By Noreen Lucey, 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

General Motors (GM) launched production of its Aveo economy car at Warsaw's FSO factory. The Aveo, which carries the Chevrolet badge, is produced under an agreement with Ukrainian car producer and FSO owner UkrAvto, and GM. Production should hit 100,000 by 2009 with most units destined for the Ukrainian and Russian markets.

State-owned Gdansk shipyards will have a new owner after competition authorities granted permission to the Ukrainian group Donbass to take over the site. Donbass declared to pay PLN 400m (EUR 110m) for a 75% stake in the yard, adding that it aims to acquire the remaining 25%.

The Hungarian company and Eastern Europe's largest drugs maker Gideon Richter will buy the Polish pharmaceutical firm Polpharm for $1.4bn. Richter, which will give Polpharm's owner, Jerzy Starak, a 26.75% stake in the company, will maintain the Polpharm brand. The combined company will have a market capitalisation of EUR 3.64bn.

The Russian energy conglomerate Gazprom is reported to be interested in purchasing 300 filling stations in Poland through a joint venture with British Petroleum, reported RBD Daily. The potential deal is estimated at up to $600m.

French insurance company AXA plans to enter the Polish corporate insurance sector where in 2008 it hopes to generate EUR 10m in revenue. The company estimates the current value of the market to be around PLN 2bn. AXA said it plans to winas much as a 5% to 10% market-share by 2012.

GE Money Bank, which posted Q3 07 net profits of PLN 313.8m, wants to add about 500 branches to its Polish network following its partial take over of bank BPH. The finance arm of General Electric, GD Money loaned PLN 6.92 bn in the first nine months of the year, a 35% increase y-o-y as the company profited from the growing demand for credit.

Romania

Over the last few years, Cluj-Napoca has become an increasingly attractive destination for big international hotel chains; whilst until now, the majority of investments have been conducted by local entrepreneurs. This year, several important brands, such as Continental and Ramada, have announced their intention to develop projects on the Cluj market. One of the first international chains to come to Cluj was Golden Tulip Hospitality Group, which has offices in Holland and Switzerland. The Dutch group closed a 5-year franchise contract through Golden Tulip Inn Hotels with the Tulip Inn Sunny Hill hotel in Cluj-Napoca, whose owners are Eugen and Rodica Tusa, two local businesspeople.

The main projects for the rehabilitation of Romania's railway infrastructure are trans-European corridors IV and IX, which total over 2,000 km of railway and investments worth above 10bn euros. EU accession has forced the Romanian state to invest in the development of its rail network through the creation of some high-speed routes that would link Greece and the rest of the continent. The two European corridors that cross Romania are corridor IV (a link between Germany and Greece) and corridor IX (between Finland and Greece), which total almost 10,000 km of track.

The first mall in the North of Bucharest, Baneasa Shopping City, which is due to open in the spring of next year, will have four anchor stores, Peek & Cloppenburg, Solmar, Inditex and Azadea Group, with the four concepts set to include several dozen stores. According to representatives of the developer, the largest store in the shopping centre will be Peek & Cloppenburg, which imports brands such as Armani, Hugo Boss and Ralph Lauren, and will cover two levels, totaling a 4,000 square-metre area. Solmar Romania will bring 11 stores onto the market and, apart from brands such as Promod and Castro, it will also have Max Mara, Oasics and other similar collections in its offer.

The number of shopping centres outside Bucharest has doubled this year from 9 to 18, and is expected to double again next year, as another 15 or 16 mall-type projects are scheduled for delivery outside Bucharest in 2008. In comparison, only four shopping centres were delivered elsewhere in Romania last year: in Sibiu, Ramnicu-Valcea, Constanta and Brasov. The impact of these malls, which put around 250,000 new retail spaces on the market, will affect both the consumption habits of Romanians and the labour market. "A good project attracts 20,000 to 25,000 visitors a day, whilst a smaller or less successful project registers 10,000-12,000 visitors," says Luiza Moraru, manager of the retail department of the real estate consultancy company Eurisko.

Irish real estate developer Moritz Group has started the development of a EUR 180 mln business center on Dr. Felix Street in Bucharest. Construction work of the first phase of Felix Plaza is due for completion in the first quarter of 2009. The building will include 35,000 sqm of office spaces, distributed in 24 levels (five underground ones, ground floor and 17 stories plus a technical level). The investment required for the first construction phase amounts to EUR 120m, while the developer is to allocate further EUR 60m for the second phase totaling another 15,000 sqm and scheduled for completion in 2011-2012. The average rental rate in Felix Plaza is EUR 20 per sqm, according to Coldwell Banker, the exclusive letting agent of the project.

