By Noreen Lucey, Property Investment Analyst, Property Secrets

This month's comprehensive round up of Foreign Direct Investment (FDI) into CEE from our Research & Analysis team. We can't cover everything, so if there's a deal we missed, let us know at investments@propertysecrets.net.

Poland

The number of Starbucks chain coffee bars in Poland is expected to increase to 300 from some 100 within five years. The market is estimated to be worth some PLN 1.5 billion and is said to be growing by some 40% a year. Global chain Starbucks, which is expected to debut in Poland in Q1 2008 is to open 100 coffee bars within several years, according to unofficial information.

Skorosze, a new generation neighbourhood centre with 12,000 square metres of retail space, opened in December in Warsaw's Ursus district. The centre is developed by IIC Group, which belongs to the Israeli concern Giron Development Building Ltd. CEFIC Company, a part of Simon Ivanhoe, is managing the project. In late 2008, as part of the next phase the centre will be expanded by 8,000 square metres. Skorosze is adjacent to a 20,000 square metre large Leroy Merlin hypermarket.

Real estate developers Gemini Holdings held the corner-stone laying ceremony for their Gemini Park shopping and leisure centre in Bielsko Biala. The 35,000-square-metre project will include a 10-screen Cinema City, a Real hypermarket and parking for around 1,100 cars.

Auchan Polska opened Port Rumia, a 20,000 square-metre shopping centre in the town of Rumia, near the Tricity. Port Rumia's 100 tenants include H&M, New Yorker, C&A, Smyk, KappAhl, Deichmann, RTV Euro AGD and Empik. Along with the centre Auchan opened a 12,000 square metre hypermarket. Immochan has handled the commercialization of the centre.

Galeria Podlaska opened for business in Bialystok, eastern Poland. The centre is anchored by a Carrefour hypermarket.

Romania

The discount retail chain Profi, part of the French Group Louis Delhaize, intends to increase its turnover rate by 30% to €140 million in 2008, including the sales of the Albinuta stores, acquired by the French group in 2007, ZF reports. The French retailer wants to extend into Bucharest next year under its own brand Profi by opening a store in the Militari quarter in February. Next year, Profi will open ten new stores, four of which to be in Bucharest, Focsani, Slatina and Targu-Mures. In the long-term, the company plans to open stores in all cities with a population of 20,000 inhabitants.

After a two-year study of the market conditions in Romania, a Dubai-based developer, whose investments in commercial and residential projects in the UAE exceed €1 billion, has decided to start two EUR multi-billion real estate developments in Romania, to be launched early next year. Fortune Group intends to develop the two projects jointly with Sadek Architects SRL, a firm with profound experience in the country. The first project will represent a waterfront residential cum commercial development located in southern Romania, on a 182.88 ha plot, including apartments, a five-star hotel and high-end wellness components. Fortune Group's second project in the north will have an exclusively residential development set amid golf courses and ski slopes with the Transylvanian mountain range as a backdrop.

The projects are considered the largest commercial venture by a UAE developer in Romania. Syed Mohammad Ali, CEO of Fortune Group, noted that the company's two projects will target the expatriate community. Many British, French and Italian property buyers have showed interest in the project, but the group is keen to attract GCC nationals as well. Fortune Group prefers establishing a strong presence through mega projects in one country rather than announcing insignificant developments all around the world. Through its projects, the company wants to attract real estate investors from the GCC to this high potential Romanian market.

A new shopping and entertainment project is to be developed in the Romanian city of Craiova. For this purpose, a 25,000 sqm lot, designated for mall construction has been acquired by the National Commercial Center BV (NCC) for EUR 10.5 million, Globes reports. NCC is currently building seven malls in Romania under the brand Galleria. 25% of the project development belongs to Aura Investments Ltd., which has recently signed a number of new deals in Romania.

Hypo Real Estate Bank International, the international division of the largest German real estate finance group, is about to expand operations to Romania's major cities, after granting the first loan in Bucharest. Oliver Gruss, an official of Hypo Real Estate's communication department, noted that Bucharest is the company's most important market in Romania, but it also targets other major cities. He added that the bank's financing activities in Romania are managed through London and Munich-based offices. In August, Hypo Real Estate Bank International granted a EUR 15.2 million loan to real estate investment company Equest Balkan Properties (EBP), to be used for refinancing several building acquisitions in Bucharest, ZF reported.

