The Fund’s Third Acquisition
Welcome to the third edition of the Property Update for the European Residential Property Fund. In this edition we provide details of the Fund’s third acquisition which is located in city centre of Bucharest, Romania and to provide an update of progress on construction of the Fund’s first two developments located in Prague, Czech Republic.
New acquisition: “Eminescu”, 163-165 M EMINESCU ST., Bucharest, Romania
Eminescu is a new development located approximately 1 km from Romana Sq in the City Centre (Sector 2) due for completion in January 2009. The property will be situated in a highly desirable area of Bucharest which is well served by public transportation and is within the central business district. Convenience and prestige are its key attractions, which are reasons for it becoming an increasingly fashionable residential quarter. As the historic heart of the City, it is also close to many embassies, as well as attracting the higher income sector of the population.
Romania:
With a population of 22 million, Romania is the second largest of the CEE countries behind Poland and is scheduled for full EU membership in January 2007. The capital city, Bucharest is the driving force behind a GDP growth rate of 4.1%*. Together with dynamic local businesses, foreign companies are increasingly investing in the country, contributing to the emergence of an affluent middle class, which comprises the target market for the individual apartments.
Eminescu (architects impression)
This 13,000 m2 d e velopment ove r 13 floors, will provide residential accommodation of 7,343 m2 in the form of 69 apartments ranging from Studio to three bedroom room flats (48-140 m2) and duplexes (150-165 m2) on the upper floors with offices below. A reception area will be situated on the ground floor serving both the offices and the residential accommodation,
with separate lift access. The basement levels will comprise of 103 parking places as well as storage facilities for residents. The residential apartments will sit above four floors of commercial offices which will be aimed at the small to mid size business market.
Details at a glance
| DESCRIPTION | DETAILS | |
| Property | 163–165 M Eminescu Street | |
| Location | Bucharest Sector 2 (City Centre), Romania | |
| Completion expected | January 2009 | |
| Number of Units | 69 | |
| Accommodation type | Studio 1, 2, & 3 bedroom apartments and duplexes (ranging from 48 to 164 m2) | |
| Target market | Local professional singles, couples working in the City centre as owner occupiers plus buy-to-let investors. | |
| Purchase price | 9,535,000 Euros (Equivalent to 1,308 Euros per sq metre for the apartments) | |
| Current estimated open market value | 1,597 Euros per sq metre | |
| Estimated Fund Internal Rate of Return (after all charges) | 12.5% (ungeared) | |
| Residential house price inflation in Romania (2006/7) |
10-15% p.a.* | |
| Primary ERPF Investment strategy | Sell to local residents | |
| Secondary ERPF investment strategy | Retain and let |
* source: EIU / Knight Frank residential research, Summer 2006
Comment from the manager, Morley Fund managers:
With the fund continuing to attract new investors, the managers have been actively assessing a number of potential investment jurisdictions and Bucharest in Romania offers the prospect of above average property price growth as well as introducing diversification to the Fund on two levels: firstly through country diversification - as a new EU member state Romania is at
an earlier stage of the EU convergence cycle than the Czech Republic and secondly through the target market demographic - the Fund’s first two developments (in Prague) are targeted at the buoyant lower/middle market while “Eminescu” is targeted at the professional occupier end of the market, where local demand and affordability is at its greatest. With the fund continuing to attract new investors, the managers have been actively assessing a number of potential investment jurisdictions and Bucharest in Romania offers the prospect of above average property price growth as well as introducing diversification to the Fund on two levels: firstly through country diversification - as a new EU member state Romania is at an earlier stage of the EU convergence cycle than the Czech Republic and secondly through the target market demographic - the Fund’s first two developments (in Prague) are targeted at the buoyant lower/middle market while “Eminescu” is targeted at the professional occupier end of the market, where local demand and affordability is at its greatest.
Fund Performance:
Many of our investors who have been eagerly awaiting news of further property acquisitions feeding through to share price performance will be pleased to note that with the revaluation of Krejcarek and Tulipin together with acquisition of Eminescu, the performance of the European Residential Property Fund was up by 2.1% in Dec 2006. With further development
of the Fund’s property portfolio your managers are confident that further uplifts in share price during 2007 can be enjoyed.
New Property Adviser:
With the objective of furthering the ERPF’s reach throughout the full universe of new and applicant EU member states, we are delighted to announce the appointment of Colliers International (Residential) as an additional property agent to the Fund. Colliers has considerable strength and penetration in several jurisdictions and will be an excellent compliment to our existing property adviser King Sturge. As a result, we anticipate an increasing flow of development opportunities for the Fund over the coming months.
In the second part of this property update, we report on progress with the construction of the Fund’sfirst two projects
Krejcarek, Prague 9, Czech Republic
In the last property update we detailed progress to early May 2006, which anticipated completion of the basement ceiling and walls to the level of the ground floor by the end of May. With the build project now in its 11th month, the main structure and roof is complete as are the windows, doors and internal walls. The installation of utilities (e.g. electrical cabling) is well progressed and plastering is following on. External rendering is 75% complete. Whilst the project was delayed by approximately 3 weeks at the start of the year (due to frozen ground conditions), the development is proceeding in line with the revised timetable with completion anticipated in March 2007.
With the completion of the building firmly in sight, resale has commenced and our property agents are already confirming early purchaser reservations at the Fund’s required sales prices.
Tulipan, Balabenca Point, Prague 9, Czech Republic
Having secured “Tulipan” in May, 2006 works began in July clearing the site, ready for the building contractors to commence excavations for the sub ground level together with supports and foundations. As at mid-November, all excavations have been completed and concrete casting of the pit is approximately 30% complete. The remainder of the concreting (including the base of the lift shaft) is due to be finished before the end of November and a
tower crane has now been erected on site. Construction works are on schedule and the developer has confirmed completion is on schedule for September 2007.
Important Notes This fact sheet is for information only and any growth expectations should not be relied upon. Please refer to the Fund prospectus
for further information relating to the Tri Investments European Residential Property Fund. The information contained in this fact sheet is subject to contract terms and thus details provided may be subject to change.
Further information
For more information about property assets, please refer to our property update PDF or contact the Tri Investment team on +44 (0)207 7763 7170