Australian South Pacific Group intends to start building the first Grand Prix One circuit in Snagov, Romania, which will include a 3.8 km car track, retail spaces, showrooms, restaurants and a 140-room four-star hotel, the Romanian media reports. Andrew Prelea, CEO of South Pacific Group, said the company will develop such a project in Romania because of the absence of a track for car races as in Vienna, Rome, Milan, Barcelona or London. The EUR 300m project, to be financed exclusively by the group's own funds, is scheduled to start next summer.

The financial company Edmond de Rothschild Banque has entered the Romanian market by allocating EUR 104m for acquiring 60% of the developer firm Euro Habitat, with the mediation of an investment fund. Besides this transaction, the financial company will obtain the majority stake in three large-scale residential projects, the Money Channel reports. The largest one will be in the north-eastern part of Bucharest, where 3,005 apartments are to be built on a 9 ha plot. The ensemble requires a EUR 450m investment, while the parcel is estimated at EUR 50m.

In Petrosani, Dutch group Spar will today open its 14th outlet in Romania. The EUR 850,000 unit will have a total area of over 1,250 sqm, the company's management notes, quoted by NewsIn. This is the second store in the chain, situated in a shopping center after the one in River Plaza - Ramnicu-Vâlcea. The new outlet is to have a usable area of 800 sqm. Spar entered the Romanian market in 2005. The company presently owns EUR 22 m supermarkets in Arad, Resita, Deva, Odorheiu-Secuiesc, Alba Iulia (three stores), Hateg, Medias, Ramnicu-Valcea, Orsova, Sfantu-Gheorghe and a hypermarket in Targu Mures. The company's middle-term development goal projects store openings in 55 locations, including Bucharest. In the long-term, Spar intends to open 250 stores in all country's major cities. Internationally, Spar owns over 13,700 stores with a EUR 27 bn turnover in 2006, distributed over four continents and 33 countries.

Attracted by higher yields, Austrian Sparkassen Immobilien, currently implementing a EUR 180m mall in Bucharest and a EUR 210m project in Sofia, is going to sell part of its properties in CEE markets like Vienna, Prague and Budapest and re-invest the proceeds in development projects in Bucharest, Sofia and Kiev. According to the company's third quarter report, the yields in Prague and Budapest are already running at Viennese levels (just fewer than 5%), while in Bucharest and Sofia, on the other hand, one can still achieve returns of between 6.5 and 7%. In Kiev the yields for retail properties are significantly higher, ranging between 7 and 9.5%.

А EUR 110m shopping and entertainment center with a 40,000 sqm GLA, including 140 stores and a parking lot for 1,700 vehicles will be developed in the Romanian city of Craiova by Delta and ImmoEast. The Austrian group will use last technology of construction materials and design ideas for the complex, scheduled to start in February 2008. Construction work is to be completed in May, 2009. The three-story West Gate Center will offer a large spectrum of stores, including the presence of the most powerful international and Romanian companies. A multiplex, an electronic casino totaling 590 sq. m, bowling hall with eight tracks and a total area of 500 sq. m and a fitness center totaling 1,055 sq. m are also projected. The complex with a total area of 73,670 sq. m will also include a 200 sq. m children's area, called "Kinderland", a pharmacy and bank branch. The Romanian branch of DTZ will act as letting agent for the project.

A Czech-headquartered company, specializing in development of sheds built-to-lease properties, is about to allocate EUR 100m for Romania over the next two years with 60 ha of land already secured at three strategic locations, according to Remon L. Vos and Laurentiu-Catalin Hanu presentation focused on CTP Invest's current activities and future plans for Romania. CTP Invest is soon to develop a CTPark in Cluj, one of the most interesting university cities in Romania, with a large skilled labour force and significant student population. The other two CTP Invest projects foresee a 66,219 sqm CTPark in Bors, located in Bihor County, close to the Hungarian border, with excellent access to CEE, and a 242,327 sqm CTPark in Pitesti, the heart of Romanian automotive industry, nearly 90 km west of the capital Bucharest.

Bulgaria

The Austrian company of real estate investments Eco Business- Immobilien has plans to invest in the Romanian, Bulgarian and Ukraine real-estate market, where they already started to build offices. The portfolio of the Austrian country include 100 projects in Austria and Germany, half of it are investments in commercial centers.

French Apsys Groupe, an international developer, investor and retail operator, present on the Polish market through its daughter firm Apsys Polska, intends to allocate EUR 2bn for the Ukrainian and the CIS market over the next five years, Rynok.biz reports, quoting Interfax-Ukraine. Apsys Groupe has established the daughter firm Apsys Third Region, which is to operate in Ukraine and Russia and is also eyeing the Bulgarian market.

