding its Otthon                  market.                                         the area.

Real Estate Report 07 April 2008
                                                                                          Czech/Slovakia 1
 Undeterred by the credit crunch, Orco looks to expand                                           CzechInvest offers real estate subsidies
                                                                                                  Entrepreneurs can apply between

 Orco looks at newer                                                                             April 1 and December 31 this year for
                                                                                                 subsidies with the state agency for
                                                                                                 business development CzechInvest

 markets to the South                                                                            within its Nemovitosti (Real Estate)
                                                                                                 program. Entrepreneurs can receive
                                                                                                 subsidies mainly for planned industrial
  Prague-listed developer Orco Property            While banks began to distinguish              zones, technology centers, and proper-
  Group (Orco) has not felt any negative        between strong and weak developers, Orco         ty reconstruction.
  impact from the global credit crunch and      has secured financing for its projects this       The goal of the Nemovitosti program
  is eyeing new markets for residential         year, Vobruba told the Report.                   is to support projects within prepara-
  development including Romania, Bulgaria          “We'll certainly not build on a specula-      tion, construction, development and
  and Croatia, company senior vice presi-       tive basis,” he said. “We have secured           reconstruction of real estate with an
  dent Ales Vobruba told the Report.            cash-flow for 2008.”                             emphasis on property reconstruction,
     “We're monitoring the markets in              The company has up to €700 million for        CzechInvest said. Subsidies are also
  Romania and Bulgaria for residential          investment for 2008, of which €190 mil-          available to cover part of the purchase
  development,” Vobruba said on the side-       lion can be postponed if sufficient pre-         price and demolition of disused build-
  lines of a presentation on 2007 results.      release of Orco's office project in Budapest     ings. CzechInvest has a total CZK 2
  “In Croatia [the top summer foreign holi-     is not secured, for example, Vobruba said,       bln in subsidies with a maximum of
  day destination for Czechs] we're consid-     but any postponement in investment will          CZK 500 mln for a single project.
  ering building second-home apartments         not be related to the U.S. crisis, he added.      The Nemovitosti program is part of
  by the seaside for Czech and other               “There's been a lack of quality housing       the Operational Program Enterprise
  tourists.”                                    in Central and Eastern Europe for a long         and Innovations (OPPI) 2007-2013 of
     Vobruba said that residential develop-     time and many developers will have work          the Ministry of Industry and Trade.
  ment continues to be the main source of       in the coming years,” Vobruba said,
  cash-flow for the company. Last year, Orco    adding that Hungary is among the lagging         Lukoil first tenant in Galleries Louvre
  delivered 1,503 units and in 2008 the         markets, even taking into account the             The Czech subsidiary of Russian oil
  developer expects revenues from apart-        country's macroeconomic situation.               company Lukoil has leased almost
  ment sales at €197 million, he said.             Orco nearly doubled the value of assets       1,600 sqm of the total 4,515 sqm of
     The vice president said Orco had not       last year to €2.4 billion. Net profit reached    office space at the Galleries Louvre
  been influenced by either the U.S. credit     €87.5 million in 2007, down 9.5% year-on-        building in Prague 5, the office build-
  crisis or the rise in value added tax (VAT)   year (y/y), and below market expectations        ing's leasing agent Cushman &
  from 5% to 9% on construction as of 2008      of €100-112 million. Orco's net asset value      Wakefield said. Developer Mayfield
  in the Czech Republic as a result of EU       (NAV) per share was at €106 last year, up        Radlice East-group, a member of the
  regulations.                                  6% y/y on 2006.                                  UK-based Fordgate Group, launched
     He added that the company's new resi-         The company is considering selling its        construction of the office building in
  dential development Citadela in Prague 4      logistics projects and mature office proj-       spring 2007 and expects to complete it
  is already 40% pre-sold—although sales        ects this year to its Endurance Fund,            in June this year. Lukoil Czech
  were only launched in March this year.        Vobruba said.                                    Republic plans to move into the com-
                                                                                                 plex in September.

