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.

Slovak Republic

US distribution facility REIT ProLogis has completed a 50,000 sqm built-to-suit facility in Slovakia for global food retailer Tesco. Smart Financial portal reports that Tesco's new distribution centre is in ProLogis Park Galanta-Gan, an industrial park under development 60km northeast of Bratislava. When complete, Park Galanta-Gan will comprise three buildings totaling 146,000 sqm of distribution space.

In the Czech Republic, ProLogis has also leased 7,000 sqm at a distribution park to Czech logistics provider Transkam. On completion, it will have seven buildings totaling 170,000 sqm distribution space. ProLogis is the largest provider of industrial distribution facilities in central and eastern Europe with over 2.7m sqm of industrial space owned, managed and under development

Czech Republic

Despite an increase in value added tax this year, Prague developers have extensive apartment construction plans for 2008, with major projects on the drawing board in the Karlín and Vysočany neighbourhoods. Hospodarska Noviny newspaper reports that the top five local builders plan to start work on 7,230 new flats worth CZK20bn
(€77m), with smaller developers targeting a further 5,000 units. A planned increase in the lower VAT bracket to 9% in 2008 from a prior 5% has not discouraged developers from starting new housing projects, it said.

Privately-held Czech commercial property developer CTP Invest has signed a €462m loan contract with the European Investment Bank for investment in industrial and office space mainly in Brno and Ostrava in southern and northern Moravia and in the Plzensky region in western Bohemia. CTP CEO Remon Vos and EIB vice-president Marta Gajecka told reporters in Prague recently that the loan is payable in 11 years, and is intended to secure sufficient liquidity on the capital market in future. The first stage of the construction of a €610m industrial and logistic complex in the 200-ha industrial park in Brno-Turany will be financed from the new facility. CTP also plans to invest €350m-€400m in the construction of 500,000 sqm of buildings for lease. CTP was considering entering the Prague Stock Exchange last year but abandoned this due to conditions on capital and property markets. However Vos did not rule out a future flotation. CTP, established in 1996, specialises in commercial property in central and eastern Europe.

A repair center for Boeing Company aircraft called Central European Aircraft Maintenance (CEAM) will be opened at the Ostrava Leoš Janáček Airport in Ostrava, North Moravia, in early March. It will be worth more than Kč 1 billion and will focus on clients from Europe. The center is fully owned by Czech aviation group CCG, a part of holding firm Geofin, headed by entrepreneur Daneš Zátorský. The project should compete with the repair center of Czech Airlines (ČSA) in Prague. CCG received investment incentives from state investment promotion agency CzechInvest worth Kč 600 million. It covered one-third of the costs from own resources, while the rest was financed through loans.

Romania

Several companies and businessmen will allocate €20 million for the construction of six new three and four-star hotels in Sibiu, Romania, by the end of 2009.

AFI Europe Group, part of Tel Aviv-listed Africa Israel Investments, is developing two industrial sites in Ploiesti and Bucharest for major mixed-use projects, taking its investments in Romania to around €1 billion. The Diplomat Bucharest reported that AFI Europe plans to build 3,000 housing units on the site of a plant in Bucharest in a €500m project including a 25,000 sqm shopping mall. On the other industrial site in central Ploiesti, AFI will build a 25,000 sqm shopping mall. The company also plans to construct a 16,000 sqm office development in Ploiesti and around 300 apartments. AFI is also developing 16,000 sqm of offices and a mall in central Arad in Romania. Meanwhile, its ongoing Cotroceni Mall project is 80% leased and expected to open by December 2009. AFI will build 90,000 sqm of offices next to the mall, with five as yet undesignated buildings to follow in respective years, possibly beginning in 2009.

Tel Aviv-listed property investor Aura Investments has signed a number of new development deals in Romania. It has taken a 25% stake in a mall project on a 25,000 sqm plot in the western Romanian city of Craiova. The Globes portal also reported that Aura subsidiary Aura Europe has signed a memorandum of understanding with Plaza Centers and the Baron-Adam group to buy Romanian subsidiaries.

Aura will become full owner of BAS Development, which is building a 385-unit residential project in the city of Ploesti by buying out Plaza BAS's 25% stake. Aura will also buy half of Sunny Invest SRL, which plans to build a 250-unit residential project at an estimated cost of €17.5m. Aura estimates proceeds of this project at €22.5m. Aura will also buy half of Colorado Invest SRL, which owns land in Brasov zoned for a 425-unit residential project. Aura estimates the cost of this project at €33.6m and proceeds at €42m. Aura and Plaza Centers, a subsidiary of Israeli company Elbit Medical Imaging, already collaborate through the Primavera label.

US-owned Romanian residential and commercial property developer Adama has secured a 15,000 sqm land plot in west Bucharest, Romania and will begin construction of 500 apartments, an investment of €150m.

Spanish group Iberdrola, a European energy giant, has acquired 50 wind farm projects in Eastern Romania through its renewable energy division, Iberdrola Renovables, for an estimated value of €200 to 300 million reported local ZF yesterday.

Romanian subsidiary of German constructor Max Boegl and Romanian-based construction company Bog'Art will build together a prefabricated constructions materials plant on a six hectare land plot in Ciorogarla, Ilfov county. The companies will invest €22 million in the project which will start this year and will be delivered in three phases by 2011, Romeo Botocan, executive manager of Max Boegl Romania told The Diplomat.

