By Noreen Lucey, Investment Analyst, Property Secrets

Interesting news from Bulgaria and massive Foreign Direct Investment into Romania continues - that's the big news this month. Of course, we can't cover everything, so if you know of any big deals we may have missed, then let us know at investments@propertysecrets.net

Poland

Foreign Direct Investment, which became one of the main forces behind Poland's rapid economic growth, could hit a record level in 2007. according to central bank figures, total FDI in Poland for last year came to EUR 15.198bn (PLN 56.9bn) but in the first seven months to 2007 investment reached EUR 7.3bn.

Poland keeps benefiting from accession to the European Union with over EUR 516m received in September from the EU and EUR 226m paid into the Union's coffers in the same month. In the last nine months of 2007 Poland received some EUR 4.23bn from the EU.

The labour ministry in the Law and Justice (PiS) government drafted an incentive plan for Poles working who intend to return home. Among the incentives to those who would start their own business in Poland is a two-year-long vacation from corporate income tax, lower social-security contributions, and no pension fund fee for two years. Catering to employers, the ministry said, they would have to pay only one third of the regular pension fee on each former emigrant Pole they employ. An estimated number of 1.2 million Poles were working abroad in 2006 alone.

Hochtief Construction has finished work on a deepwater container terminal in Gdansk, two years after work began. The terminal, according to Hochtief, is the largest in the Baltic and will be able to handle most container ships and therefore should act as a hub for regional shipping. The new facility is owned by DCT Gdansk.

Globe Trace Centres (GTC) signed an agreement with Cinema City International NV, the owner and operator of a cinema chain, for the provision of seven multiplex facilities. The new cinemas will be attached to GTC projects in Poland, Romania and Bulgaria.

Carrefour Polska plans to launch a convenience store chain called Five Minutes to tap into local grocery niche so far dominated by the Biedronka chain. Carrefour will open between 20-40 franchise stores sized between 80-500 square metres. The move will be supported by competitive pricing of Five Minutes branded products.

The coffee company Tchibo opened three new outlets in Gdansk, Bygoszcz and Wroclaw in late September. The concept of the outlets, called Tchibo, is to sell the firms products and promote the brand awareness across the main retail areas across the country.

Galerai Baltycka opened its doors for business. The EUR 140m shopping centre brings 200 retail outlets, 15 restaurants and a fitness centre to the TriCity region. The lead investors on the project are the German concerns Deutsche Euroship and ECE. Carrefour is one of the anchor tenants and will employ up to 200 people in the hypermarket.

The Raiffeisen Real Estate Fund Management Company announced that it has invested EUR 19m in a new logistics property close to Warsaw's international airport. The property is subject to a long-term lease agreement.

Romania

Romania Invest, a Norwegian investment fund, has acquired around 800 new apartments in five residential projects in Bucharest and around the city since the beginning of the year. The investors hope to achieve a 30-50% growth rate when the apartments are sold.

"Our plan is to sell the apartments one by one either before completion, or sell the entire portfolio to other investors. We could also let some of them, but this is not our primary strategy," Bjorn Hauge, country manager of the company told ZIARUL FINANCIAR. The Norwegians have bought apartments in the Vitan Platinum Towers, Residenz (Chitila), Planorama (Colentina), Blue Tower (Colentina) and Ten Blocks (Militari) projects.

"We bought the first apartments at the beginning of 2007, even though we began talks at the end of 2006. We are trying to buy homes as fast as we can. Most of the time we start talks with developers before projects are even made available to the public," Hauge explains.

"We are in advanced talks for other projects and estimate our portfolio will reach 1,100-1,300 homes by the end of the first quarter of 2008," Hauge says. "I believe demand will grow faster than supply for at least the next three or five years, while, at the same time, I don't see any projects that are good enough to be completed and delivered, so that the shortage will remain significant,"

Romania Invest is not the only company with such a strategy on the domestic market, as other companies conduct similar operations. "I know there are a few companies with similar businesses, but not identical. I have also heard a rumour that some investors intend to enter the market soon," Hauge adds.

Bucharest's residential market has been witnessing unprecedented development since 1989, with approximately 100 projects announced in the Bucharest and around the city within the last few years. The slow rate of completion of these homes, which has failed to keep up with demand, has pushed the average price per square metre to around 1,500-1,700 euros. (Source: Ziariul Financiar)

Romania's mortgage market, which is isolated from the US credit crunch, is expected to boast the fastest growth rate in Central and Eastern Europe, with improved salaries to largely increase the number of housing loans.