  Ruling party proposes bringing                                                                 Bank tightens mortgage lending
                                                                                                  Czech bank Ceska sporitelna (CS),
  forward rent deregulation date                                                                 which has nearly a 30% share in the
                                                                                                 Czech mortgage market, announced it
 The ruling Civic Democrats (ODS), may          square meter (sqm), or one-third the mar-        will toughen its mortgage approval
 bring forward the abolition of rent con-       ket rent, said Jiri Pacal, director of Central   conditions, saying it fears the U.S.
 trols ahead of the current 2011 phase-out      Europe Holding, which owns and rents             mortgage crisis might spill into the
 date, which would likely result in average     out 15 apartment buildings in the Czech          Czech Republic.
 rental prices for Prague apartments falling    capital.                                          "There are similar symptoms [here] as
 from CZK 150 to CZK 80 per square meter           After rent deregulation, market rents         in the United States," CS retail execu-
 (sqm), daily Mlada fronta Dnes (MfD)           would drop from CZK 150 to CZK 80 per            tive Jiri Skorvaga said in an interview
 reported.                                      square meter in the Czech capital, Pacal         for the business daily E15. "We have
    “We would end the past system when          said.                                            decided we will no longer participate in
 contracts were not signed freely [i.e. under      Under the new proposal, a court would         this mob madness around mortgages."
 communism],” ODS deputy Zdenka                 decide on the market rental rate if the          CS is a subsidiary of Austrian lender
 Hornikova said, as cited by MfD.               landlord and tenant are unable to come to        Erste Bank.
    ODS is to propose canceling the current     an agreement, ODS deputy Hornikova
 law, according to which rents should be        told MfD.                                        PSJ to reconstruct port in La Goulette
 completely deregulated as of January 2011,        Some 800,000 of the four million               Czech construction company PSJ has
 and adopting a new one that would speed        apartments available for rent in the Czech       become a general supplier which
 up the process, MfD said.                      Republic are subject to rent control. Nearly     should modernize a port in Tunisia’s
    Prague apartments subject to rent con-      half of the country's apartments are in the      capital of La Goulette for €25 mln, the
 trol are currently let for about CZK 55 per    hands of private companies.                      company announced in a press release.

Real Estate Report 07 April 2008
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                                                                                                 Romania                            18
                                                                                                 Mivan to reconsider malls
 Investors choose Romania over Russia for leisure park                                            U.K.-based property development com-

 Asian investors in talks                                                                        pany Mivan Development is reconsider-
                                                                                                 ing plans to build a mall in the western
                                                                                                 Romanian city of Arad due to a saturat-