Condmag Brasov is about to allocate EUR 25 million for real estate projects by 2009. The company's shareholders have approved the signing of a EUR 1.67 million loan contract from Volksbank, to be used for purchasing a 6 ha parcel, situated in the Feldioara area, Braşov County. Condmag is specializing in construction of gas, petrol and water pipelines, as well as of technology installations for other liquids. Principal clients of the company are gas transport and methanol distribution companies like Falcon Oil, Wirom Gaz, Conpet Ploieşti and Congaz Constanţa.

Romania's first Hard Rock Café will open on January 20 in the Herastrau Park in Bucharest, near the Arc of Triumph.

Romanian National Motorway and National Road Corporation (CNADNR) is to supervise construction work of 809 km of motorway in 2008, according to a program of high priority investments adopted by the Transport Ministry, Rom Press reports, quoted by Nine O'clock. Apart from this, 127 km currently under construction will also be completed in 2008. The main motorway projects, currently being implemented, include the Transilvania Motorway (Brasov - Bors), where two segments, (Suplacu de Barcau - Bors, 64 km, and Campia Turzii - Gilau, 54 km), will be built this year.

Construction work will also be carried out on the Moara Vlasiei - Ploiesti segment of the Bucharest - Brasov Motorway (42 km), and in February construction work will be started on the Bucharest - Moara Vlasiei segment (19 km). Later this year, construction work is also expected on the Comarnic - Brasov segment, to be built under a concession contract.

In 2008, by-pass routes in cities where such facilities do not exist, such as the Ploiesti Vest by-pass, the Constanta by-pass and the Bucharest Northern by-pass which will connect the Sun Motorway (Bucharest - Constanta) to the Bucharest - Pitesti Motorway, will start construction. Also this year, segments of the Pan-European Corridor 4, connecting Constanta to Bucharest and Sibiu to Nadlac, on the western border, will be built. In 2009, another 180 km of motorway will be completed and further 682 km under construction, while in 2010 construction work is be carried out on 907 km, with 238 km to be completed the same year.

Romania which will have 2,139 km of motorway and 507 km of expressway in 2013, hopes to fund the EUR 12.8 billion 1,798 km of motorway to be built in 2007-2013 by EUR 1.5 billion from the European Union, EUR 600 million from international financial institutions (5 pct), EUR 6.5 billion from the State Budget (51 pct) and EUR 4.2 billion from motorway concession contracts (31%).

Qatar-based Doha Bank has announced its intention to open branch offices in Romania, Germany and South Korea in 2008, Bursa Online reports, quoting the bank's Executive Manager R. Seetharaman. Doha Bank plans also to open a representative office in Kuwait City in the first quarter of 2008. Presently, Doha Bank operates in big cities like New York, Singapore, Tokyo, Shanghai and Istanbul.

A Cluj-based developer has announced it will start construction work on the EUR 30 million shopping and entertainment complex under the name Akademia Center Cluj at the beginning of March 2008. Ovidiu Bojan, Executive Director at Nisco Invest, project investor and developer, noted that the company received the construction permit last month and presently is in the process of launching a general contractor tender. The 41,000 sqm mall, including usable A-class office and retail space of 18,000 sqm, is due for completion in the first quarter of 2009.

According to experts, the Romanian retail market, the second largest market in the CEE after Poland, will surpass €50 billion in 2008, compared to €40 billion in 2007, and is to reach over €100 billion turnover in 2010, due to the average 50% growth over the last few years. By 2010, the stake of the modern commerce in Romania will surpass 50%.

Red Management is to allocate €200 million for four projects in Iasi, including a business park similar to Iride Park in Bucharest, two residential developments and an industrial park. The business park will comprise of 22 buildings with two to six stories each. Construction work on the project will start in autumn this year. The business park will be built on the site of the 13 ha former Terom industrial platform.

Teodor Pop, Managing partner at Red Management, said the project will be dedicated to back-office and call center activities. In the residential sector, the company's investment amounts to €80 million, including two complexes with 770 apartments. The fourth project to be implemented in Iasi is a €40 million industrial park, to be built on a 14 ha plot near the city, with a total area of 75,000 sqm. Construction work will start in the spring of next year with the four projects due for completion over the next five years.