Orchid Developments Group Limited, an established property developer in Bulgaria, today announced that it has been granted a construction permit for the Orchid MultiUse Complex, which includes the Grand Mall Varna, and has secured the finance required for the development, the company's sources note.

By the end of 2007, CBA Property Investment AD will be awarded with a first-class investment certificate for its EUR 36m commercial park Veliko Tarnovo, Bulgaria, to be developed on a 4.44 ha site, owned by the company. The project will be one of the first commercial parks in the country. It is near the main road Sofia-Varna, between two of the most populated Veliko Tranovo quarters, Buzludzha and Zone B.

London headquartered HSBC, one of the largest banking and financial services organizations in the world, intends to launch a USD 300 to 500m fund dedicated to frontier-emerging markets. According to Christian Deseglise, Global Head of emerging markets at HSBC, there is a new trend among the investors looking to repeat the success of traditional emerging markets, which is to move towards the next wave of emerging economies. These emerging economies might be the new Malaysia, Korea or the new Brazil in ten years, and to catch them at an early stage of development, Reuters reported. Bulgaria, Romania and Ukraine are also nominated among the potential target markets, besides Kazakhstan, Vietnam, Ghana, Nigeria, Colombia and Peru, as well as countries with a high standard of living but newborn capital markets, such as Qatar, the UAE and Kuwait.

A new business center is to be built in the eastern part of Plovdiv, Bulgaria's second largest city, near the commercial units of Metro and Plovdiv Gallery, on a land lot of 0.7 ha. Forego Group AD will fund the 16-story ensemble, called Business Center Plovdiv, to include offices, stores, catering shops, fitness, a swimming pool, children center, as well as a two-level parking lot. The project design, created by RT Consult Ltd, is in the preliminary phase. The complex will have a total area of nearly 39,590 sqm.

German retail group Tengelmann, which runs 4,100 Plus outlets in nine European countries, has already given over the control of its Plus stores in Germany and started negotiations with Carrefour for its business in Bulgaria and Romania, just-food reports. According to speculative rumors, Tengelmann is ready to sell its Plus stores in Romania and Bulgaria to Carrefour and also intends to concede outlets in the Czech Republic, Hungary and Poland to Tesco.

Arabesque, Romania's largest distributor of construction and finishing materials intends to undertake a regional expansion over the next few years, in Moldova, Bulgaria and Serbia, where it intends to open a chain of five stores within three years.

Carrefour Bulgaria will partner with MB Izgrev EAD in funding a new two-story shopping and entertainment complex in Bourgas, Bulgaria. The EUR 40m mall, to be built on a 5.2 ha, will include an 8,400 sq. m Carrefour hypermarket and further 15,000 sqm of usable space to accommodate stores for other companies, Chernomorski Far Newspaper reports. Although mall foundations have been laid, a tender on selecting a contractor for the EUR 11m rough construction work is presently been conducted. Active Ltd, Toan, AT Engineering, Mix AD and Sofbuild are among the bidders in the competition. Rough construction work is expected to be completed by the end of May 2008.

Czech Republic

Tesco has offered to pay about 200 million euros ($293.1 million) for 144 discount supermarkets in the Czech Republic, a Czech newspaper reported on Tuesday.

The Czech Republic's largest travel agency, Cedok, has a new majority owner, U.S. financial company Odien, which bought 98 percent of Cedok from Unimex Group, Cedok spokesman Tomas Brejcha told CTK Monday. The price of the transaction has not been disclosed.

The Prague Monitor has published a summary of the major privatization projects, foreign investments in the Czech Republic in 2007:

Privatisation

The government decided to sell 7 percent of shares in power utility CEZ. Premier Mirek Topolanek said the government does not plan to sell more shares in CEZ for the time being.

The government also sold 66 percent of shares in Komercni uverova pojistovna EGAP to a consortium of Ducroire-Delcredere and Sace.

Privatisation has advanced at Skodaexport where a tender is under way for 100 percent of the firm.

The government also decided to transform Letiste Praha airport into a joint stock company, and has selected the advisor for the preparation of the privatisation of national air carrier CSA.

Ceska posta will also be changed into a joint-stock company, in line with a government decision.

Privatisation of state-owned Budvar brewery, to be transformed into a joint-stock company, is not planned yet.

The ministers decided to spin off the cargo transport of railway operator Ceske drahy (CD) into independent subsidiary CD Cargo which the cabinet wants to privatise at least partly in the future.

AgriMin Petr Gandalovic's recent statement that a part of state-owned Czech forests could in the future be privatised gave rise to a wave of protests among opposition parties.