 to build €1.5 bln casino                                                                        ed market, Romanian national daily
                                                                                                 Ziarul Financiar reported.
                                                                                                  According to the daily, companies
 Romanian businessman Eduard Ursescu             own more than 100 hectares of the               announced the development of five
 and two other individual investors are          planned site and are also in the process of     commercial centers in Arad during the
 negotiating with a large Asian casino           buying the remaining plot.                      past 18 months, with the construction
 development group to build a €1.5-billion          The land is estimated to be worth be up      of two malls of 30,000 and 33,000
 hotel and casino resort in the                  to €24 million, as prices in the area vary      square meters already officially
 Southeastern Romanian town of Nuci,             between €4 and €12 per sqm, the news site       launched.
 having decided against Russia, as original-     added.                                           Mivan announced in September 2007
 ly planned.                                        The project is planned to include six        its plans to build 10 shopping centers
    Ursescu told the Report that the Asian       hotels with 800-1,200 rooms each and six        by 2011 in Romania in a total €700 mln
 investors of the casino project were initial-   themed casinos, which are to be operated        investment. The malls, under the Tiago
 ly planning to carry out the development        by the Asian investor. The development          brand, were planned to be built across
 in Russia, but eventually picked Romania        will also include a retail park, a water park   Romania in cities with over 100,000 cit-
 because it has a more stable legislative        and a 60-hectare zoo, which is to be final-     izens, such as Arad.
 environment and is more accessible for          ized after the rest of the development is        Mivan also recently announced plans
 future customers.                               completed.                                      to enter the Romanian office building
    “The Romanian destination can be                Ursescu expects the project to be com-       and logistics center market in 2008 by
 reached easier by the potential Western         pleted three years after the start of con-      investing €400 mln in two projects in
 European, Chinese and Israeli gamblers,”        struction, while permits are expected to be     Romanian capital Bucharest.
 Ursescu told the Report. “The local legis-      received by April next year.
 lation concerning casinos is also clearer,         The businessman believes that the            Only ten small cities left without malls
 while in Russia it is changing every two,       investment should be recovered in 30             There are only ten cities in Romania
 three or five months according to the           years, but that also depends on the con-        with a population of more than 50,000
 interest of an investor, who maybe wants        struction of the highway connecting capi-       that do not have a modern mall yet,
 to build a larger casino.”                      tal Bucharest to the central Romanian city      national daily Ziarul Financiar reported.
    Romanian news site         of Brasov.                                       The daily said that of the 45 Romanian
 reported earlier that the Romanian                 He also expects the project to benefit       cities which have population in excess
 investors plan to become the minority           from the proximity of a recently                of 50,000, the size considered neces-
 shareholders in the project, which is to be     announced Formula One motor racing cir-         sary to justify a mall development, ten
 developed on 200 hectares of land.              cuit planned for development in Snagov          have not yet had any mall construction
    According to Ursescu, the unnamed            lake area along with a planned golf resort      announced.
 Asian company will finance the project,         and other leisure facilities in the area.        There are currently over 20 malls in
 while the Romanian partners will provide           Ursescu has invested in various resi-        the finalization stage in Romania, with
 the land and will also carry out the devel-     dential projects in Bucharest, with the         13 being developed in large cities, the
 opment, for which they will receive a 20%       total value of investments reaching €20         daily noted.
 stake in the project company. Ursescu           million, according to the businessre-
 noted that he and his Romanian partners news site.                              Noble House builds residential projects
                                                                                                  Romanian construction company
                                                                                                 Noble House is planning to invest €8.1
 Tagor Capital, Patron to double                                                                 mln in three residential projects com-
                                                                                                 prising 83 apartments, which will be
 investments by end of this year                                                                 developed with the technology of
                                                                                                 Australia's House Factory franchise,
 Israel-based, listed real estate investment     Patron, under which the companies have          Romanian news site
 and development company Tagor Capital           already developed several property projects     reported.
 plans to double the value of its property       in five Romanian cities in 2007, including       According to the news site, the compa-
 investments in Romania in 2008, working         the capital Bucharest.                          ny's first project, which is nearly fully
 in a joint venture with U.K.-based proper-         Lieberson, who manages Tagor's               pre-sold, will include 28 apartments in
 ty fund Patron Capital, Controlling Partner     Romanian operations, noted that Tagor           a €2.4 mln development expected to be
 of Tagor Capital Ofer Lieberson told the        Capital expects demand to remain strong in      finalized in mid-2008.
 Report.                                         the coming period in Romania, as econom-         Noble House has started the construc-
    “We are planning to double our property      ic fundamentals are stable and wages are        tion of another residential project in a
 investments in Romania from €56 million         expected to continue rising.                    €1.7-mln investment, which will com-
 to €112 million by the end of 2008, mainly         He added that the company mostly uses        prise 15 homes, while it is also planning
 through residential projects,” Lieberson        its own sources for its Romanian develop-       to start a development comprising 40
 said.                                           ments, but it is also considering bank loans    apartments in an investment valued at
    According to Lieberson, Tagor will con-      in the future, as Tagor Capital has further     €4 mln, which is scheduled to be com-
 tinue an ongoing financial cooperation with     development plans in the pipeline.              pleted by the end of 2008.

