Page 13 - Buy Russia - bne IntelliNews monthly magazine April 2017

bne April 2017 Companies & Markets I 13
South African investors drawn to CE real estate magnet
Nick Watson in Prague
Central and Eastern Europe’s property markets have been at one time or another over the past 25 years a magnet for investors from North America, Western Europe, Russia and China. Now it seems to be the turn of the South Africans.
Although the trend of South African money flowing into CEE real estate, particularly Romania, began in 2008, over the last three years it has ramped up to the point where the volume of investment from South Africa is now on a par with that from North America and Asia.
According to the latest data from Colliers International, South Africa’s share of real estate investment going into six mar- kets of CEE (the Visegrad Four of Czech Republic, Hungary, Poland, Slovakia plus Romania and Bulgaria) has grown from 2% in 2012, to 5% in 2015, soaring to 20% in 2016. “There are at least 10 South African listed REITs that are directly or indirectly active in Central and Eastern Europe now – it’s a bit like ‘me too’, in that if one does it, then others have to sit up and take notice because as listed companies they are essen- tially competing with each other,” says Mark Robinson, CEE research specialist at Colliers.
Alex Morar, CEO of New Europe Property Investments (NEPI), tells bne IntelliNews that NEPI was probably the first South African company to plant its flag in the region, initially focus- ing on Romania, where it is now the largest real estate investor in Romania by asset value. “Obviously, the success of the business triggered additional interest from our competitors, but there’s room for everybody even though the market has become much more competitive and you aren’t the only player anymore,” Morar says.
Cushman & Wakefield, another global private commercial real estate services company, notes that the rise in South African investment in CEE has been accompanied by a fall in that
from North America. Its data shows that the volume of North American investment into CEE real estate fell by an estimated 50% over the past year or so, while Middle Eastern investment was up 30-40%, African (largely South African) investment was up 300% and Asia-Pacific investment was up 500%. To put
Delta City Podgorica, now owned by South African REIT Hyprop Investments.
the sums in context, North American investment over the past year into CEE was worth about $1.5bn, African money was about $2bn and Asia-Pacific about $2bn.
“South African money to CEE has gone from next to nothing, to the point where it is now competing on a similar footing with North America and Asia-Pacific,” says Jeff Alson, interna- tional partner CEE Capital Markets at Cushman & Wakefield, though he adds that it is a “lumpy market” that can be skewed by one or two big deals.
Those big deals included the March 2016 acquisition
by South Africa’s Redefine Properties of a 75% stake in Poland's Echo Prime Properties’ 18-asset portfolio, a deal valued at €1.2bn. The deal, which will be financed via debt and equity at a proposed 60% gearing at the property level, is the largest ever real estate investment transac- tion in Poland. It is also the largest ever single transac- tion of income-generating real estate assets in CEE.
On safari
Among the South African investors, there are varying geogra- phies and varying strategies. For example, the trend may have been begun in Romania, where NEPI’s original investors had ties to the country, but the epicentre of the investment now appears to have shifted to Poland – the largest property market in the region (excluding Russia) backed by a population of
“It’s a bit like ‘me too’, in that if one does it, then others have to sit up and take notice”
around 38m and GDP growth of about 3.5% a year – which took a 36% share of the investment transaction volume reg- istered across the CEE region in 2016. According to Colliers’ “Market Insights 2016” report, released in February, South African investors dominated the Polish real estate market last
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