"Within the next three years, I expect the CEE mortgage market to register an annual growth rate of 30%, with Romania as the main growth driver," stated Bill Schaub, GE Money's regional mortgage leader in Central and Eastern Europe.

GE Money, the retail financial services arm of US General Electric giant, has been present in Romania since 2006, when it acquired Domenia Credit, Estima Finance and Motoractive financial services firms.

"Wage incomes, the economic climate and interest rate upward or downward trends are the main factors behind the development of Romania's mortgage market. Middle class consolidation also plays a vital role in market development," added Schaub.

Jiri Rizek, CEO of the electronics and home appliances retailer Flamingo International, says he is examining 40 cities in Romania with a view to opening stores with surface areas of 600-1,000 square metres, developed under the Flamingo brand. "Romania has 40 large cities which can accommodate at least one 600 - 1,000 square-metre store, and, after at least 5 years, the number of profitable branches of an electronics store will reach a similar level to that on the Western European markets," says Jiri Rizek, CEO of Flamingo International. Flamingo's CEO says 600 - 1,000 square-metre stores can expand by a maximum 60 to 70 stores, depending on the evolution of the market.

OTP Leasing, a member of the Hungarian financial group OTP, granted funding worth 22 million euros within its first three months in business, i.e. until the end of October. By the end of this year, the company estimates it will close contracts worth 40-45 million euros exceeding their original budget, which stood at around 35 million euros, and believe they will also grant EUR 150 million worth of funding. The company's core business is car leasing, which accounts for 80% of the company's portfolio of contracts, with the rest being accounted for by equipment funding. They also plan to enter real estate leasing over the next few months. As of next year, OTP Leasing will start its territorial expansion throughout the country and plans to open six branches from February 2008: in Cluj, Oradea, Brasov, Constanta, Craiova and Timisoara.

Deloitte Romania, an audit and consultancy company has launched a department to attract structural funds. Through this new service, they will advise their clients who seek European structural funds, a sector they predict will have significant growth potential in the coming period.

They believe the structural funds consultancy market is quite large, with consultants' commissions standing at several percentage points of the value of European funding attracted for each project. Within the next seven years, Romania will be able to access structural funds worth over EUR 17bn, according to estimates made by Deloitte, because the market has a high potential for players in this field. The majority of the funds are targeted at the public authorities (in the case of which the European funds can cover up to 98% of the project's funding), with the remaining funds being accessible to the private sector (where European funding can cover up to 50% of the value of each project).

Consulting services for European funds are the latest line of business launched by Deloitte Romania, whose other departments include: audit, fiscal and legal consultancy, financial advisory and management consultancy.

The British Chamber of Commerce in Romania recently reported that British business is currently investing €1 billion in the country, the figure based on official government stats. Much of this is heading to the capital.

Brian Davies, chairman of the British Romanian Chamber of Commerce, has seen the changes in the Romanian economy first hand. "British investors are attracted by the fact that Romania is a very good export base, due to its geographical position in Central and Eastern Europe, and that it also has low manufacturing costs. It has a well-educated workforce, which is practically in full employment. Middle management sources are not only present in Bucharest, but also in the provinces and many Romanians speak English." (source: Property Secrets Article November 22nd)

Irishman Michael Whelan, one of the country's biggest property developers, is planning to significantly boost his commercial investment in Romania to more than €1 billion - reports independent.ie - Whelan's Moritz firm has signaled that its Romania investment vehicle Mivan, is to spend €300 million to develop a major new business complex in the country's capital, Bucharest, and also intends to build a €100 million logistics park in the city. The massive new investment comes on top of a €700 million blueprint announced earlier this year by Whelan to build 10 shopping malls in Romania. So far Mivan and Moritz have spent €150 million on land for the retail project, and could spend a further €700 million to develop the sites. It is understood that 70% of the land required to construct the shopping malls has been accumulated to date.

Whelan, whose Moritz firm owns Maplewood Developments in Ireland, has also been buying additional land in Bucharest and elsewhere in Romania, and intends building 2,000 apartments in the country over the next five years.

Bulgaria

Tishman International and GE Real Estate officially announced that they will found a fifty-fifty JV for development of the Sofia Airport Center project. According to the company statement, the first phase of Sofia Airport Center, representing a logistics center, totaling 22,000 sq. m, will be finalized at the beginning of next year. Tenants have already shown interest in leasing spaces there. The remaining part of the EUR 250m development includes 100,000 sq. m A-class offices, where construction work will start by the end of this year, or the beginning of 2008, including a hotel with 250 rooms.