Real Estate Report 07 April 2008
                                                                                               Romania                             1
 Italian real estate firm buys 15 centers in megadeal                                           Romania lures Hungarian workers
                                                                                                Romanian labor authorities have set up

  IGD buys Winmarkt
 Italian listed retail real estate company      rent and increase future rents through the
                                                                                               rallying agencies along the Hungarian
                                                                                               border, hoping to fill the country’s labor
                                                                                               shortage with Hungarians.
                                                                                                Romanian companies, particularly con-
 Immobiliare Grande Distribuzione (IGD)         optimization of the commercial offer and       struction firms, are faced with an
 has     acquired      Romanian      retailer   property enhancement.”                         increasingly troubling lack of workers,
 Winmarkt, which owns 15 commercial                IGD added that it also expects “adequate    which they hope to solve by capitalizing
 centers, as well as another property, for a    portfolio management” to increase the          on the high rate of unemployment in
 total €182.5 million.                          Romanian portfolio's value by 10%              eastern Hungary.
    “Today IGD S.p.A. signed a preliminary      through exploitation of the non-commer-
 agreement for the purchase of a real estate    cial potential of the properties, as well as   Westhouse builds flats in Constanta
 portfolio in Romania comprised of 15           the sale of assets which IGD considers          Romanian property developer
 Winmarkt brand commercial centers for a        non-core.                                      Westhouse, controlled by Oslo-listed,
 total of 147,000 square meters (sqm), as          The company said that the investment,       Norwegian-owned developer RomReal,
 well as commercial property leased in its      expected to be finalized by the end of         has started the construction of 409
 entirety to a bank,” said a statement.         April, will be carried out with Inpartner      apartments in the Black Sea port of
    Winmarkt is owned by U.S. private           Spa, an Italian company specialized in the     Constanta.
 equity company New Century Holdings            management and development of real-             The project is being built on a 27,000-
 (NCH), one of the largest retail real estate   estate fund portfolios, which will have a      sqm plot, of which 8,000 sqm has been
 owners on the Central and Eastern              minority stake in the Romanian portfolio.      set aside for parks, playgrounds, tennis
 European market.                                  IGD also signed a preliminary pur-          courts and a promenade. The project
    IGD said that according to the existing     chase agreement of another commercial          will include ten buildings, while the
 contracts, the total annual rent of the 16     center in the central Romanian resort of       apartments will range between 48–180
 properties in the Winmarkt portfolio will      Sinaia for €16.24 million. According to the    sqm in size.
 amount to €19.138 million in 2008.             company, once acquired, the center is           Westhouse earlier announced plans to
    According to the statement, the average     expected to bring rents of around €1.35        invest €1.5 bln in residential projects in
 leasable area of the acquired commercial       million.                                       Romania by 2014.
 centers, which are located in major               The company's real estate portfolio,
 squares in 14 large Romanian cities, is        which consists of 10 malls, 14 hypermar-       Gigant Construct builds 1,500 homes
 around 9,000 sqm.                              kets, three further properties yet to be        Romanian-Icelandic property develop-
    IGD CEO Filippo Carbonari said the          developed, and two commercial centers          ment company Gigant Construct plans
 company will invest a further €23 million      owned through joint ventures, was valued       to build 1,500 apartments in a €150 mln
 in Romania in order to “stabilize the cur-     at €1 billion at the end of 2007.              investment, Romanian national daily
                                                                                               Ziarul Financiar reported.