Besides this investment, Red Management is implementing many other residential and retail projects in Bucharest, Constanţa, Arad, Baia-Mare and Braila, which require a € 400 million investment. Iride Business Park, sold in 2004 to the Austrian Immoeast Fund for EUR 63 million, was the first project the group implemented on the Romanian market. The main shareholders of RED Management Capital are investment funds like Warburg Pincus (USA) and GED Capital (Spain).

Details of retail projects planned for cities in Romania were also published in an article by leading Romanian newspaper the Diplomat this month. We have published information on this on our forum this week. For more details click here.

After acquiring two exhibition houses in Hungary, due for completion in April, the Austrian furniture chain Lutz further intends to expand to Romania. Target cities of the Romanian expansion are Arad, Oradea and Timisoara, as well as Bucharest. Both newly acquired markets are to be re-branded to Möbelix. This year, construction work of three more locations in Hungary will start, while the entire network is to be rounded to ten over the next two years.

Kaufland is expected to allocate €75 million to open ten new Romanian hypermarkets in 2008.

Romanian residential developer EuroTrend is branching out into the hotel industry, with a four star hotel in Cluj-Napoca due to open in the second half of 2008. Located on 43-35 Calea Turzii, the 7.5 million Euro Hotel Akantus includes 240 rooms on eight floors, a restaurant and Cognac bar, says manager Carmen Stanescu

International fashion magazines InStyle and celebrity magazine OK! will launch next year in Romania through the initiative of Attica Publications and Imako Media. The joint publishing and distribution venture will have an initial capital of 500,000 Euro, according to Business Standard. InStyle is a monthly publication for celebrities and lifestyle and is part of the US Time Warner Group. The rights to OK! are owned by UK media empire Northern & Shell.

Joint Icelandic-Romanian pharmacy chain Remedio plans to extend to 300 units by 2009. Remedio has now 68 pharmacies and intends to outstrip market leader Sensiblu which owns 213 pharmacies in the country. The company plans to open ten drug stores with an investment of 500,000 Euro this month and 100 more units in 2008. Three pharmacy brands, Remedio, Omnia and Montero will be rebranded under the Remedio name at a cost of three million Euro. Half of Remedio is owned by Pharma Investment, a subsidiary of Icelandic investment company Milestone Group. The other 50 per cent is owned by Newarch Investment, a company created by the founders of Montero and Remedio.

Real estate developer Plaza Centers will invest 600 million Euro in constructing Dambovita Center near Eroilor Metro in Bucharest. The property includes two office towers, ferris wheel, a building for the City Hall, a shopping centre, hotel and aparthotels on a land conceded by Bucharest City Hall to Plaza Centers for 49 years. Plaza Centers is part of Israeli company Elbit Medical Imaging, which owns the CentreVille aparthotels and Radisson Hotel on Calea Victoriei.

Power giant Enel has bought Blue Line, a Romanian company that holds the rights to develop wind energy projects in the Dobrogea region, due to be operational in 2010. This is part of the Italian group's intention to invest around 4.1 billion Euro by 2011 in research into renewable energy. Enel owns electricity distribution firms Enel Distributie Banat, Enel Distributie Dobrogea and Electrica Muntenia Sud, which includes Bucharest.

Tools manufacturer Makita intends to open a second factory at the back of existing facility in Branesti, Ilfov county. The tool-maker entered the Romanian market earlier this year with its 26 million Euro factory close to Bucharest. The company will employ 100 more workers in 2008, adding to its current roster of 180. Its 2007 sales forecast for its Romanian operations, which export to Europe including Russia, is ten million Euro. For 2008 Makita expects sales of 25 to 27 million Euro.

Dutch real estate developer CTP Invest will pour around 100 million Euro into the Romanian market in the next two years. The company, based in the Czech Republic, has acquired 60 hectares of land and is planning to develop three industrial projects in Bors, Bihor county, Pitesti, Arges county and Cluj. CTPark Bors will stretch over 66,219 sqm, while CTPark Pitesti will cover 242,372 sqm. CTP Invest was established in 1998 and has projects in the Czech Republic, Poland, Hungary and Romania.

Constructor Al-Arrab Consulting has bought Dolj county-based transformer and locomotive producer Electroputere Craiova. The Saudi company paid 2.34 million Euro for a 63.82 stake in the firm. Al-Arab's main fields are construction, design, building and equipment in the real estate sector.