Plaza Centers N.V., an emerging markets property developer, announced it has acquired a retail development project in Shumen, Bulgaria. Total budget of the shopping and entertainment center is estimated at EUR 38 m. Shumen is situated in northeast Bulgaria, 80 km from Varna. The city has a population of over 100,000 and is located within a larger catchment area of 205,000 people. This acquisition is the first company's investment in Bulgaria. Plaza Centers is currently developing five sites in Romania as well as two in Serbia.

The coffee shop chain Starbucks will enter Bulgaria and open its first units next year, The first Starbucks cafes are expected to be completed mid next year. Presently, the chain targets Sofia, but can also develop its network in the country's major cities. Starbucks is number one in the world for last year, followed by Chibo, Costa Coffee, also present in Bulgaria since the beginning of the year, and Maccafe which has also opened its first unit in the country.

Greek company GLS Ltd will develop a mixed-used commercial complex in Krastova Vada, between the Sofia quarters Dragalevtzi and Boyana. The development will be built on a 1.34 ha plot and will have a total area of 29,200 sq. m.

A deal between Kaven Orbico and Industrial Park Sofia East has been announed. A 22,000 sqm space will be developed in three stages within the next three years and gradually occupied by the client, Kaven Orbico. Kaven Orbico is the official distributor of a number of world brands for Bulgaria including Procter & Gamble, Philip Morris, Shell lubricants, Mars, and SC Johnson. Industrial Park Sofia East is a pioneering project located in Elin Pelin municipality, around 20 km from Sofia. It will provide space for light manufacturing, logistics and warehousing, benefiting from its proximity to the two main traffic corridors - Trakia and Hemus highways, and its location in to three Trans-European Corridors (ETC 4, ETC 8 and ETC 10).

Bulgaria's Parliament accepted Friday this week the first reading of the amendments to the taxation law that will introduce a flat tax of 10 %. The country's flat tax rate will be the lowest in Europe and among the lowest in the world, down from a rate that currently ranges between 20-24%.

Czech Republic

Consumer goods provider Zepter International has an ambitious plan. The direct-selling firm is looking to recruit an additional 1,000 direct-selling representatives in the Czech Republic, boost its local activities by a fifth in 2007 and improve its corporate image, said Jiří Bunda, Zepter International's general manager.

The Czech and Bavarian transportation ministries plan to launch a high-speed rail line between Prague and Munich. If launched, the train would cut the six-hour ride between the cities nearly in half. The tracks between the two cities should be modernized by 2020, allowing speeds of up to 250 kilometers per hour.corporate image, said Jiří Bunda, Zepter International's general manager.

Hungary

ThyssenKrupp Építőelemek Kft, an affiliate of Hoechst Bausysteme, a part of the German ThyssenKrupp Group, will be opening a site in Felsőlajos, 60 km from Budapest for producing steel sandwich elements to be used in building and cold room construction. Producing around 1.2 million square meters of steel sandwich elements a year, the plant will supply customers not only in Hungary but also in the Czech Republic, Slovakia, Ukraine, Romania, Bulgaria, Serbia and Croatia. The investment volume for the new production site amounts to €8 million (about $11.9 million). The new plant will supply the booming construction markets of Hungary and the neighboring countries as well with a yearly production capacity of 16,000 tons of steel panels.

Spanish Iberdrola will start building a wind power plant in Ikervár (Zala County) next spring according to daily Napi Gazdaság. With the capacity of 27 megawatt and consisting of 13 towers, the power plant is a €225 million investment. As a result of five years of preparations, now the construction has all the permits. The tenth biggest global energy provider Iberdrola is planning to make further investments in Hungary to extend its capacity to total 158 megawatt.

Pápa will host the new NATO airbase supplying the alliance's troops stationed in Afghanistan and Iraq, announced Defense Minister Imre Szekeres. Pápa was chosen over Germany's Rammstein and Romania's Konstanca for the $30 million investment, the minister said. The base, becoming the new waypoint of NATO Boeing C-17 Globemaster III carrier planes will also contribute 300 to 500 civilian jobs the town, he added.

Commentary

Interesting in the Bulgaria FDI news is the property developer moving into the Bulgarian market - what is of note here is that this is their first project in Bulgaria but they are already developing five sites in Romania - this is a further indication for us that Bulgaria will now start benefiting from the investment that Romania is currently receiving.

Romania however lead the way again this month with huge infrastructural and announced for the country.