 Futureal pushes €100 mln                                                                       According to the daily, the company
                                                                                               has acquired three plots of a total
                                                                                               42,000 square meters in the Titan dis-
 investment, waits on office                                                                   trict of Romanian capital Bucharest for
                                                                                               a combined €8 mln, where it intends to
 Hungarian real estate developer Futureal          Futureal is also looking at other retail    build the homes by 2012. The daily said
 announced that it will invest approximate-     opportunities, with a special focus on         that the company has another three
 ly €100 million in a major project in          favorable location.                            ongoing residential developments in
 northern Romania's Baia Mare.                     “We are in talks about a mixed retail,      the Titan district.
   “We received the building permit two         office, and residential project in
 weeks ago for the shopping center, and we      Bucharest,” Tatar said. “This could be a       Price of reinforced concrete up
 expect construction to start within about a    development similar to our Corvin               The average producer price of rein-
 month,” Futureal CEO Tibor Tatar told the      Promenade [urban development project in        forced concrete has increased by 10% in
 Report.                                        Hungarian capital Budapest], although          Romania over the past year to €490 per
   The investment is being developed in         there are no details yet.”                     tonne and it is expected to rise further,
 cooperation with Austrian real estate fund        Although Hungarian real estate devel-       Romanian national daily Ziarul
 Immoeast. It will be 15% financed from         oper Futureal is interested in building        Financiar reported.
 the developers' own sources, as well as by     office projects in Romania, it has decided      According to the daily, the end-user
 a Hungarian bank that Tatar declined to        to remain on the sidelines for the time        price construction firms pay for rein-
 name.                                          being and launch retail projects instead, .    forced concrete is currently around
   As part of the cooperation agreement,           “We would be more than happy to build       €750 per tonne, which is expected to
 Futureal will build and manage the             offices in Romania, especially in capital      increase further in the second quarter
 planned shopping center, dubbed Gold           city, Bucharest,” Tatar said.                  but is seen stabilizing by the second
 Plaza, while investment firm Immoeast             “However, it is currently impossible to     part of the year.
 will be the project's owner, Tatar said.       start a project at reasonable prices due to     The daily noted that the price of iron
   The shopping center will include             skyrocketing land prices. We are looking       and steel products is influenced by the
 30,000 square meters (sqm) of gross            at a lot of projects, but we have decided to   currency exchange rate, the volume of
 leasable area, which is already around         wait until the market calms down some-         investments, and the structure of
 30% pre-leased.                                what.”                                         imports.

Real Estate Report 07 April 2008
                                                                                                 Romania                            0
                                                                                                 Equest Balkan gets project financing
 Two major players form joint venture for residential                                             Equest Balkan Properties Plc, a UK-
                                                                                                 based property investment company

 Plaza Centers, Dutch                                                                            focused on commercial, retail and
                                                                                                 industrial property in South Eastern
                                                                                                 Europe, announced that it has secured