Events at large firms

Power company CEZ announced its plans to set up a joint venture with Hungarian concern MOL; in the first stage, they would build two gas-fired power plants. CEZ is in talks about the purchase of second largest Czech brown-coal mine Mostecka uhelna (MUS). The CEZ board of directors decided on CEZ's merger with regional power distributors.

Car maker Skoda Auto announced it would modernise and enlarge its plants in Kvasiny and Vrchlabi, would launch production of the Yeti SUV, and start producing the Octavia models at VW's plant in Bratislava.

Petrochemical holding company Unipetrol sold Kaucuk Kralupy to Polish chemical company Dwory for some Kc5.5bn and merged Chemopetrol, Unipetrol Rafinerie and Unipetrol RPA into Unipetrol RPA.

Italian insurer Generali and Czech financial group PPF, which owns Czech insurer Ceska pojistovna, decided to set up a joint venture.

Zivnostenska banka and HVB Bank merged into UniCredit Bank, Zivnobanka ceased to exist; UniCredit Bank became the fourth largest bank on the Czech market.

Brown-coal mining company Mostecka uhelna and German concern E.ON announced their plan to jointly build a 1,200 MW coal-fired power plant.

Czech soft drinks producer Kofola Holding and Polish drink maker Hoop agreed on a merger, creating Kofola-Hoop S.A. group.

Investments

South Korean car maker Hyundai launched construction of its new plant in Nosovice in northern Moravia planning to invest about Kc30bn. Hyundai's project has attracted, through government agency CzechInvest, 11 Korean investors to the region.

Taiwanese company Foxconn launched construction of a plant for the production of LCDs and computer components in Kutna Hora, central Bohemia, planning to invest Kc3.1bn.

Japanese producers of LCDs and LCD and plasma TVs - IPS Alpha Technology Europe and Hitachi Home Electronics - launched production at the Triangle business park in northern Bohemia. IPS Alpha (an alliance of Hitachi, Panasonic and Toshiba) said it plans to invest nearly Kc3bn and Hitachi some Kc1.73bn there.

Chinese company Changhong Europe Electric opened a new facility for the production of plasma TVs in Nymburk, central Bohemia, having invested Kc315m, and also plans to build an innovation and development centre.

Hungary

Used car dealer AAA AUTO has opened its 7th Hungarian branch in Debrecen, SE Hungary. The company announced in a press release on the Budapest Stock Exchange website:

"We have been looking for suitable plots for a long time in this region and I have to say, that we finally managed to obtain great space. It is located in the main shopping zone of the city near Cora, Aldi hypermarkets and other wholesale stores under construction," said Zoltán Markó, AAA Auto country manager for Hungary.

Slovak Republic

Three new stretches of highway were put into operation on December 11, the Pravda Daily reported on December 12. Construction of two of them was launched by the previous government of Mikuláš Dzurinda, while construction of the third was launched nine years ago. The most important stretch is a 7.5-kilometre section from Hričovské Podhradie to Žilina-Strážov, which cost about Sk5.3 billion. It was built in a record short time of two years.

GETRAG Ford Transmissions Slovakia officially opened its new transmission factory in the Kechnec industrial park in eastern Slovakia on November 22. This is the first factory of the international transmission systems producer, and it will introduce a new technology to make dual clutch transmissions, the SITA newswire wrote.

"Through the introduction of a new technology, we are entering the automatic transmission market," said the company's executive director, Mihir Kotecha. "We are thus opening opportunities for the significant growth of our company and our partners, meaning customers and suppliers in Kechnec, Košice Region and Slovakia."

The Kechnec-based plant is planned to produce 110,000 gearboxes for cars and 100,000 motorcycle transmissions each year. It will hire up to 450 employees. The plant's production capacity is to reach 220,000 transmissions a year by 2010. By that year, Getrag Ford plans to create another 300 jobs, mainly in technical professions. Construction on the plant started in July 2005 and cost €300 million (Sk10 billion). Production of motorcycle transmissions for BMW and Harley Davidson started in November 2006.

The internet bank mBank officially launched operations in Slovakia through its website during the last weekend of November. The virtual bank, which is a retail electronic banking division of one of the biggest Polish financial institutions, BRE Bank SA, plans to win at least 100,000 clients by the end of 2010. It expects to provide about €500 million (Sk16.6 billion) in loans and roughly €91.1 million in client deposits, the SITA newswire reported.

Commentary

More of the same from Eastern and Central European's two largest markets, Poland and Romania, with more FDI confirmed for the two countries. 450 jobs have been announced in Kechnec in Eastern Slovakia in the automotive sector further consolidating Slovakia as the automotive centre in ECE.