Warsaw's Riverside Park office project was sold at the end of the year, but itfs looking prophetic that the first deals of 2008 are coming from the regional cities.
Last year's office investment market closed with the sale of Riverside Park in Warsaw, but it's the first two deals of 2008 that are more likely to be representative of what's coming this year - both of which took place outside the capital.
Riverside Park was developed in 2005 by AIG/Lincoln and had been owned by a private equity fund from Ireland before being sold to the German fund SEB in mid-December, Jones Lang LaSalle's managing director Ben Bannatyne tells CiJ. The price was in excess of Euro 40m at a record-low yield in the vicinity of 5.4 percent.
A 12,500-sqm class A office project, it consists of two buildings in a peaceful and green location on Fabryczna Street in the Powiśle district, recently popular with residential developers. SEB bought it fully leased with a tenant list that included Tchibo and ECE Projektmanagement.
According to Tomasz Trzósło, JLL's head of capital markets and responsible for carrying out the deal on behalf of the buyer, Riverside Park presented a rare opportunity on the Warsaw market these days. "Rents there are low and there's a huge potential on these buildings for the rents to go up once leases expire," he claims, referring to the fact that back in 2005 the project debuted on a rather slow market with headline rents of €14 to €15 per sqm, with the majority of these leases still in force now.
"Buildings like Riverside Park-high-quality constructions, fully-leased and with long-term lease agreements with good tenants - will always be attractive to investors. The question is about getting the right price," says Trzósło. He points out that there's a certain level of confusion on the financial. markets these days, which affects some of the funds in terms of their investment capabilities. German funds are therefore still strong players, in his view, especially with their tendency to accept low returns on investments.
"There aren't too many buildings like Riverside Park in Warsaw, however, and what we're going to see will be a move towards riskier developments: buildings requiring modernization, or ones in need of tenants," he continues. Examples include the purchase of FIM tower -now Orco Tower - or alleged moves going on from Atlas Estates to offload Millennium Plaza to an Austrian investor. "Such transactions will dominate in 2008," claims Trzósło.
"lnvestors will tend to seek bigger returns, rather than looking at ones like Riverside Park that offer [merely] solid value," he adds.
It could be, however, that investors will end up looking for their Riverside Parks elsewhere, as the first two weeks of 2008 revealed a pair of interesting deals in prime property outside Warsaw. First came the sale of an unnamed 16,000+ sqm office project in Wrocław, which developer Archicom Projekt 7 sold to GE Real Estate. The fund paid 100 percent cash for the building, though the amount of the transaction and the yield were not disclosed.
A week after the GE Real Estate transaction, another German fund, this time Deka Immobilien, bought Von der Heyden Group's mixed office and hotel development Andersia Tower in Poznań. "The volume of the transaction was north of €80m, at a yield of 5.7 percent," says Sven von der Heyden, CEO of the developer that invested €64m in the project, which was co-developed with Poznań City Hall. The yield on Andersia Tower is the most aggressive one achieved to date in terms of office investment outside the capital city.
Andersia Tower is Poznań's tallest building at 102 m, with an IBB-operated, 171-room four-star hotel occupying the first nine floors of the building. The remainder is class A office space, fully let by tenants like Franklin Templeton lnvestments Poland, Ernst & Young, IKB Leasing, and Panattoni Development.
Wojciech Kość