 BAS invest €0 mln                                                                             €25.675 mln of development financing
                                                                                                 for its Equest Logistics Centre project in
                                                                                                 Bucharest. The financing was agreed at
 Israeli property developer Plaza Centers         acquired four sites in Romania last year.      normal market rates on a five-year term
 and Netherlands-based BAS Development            The Timisoara project will include 41,000      with Raiffeisen Zentralbank AG, the
 plan to invest a total of €290.4 million in      sqm of leasable retail space and 30,000        firm said in a statement.
 seven residential and office projects in         sqm of office space.                            Equest Logistics Centre consists of 11
 Romania, with a potential sales value of            The project in Miercurea Ciuc will cover    hectares of land situated within the
 almost €411 million, Plaza Centers said in       14,000 sqm of built-in retail area. The Iasi   Bucharest West Logistics Park develop-
 its latest financial report.                     project will build 41,000 sqm of shopping      ment. The first of the project's three
    The company said that it set up a joint       space and 30,000 sqm of office space,          buildings opened in February, with the
 venture partnership last year named              while the project in Slatina will have         second scheduled for completion in
 Plaza-BAS, in which it has a 50.1% stake,        21,000 sqm of built-in shopping area. The      August of this year.
 to develop seven residential and office          company noted that it has acquired two
 projects in three of Romania's largest           further plots for mall development since       Bucharest luxury sales to double
 cities—the capital Bucharest, Brasov and         the end of 2007.                                The luxury apartment market of
 Ploiesti.                                           A 20,000-sqm project will be built on       Romanian capital Bucharest amounted
    The joint venture plans to develop five       the acquired site in Hunedoara and a           to €65–70 mln in 2007, and is expected
 residential projects, covering a total of        30,000-sqm shopping center is expected         to double this year, according to a
 237,000 square meters (sqm) of built-in          to be constructed in Targu Mures.              report by real estate consultant Atisreal
 area, with the largest one, the Boiana              Plaza Centers is also involved in a pub-    Romania, part of French group BNP
 Brasov project, to contain 130,000 sqm of        lic-private-partnership project with the       Paribas, Romanian news site business-
 homes in a €155-million development.             Romanian government. The company has  reported.
    The company will also develop two             a 75% stake in the $1-billion Casa Radio        According to the report, around 2,000
 10,000-sqm office projects; one in the cen-      project, which is currently developing a       apartments were completed in the capi-
 tral Romanian city of Brasov and one in          mixed-use retail, leisure, residential and     tal last year, including around 100 pent-
 Ploiesti in the southeast, in a total €36 mil-   office complex. The project, which has         houses, of which some 90% were
 lion investment, the company said.               360,000 sqm of gross built area, is expect-    already sold. The average price of luxu-
    Plaza Centers added that the joint ven-       ed to be completed by 2012.                    ry apartments is around €800,000, the
 ture expects to receive €410.6 million from         To date, Plaza has developed 30             news site said.
 the sale of the seven projects.                  schemes in nine countries, of which seven
    According to the report, Plaza Centers        are located in Romania.                        Bucharest flat prices stagnate
                                                                                                  The price of apartments in Romanian
                                                                                                 capital Bucharest slowed to a mere 1%
  Delhaize acquires La Fourumi                                                                   in the January-March period of 2008,
                                                                                                 the smallest increase in the last three
  Bucharest supermarket chain                                                                    years, Romanian national daily Ziarul
                                                                                                 Financiar reported.
  Belgian food retailer Delhaize Group has          Some 90% of La Fourmi, the first              According to the daily's survey of
  acquired Romanian supermarket chain La          supermarket chain opened after the fall of     three-bedroom apartments built
  Fourmi, which operates 14 supermarkets          communism in 1992, was taken over in           between 1980 and 1990, Bucharest
  in Bucharest, for €18.6 million, the com-       2005 by Global Finance, a Greek private        home prices have tripled over the last
  pany announced in a statement issued to         equity fund, while the remaining 10%           three years in to an average €2,050 per
  the press.                                      belonged to private investors.                 sqm. The deceleration comes after
     "Delhaize Group [...] has entered into an      Delhaize Group expects revenues of the       almost a whole year during which
  agreement to acquire La Fourmi, which           14 stores, which have a size of 350-500        prices rose by 4–5% a month. On the
  operates 14 supermarkets in Bucharest,          square meters each, to come in at around       year, apartment prices in Bucharest
  through its fully-owned subsidiary Mega         €30 million in 2007, the announcement          were up by 40% from €1,430 per sqm
  Image," the company said.                       stated.                                        in March 2007.
     According to John Kyritsis, general            According to Delhaize's plans, the
  manager of Mega Image, the acquisition is       newly acquired stores will join the Mega       Neim Maki invests in residential
  expected to strengthen the company's            Image supermarket chain, which already          Romanian businessman Neim Maki
  store network and to bring, "sizable sales      has 22 outlets in Romania.                     plans to invest €1.5 mln in the 20-home
  opportunities and buying synergies."              Delhaize Group, which is listed on           Brown Apartments project in Romanian
     The company said the acquisition is          Euronext Brussels and the New York Stock       capital Bucharest, Romanian news site
  subject to customary conditions, including      Exchange and operates 2,545 stores in reported. The project,
  approval by Romanian antitrust authori-         seven countries, noted €19 billion rev-        which includes studios, two-, and three-
  ties. The transaction is expected to be         enues in 2007, while its profit came to        bedroom apartments and parking, is
  finalized in the second quarter of 2008.        €410 million.                                  expected to be completed in August.

Real Estate Report 07 April 2008

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