Spanish real estate agency Contempo plans to invest two million Euro by 2009 in 20 new branches in Romania. The company is targeting cities with over 300,000 inhabitants, according to Rafaela Nebreda, managing partner at Contempo. Launched this September, Contempo owns four stores in Bucharest and plans to open three more stores by year-end. In 2008 the company plans to complete real estate transactions worth over ten million Euro.

Bulgaria

By the end of 2008, Billa Bulgaria intends to open eight to ten more stores in different cities of the country. According to the company's development plans, at least eight new outlets are to open yearly to exceed the number of 75 network units. At the end of January, the company, which has already allocated more than €108 million for Bulgarian projects, will announce where it intends to build its first hypermarket for 2008.

Emil Stefanov said the company's investment strategy targets Bulgaria's cities with population of over 30,000 inhabitants, while implementation of the projects depends on the city and its situation, as well as on the possibility of finding proper sites for constructing the supermarkets.

Presently, Billa Bulgaria does not intend to build supermarkets on the resorts. Last year Billa Bulgaria opened seven stores in the country, including Lovech, Razgrad, Dimitrovgrad, Samokov, Kardzhali, Silistra and Yambol. The company entered Bulgaria in 2000 by opening its first supermarket in October in Sofia. Over the last seven years, 29 stores have been opened, including seven in Sofia.

A € 200 million exhibition center is to be built in Sofia, on a 10 ha plot near Lomsko Shosse Blvd, facing the Obelya 2 quarter. In Out World Company will manage the project, including exhibition halls, a multifunctional sports hall for 18,000 visitors, a hotel, offices, congress spaces, an outlet, catering units and parking lots. The project is in the initial phase.

Presently, negotiations are being conducted with German, Russian and UAE businessmen on construction finance. The company also intends to use the nearby railway tracks for companies which will participate in the exhibitions. Talks with the national authority railway infrastructure are to be conducted on the subject. In Out World has also intends to construct multi level parking lots and an outdoor parking lot for 12,000 vehicles.

Costa Coffee has announced it intends to allocate €1.5 million to open ten units in Bulgaria over the next five years.

Hungary

The Hungarian factory of car manufacturer Audi significantly increased the produce of its Győr plant in 2007, the company announced. The factory of Győr-based Audi Hungaria Motor Kft produced 56,982 cars and 1,913,053 engines in 2007, 140.75% more cars and 1.03% more engines than in 2006. The company had spent over EUR 200 million on investment and created 700 new jobs, of which over 80 are engineer positions.

Slovak Republic

By the end of 2009, the Slovak-western town of Sereď should have 750-900 jobs more. Marek Švec of the company Devecom, which runs the Sereď industrial park, told the SITA newswire that before end of 2009 new production lines should be built in the park. He expects that negotiations with the foreign partners who are expected to create about 250 jobs and invest Sk1.2 billion (€35.7 million) in the park should be completed by the end of 2008. The Slovak Investment and Trade Development Agency (SARIO) mediated the first contact between the park administrator and more than thirty entities interested in investing in Sereď. One of them was the Belgian company Bruynssel - Vochten, which is the biggest plastic windows producer in Benelux countries, said Švec. It plans to launch production in Sereď in 2008.

Czech Republic

Marsh & McLennan Cos (NYSE:MMC) unit Guy Carpenter & Co LLC, a global risk and reinsurance specialist, said it will open an office in Prague on March 1 to further develop business and serve clients based or conducting business in the Czech and Slovak Republics.

One of the largest European sellers of photographic equipment, Pixmania, has plans to open kiosks in Czech shopping centres

Commentary

We would expect the last two weeks in the December and the first two of the new year not to produce much in terms of investment projects announced for the CEE countries however from the length of the FDI monitor report this month we can tell there was a bit going on in the region.

Romania definitely saw the lions' share of this with some significant stories from this months FDI monitor. Of note was the announcement by Doha Bank to set up an office in Romania along with South Korea and Germany. This indicates the importance of the Romanian market to the bank that also has branches in big cities such as New York, Singapore, Tokyo, Shanghai and Istanbul.

The amount of money going into retail investment in Romania also keeps on increasing. At the start of the week the Diplomat newspaper in Bucharest published an article outlining the increase in the number of shopping malls under construction and the increased sophistication of the Romanian consumer.

This was further endorsed by news later in the week that the Romanian market is only the second largest market in the CEE after Poland and will surpass €50 billion in 2008, compared to €40 billion in 2007. It is set to reach over €100 billion turnover in 2010, due to the average 50% growth over the last few years.