Birmingham-based car parts maker Wagon Automotive is building a production site in Pogoanele, Buzau county, in an initial investment of almost €8 million. The company will, at first, build sunblinds for sunroofs beginning at a target date of April 2008, for export to two original equipment manufacturers in Germany. The site will create about 100 local jobs in production, office staff and management.

UK New Europe Property Investments (NEPI) has bought an industrial facility from Hi-Lo Sisteme de Depozitare in a partial sale and leaseback transaction for around €15.2 million, subject to conditions. The Rasnov-based property in Brasov county includes 21,000 sqm of gross lettable area containing 1,554 sqm offices. Last October NEPI, which is listed on the alternative market of the London Stock Exchange, invested €11.8 million in four Romanian properties. The company targets office, retail and industrial property in Romania.

Israel's second largest bank, Leumi, will open a new branch in Craiova. Leumi Bank has another 36 branches nationwide and a market share of under 2%. Leumi Bank entered the Romanian market through the purchase of Eurom Bank in 2005 for an initial figure of €34 million.

Leading Swiss electricity trader Aare-Tessin for Electricity (Atel) has bought Buzmann Industries, a Bucharest-based energy trader with a market share of 0.75 per cent. With this acquisition Atel will double its operations in Romania. Buzmann Industries supplies electricity to industrial customers, metering and technical consulting.

New Europe Real Estate Investment (NEREI) is developing an industrial and logistics park at kilometre 23 of the Bucharest-Pitesti motorway. New Europe Industrial & Logistic park will include available spaces of 1,000 sqm. Each company will have its own industrial space with separate parking places, uploading and downloading platforms for vehicles and green areas for each owner. The total area of the project is of 35,000 sqm. Construction works started last July and will end this year.

Central and eastern Europe-based private equity fund Royalton Capital Investors II has bought 95% stake in Romanian insurance company Certasig from Spanish and Romanian investors. The management and local Romanian investors own the remainder of the shares. Certasig is licensed for non-life business. The company remains managed by Radu Frincu.

US Business process outsourcing firm WNS Global Services is opening a branch in Bucharest offering financial, accounting and customer support services in French, German, Italian and Spanish for its European clients. WNS, which began operations in India in 1996, is developing plans for additional centres in the region. The majority share-holder of WNS is US-based private equity firm Warburg Pincus.

US Real estate investment and development company D4 Investment Group will pour €100 million into residential, commercial, office and industrial projects throughout Romania. "This is our initial step into the region," Don Rosacker, managing partner at D4 Investment Group told The Diplomat. "We have the ability to bring in significantly larger amounts for investments. The average deal size that we look at is €10 to 40 million, but we can look at deals as large as €100 million or more."

Poland

Low fare airline Wizz Air plans to open an operations base in Poznan, the fifth in Poland and 7th in Central and Eastern Europe. The base will support 40 jobs. Wizz Air will start new flights from Poznan to Oslo, Norway and Malmo, Sweden. In Poland Wizz Air has its' bases in Katowice, Warsaw, Wroclaw and Gdansk. This year, the company plans to carry four million passengers to and from Poland.

Norwegian airlines will add new flight connections to the present 13 it runs from Krakow, Warsaw, Gdansk and Szczecin to destinations in Scandinavia. In mid-June this year Norwegian will launch a connection between Warsaw and Trondheim, Oslo and Wroclaw, and Stavanger and Krakow.

Goodman, a gloal property group, inked a deal with home appliance producer Whirlpool Corporation for the development of a new 25,695 square-metre purpose-built warehouse. The facility will be developed on a 53,907 square-metre plot of land adjacent to Whirlpool's current infrastructure.

Construction, engineering and project management specialist PM Group delivered a notebook factory for Dell in Lodz. The 37,000 square metre development took 15 months to build.

Bulgaria

Sofia-based construction company Orchard will lead the works for a project to build a multi-use centre in the Bulgarian resort of Varna that will cost €107m and has been approved by the authorities. The project will be called Orchid MultiUse Complex and will be part of a broader poly-functional centre. The final target is to creating an 80,000 sqm area for shopping and entertainment and a 51,000 sqm. Work is scheduled to start early in 2008 and should be completed in two years. Orchard Development, which is also active in the residential sector, has built 5,500 apartments since 1979.

Estonia

Helsinki-listed retail investment and development company Citycon is continuing its development and redevelopment project of the shopping centre Rocca al Mare in Tallinn, Estonia, and will invest €38.9m in its second and third phases. Total capital expenditure will be some €130m, including €68m development investment and the initial acquisition cost. Phase one of the project is expected to be completed this spring. Phases two and three will start immediately and Citycon plans to open the mall in autumn 2009. Rocca al Mare is one of Citycon's pilot projects in the sustainable development of its properties. Citycon is Finland's market shopping centre developer and also owns 127 supermarkets and shop properties in Finland.

Commentary

There were very some very positive reports from the Czech residential and commercial markets this month. As we predicted the increase in the VAT rate effective from January has not had an impact on the market as demand is still very strong for residential property. The Prague market is booming with news reports that Prague developers are planning to invest upwards of €77 million into the Prague market.

Outside of Prague, Czech's secondary cities are also continuing to attract investment. CTP Invest has signed a €462m loan contract with the European Investment Bank for investment in industrial and office space mainly in Brno and Ostrava. February proved to be yet another bumper month for investment into Romania. Secondary cities such as Ploiesti, Arad and Craiova are starting to attract big investments - all signs of a healthy market as the second and third tier cities in this market start to emerge.