What a strange valuation report!!!

Most of it is spent discussing the Bratislava market and not Kosice. They then present a list of comparables between 29000 and 48000m2 and without any explanation value the Cassovar units at 60000.

Perhaps these properties are of a much higher standard, but there is little indication of this in the report. It doesn't fill me with confidence!

Can anyone see a clear reason in the report for such a high valuation?

Hi Jeremy

I can see your point about the valuation. However Brewery Cassovar is the first such development of its kind in Kosice. It is also of a much higher standard than any of the nearest comparables used by Colliers in the valuation report.

Developments such as those valued at 29,000SKK psm are a considerable distance from the city centre while Cassovar is right in the centre. It appears the difficulty for Colliers has been to come up with a realistic valuation which reflects the location as well as the standard of the development.

There is simply nothing else in the immediate locality with the character of Brewery Cassovar. This development is one that sets the standard in Kosice's city centre. This in itself has created demand with half the units already sold to the local market 20 months before completion.

Colliers tend to use Bratislava in their Slovakia reports because much more is known about the market in the capital in comparison to emerging cities like Kosice. We are entering the market at the start of the city's growth curve and the developers are only just realising the potential of the Kosice.

Having analysed the development and the standard of spec in detail i think this is one of our best deals, as i hope the images shown in the report demonstrate.

our portfolio development team Kim Stokoe and Martin Grainger would be happy to discuss Brewery Cassovar in more detail on 01270 539576

Cheers
Brett

out of interest, has anyone looking at this development evaluated it against the re-sale market in the region?

It is not the easiest deal to evaluate, and sometimes it is hard to really get underneath the valuation reports, and especially know how much you are comparing like for like.

I have done considerable research on values in Kosice using the internet, and I have also been there twice in the past in 1987 and more recently in 2005. Obviously the first time was well before anyone hardly ventured into the socialist Czechoslovak state and all I can remember wwas the heavy industry, panelok and socialist slogans! The second time I travelled from Bratislava and it struck me how less developed Kosice was wrt Bratislava. Even so I get the impression of economic development moving fast, and a relatively young population. Kosice can also be though of as a mini-capital, much closer to Bratislava in relative importance to SK than any Czech city is in relative importance to Prague

The development itself obviously scores very high for both location and quality, falling within the luxury sector, so the apparent premium could easily be more than justified. A city centre location can be considerably more beneficial in much of CEE than in many UK cities. The fact that so many have already sold in December to the local market can only be encouraging, asis the fact that banks etc (eg SCF) seem very ready to fund lending on these apartments. I am very keen on the development, even though I would not describe it is cheap.

I would be interested in knowing

1. Are more apartments planned in Kosice, either luxury or normal and is there any risk of oversupply kicking in like in Trnava and Bratislava?

2. Is the yield likely to improve by the time the apartments are completed.? I know we have to be realistic in terms of monthly rental receipts but I would like to see nearer to 4-5% as this would nearly cover mortgage costs.

3. How definite is the euro in 2009 for SK? Is there a possibility they might put it on hold and join when the Czech Koruna and Polish zloty join.?

Hello again Charles,

Thank you for your informative post on this development in Kosice. You are right about us being able to justify the premium on this; Cassovar is the first build of its type in Kosice and is right in the centre of the city. How many cities throughout Europe can one buy a new build apartment right in the centre? Not many, especially not in a city moving forward in such a way as this one is.

To answer your questions..

1) We have been monitoring this city for a while and will be sourcing more deals here during Q1 and Q2 of 2008. We know of one more deal planned for Kosice, just slightly further out of the city than Cassovar, although this is in the planning stage. Since some basic off plans were built on the outskirts more developer have looked at this city and I predict more opportunities will arise. There is a large population here and an increase in white collar workers meaning demand is growing, so nothing to worry about.
2) If we look at Czech Republic as an example it is possible that the yields could go up. Property Secrets have to be conservative with the predictions so to prevent any issues further down the line. Some areas of Czech are seeing 8% and 9% gross when we originally predicted 5% and 6% so anything can happen.
3) This is not easy to answer as nothing is certain until 01/01/2009. To put it as simple as possible, Slovakia have applied to join the euro and been accepted; now they have to adhere to the convergence criteria and make suitable law changes and rules.

I hope this answers your questions and is of some help. If anyone else has further questions, please feel free to post them here or email me on purchasesupport@propertysecrets.net

Also, my current article refers to the city of Kosice, please follow the link below to view

http: / /www .propertysecrets .net /article /kosice _the _jewel _in _the _slovak _koruna _ /1908 .html

Kind regards,

Martin Grainger
Head of Portfolio Development