CEE Real Estate: Turning constructive (Atrium, CA Immo, Dom Development, Echo Investment, Etalon, Globalworth, Graphisoft, GTC, Immofinanz, LSR, NEPI Rockcastle, S Immo, Warimpex)
We are bullish on CEE real estate on a one-to-three year horizon, as we believe the rent levels should be broadly sustainable, at both quality offices and retail assets. Financing seems accessible, if at a higher cost than before the pandemic started. The available liquidity should support the investment volumes and, in turn, limit the downside for valuations, in our view. That said, we do expect the companies to book further revaluation losses in the rest of the year, beyond the 2-4% write-off that most of the CEE real estate landlords have recorded so far. As such, our preference – for the time being – lies with quality companies with low leverage: NEPI Rockcastle in retail and CA Immo in offices. Our more opportunistic picks include Globalworth and Graphisoft Park: their valuations are undemanding, and each one could become a takeover target. The time to rotate into higher-beta names could come at some point next year, in our view. We also initiate coverage of two Russian homebuilders in this report – Etalon and LSR. At 4.25%, the policy rate is at a record low in Russia, and we expect further easing. This is driving steep improvements in affordability. The ongoing transition towards escrow accounts is likely to lead to market consolidation and less competition for land plots, which should also support pricing and profitability. While the trading may be volatile in the short term, we believe that both homebuilders are trading deep below fair value and offer a very attractive risk-return on a one-to-three year basis.Atrium European Real Estate is engaged in the ownership, management and operation of commercial real estate in the retail sector. Co. primarily operates in Poland, the Czech Republic, Slovakia, Russia, Hungary and Romania. Co. has two reportable segments: the standing investment segment includes all commercial real estate held to generate rental income for Co.; and the development segment includes all development activities and activities related to land plots. As of Dec 31 2016, the portfolio of standing investments consisted of 59 properties in Poland, the Czech Republic, Slovakia, Russia, Hungary, and Romania.
CA Immobilien Anlagenis a real estate investment company. Co. invests in commercial real estate, comprising hotel, residential, office, industrial, storage space, and logistics. Co. is also active in project development business. Co.'s activities are focused in Austria, Germany and Eastern Europe. Co. has 263 subsidiaries (including 24 joint ventures) in the following countries: Germany, Austria, Hungary, Luxembourg, Bulgaria, Netherlands, Slovakia, Cyprus, Russia, Czech Republic, Poland, Croatia, Ukraine, Romania and Serbia. Co., through its subsidiaries, is engaged in creation of entire urban districts, acquisition of real estate, project development, as well as property renovation.
Dom Development is engaged in the construction and sale of residential real estate in Poland.
Echo Investment is a real estate investment and development company based in Poland. Co.'s is engaged in operations in the real estate market, the design, construction and development of shopping and entertainment centers, hotels, office buildings, houses, blocks of flats and apartments. Co.'s operations are organized along three operating segments: Shopping and Entertaining Centers, Offices and Hotels and Residential. Co. also offers general contracting services for third party investors. Co. owns properties throughout Poland, including Szczecin, Poznan, Warsaw, Krakow and Kielce, among others, and abroad, including Ukraine, Romania and Hungary.
Etalon Group is a real estate development and construction company. Co.'s principal activity is residential development in Saint-Petersburg metropolitan area and Moscow metropolitan area, the Russian Federation. Co. has three reportable segments: Residential Development, which includes construction of residential real estate including flats, built-in premises and parking places; Constructions Services, which includes construction services for third parties and for internal purpose; and Other Operations, which include selling of construction materials, construction of stand-alone premises for commercial use and various services related to sale and servicing of premises.
Globalworth Real Estate Investment is a integrated real estate company operating in the Central and Eastern Europe and South-Eastern Europe region with a primary focus on Romania, where it acquires, develops and directly manages primarily office and logistics/light-industrial real estate assets. Co. has three reportable operating segments: the Offices segment, which acquires, develops, leases and manages offices and spaces; the Residential segment, which builds, acquires, develops and leases apartments; and the Other segment, which acquires, develops, leases and manages industrial spaces and corporate holding offices.
Globe Trade Centre is the parent company of the capital group, Globe Trade Centre (the Group). The Group is engaged in the development and rental of office and retail space and the development and sale of residential units. The Group is a real estate company in Central and Eastern Europe and South-eastern Europe, operating in Poland, Romania, Hungary, Croatia, Serbia, Bulgaria, and Slovakia. Additionally, it co-owns land in Ukraine and Russia and operates in the Czech Republic. The Group's portfolio comprises: completed office buildings and office parks as well as retail and entertainment centres; residential projects; and undeveloped plots of land and suspended projects.
Graphisoft Park SE Ingatlanfejleszto Europai Rt is a Hungary-based company engaged in the real estate operations. The Company operates as a holding and provides management, financial and administrative services to its subsidiaries. As of December 31, 2011, the Company operated two subsidiaries, Grpahisoft Park Kft, engaged in the real estate development; and Graphisoft Park Services Kft, responsible for property operation tasks. The total area of the Company's properties was nearly 18 hectares. As of December 31, 2011, the Company's two subsidiaries, Graphisoft Park Universitas Kft and GP3 Kft merged into Graphisoft Park Kft. As of December 31, 2011, the Company's parent entity was Graphisoft SE.
Immofinanz AG is an Austria-based real estate company that invests in commercial properties. The Company's core activities are the management and development of retail and office properties in selected Central and Eastern European countries. The Company focuses its operations on such markets as Austria, Germany, the Czech Republic, Slovakia, Hungary, Slovenia, Romania and Poland. The Company manages a portfolio of approximately 240 properties, covering rentable space of approximately 1.8 million square meters. In the office sector, the Company concentrates on the capital cities of the core countries and the major office locations in Germany with its international myhive brand. The Company's activities in the retail sector are based on the brands STOP SHOP for retail parks and VIVO! for shopping centers which are designed for secondary and tertiary cities of Central and Eastern Europe.
NEPI Rockcastle is engaged in developing, acquiring and holding commercial properties, either directly or indirectly through the acquisition of listed equities.
S Immo AG is an Austria-based company engaged in the real estate sector. The Company specializes in the acquisition, letting and sale of properties. Furthermore, It offers real estate project developments, which includes Einsteinova office, Quartier Belvedere Central, and The Mark office project, among others, renovation of existing properties, asset and portfolio management and a range of services, such as facility management and brokerage. The Company's real estate portfolio comprises residential, office, retail and hotel properties. It operates four geographical segments: Austria, Germany, Central Europe (CEE) and Southeastern Europe (SEE). In addition, the Company is a parent of CEE Immobilien GmbH, Hansa Immobilien EOOD, Rega Property Invest sro, Ikaruspark GmbH, SC Societate Dezvoltare Comercial Sudului (SDCS) SRL, Maior Domus Hausverwaltung GmbH, and Eurocenter doo, among others.
Warimpex is a real estate group based in Austria Co. is a "hybrid" real estate company that develops and operates properties itself as an asset manager and property owner until the time at which the highest added value can be realized through sale. The majority of these projects is located in Central and Eastern Europe. Co. has developed real estate with investments including hotels in the five-, four- and three-star categories. In addition, Co. also develops office buildings and other real estate. Accordingly, Co. generates revenue from the operation of hotel properties and the letting of commercial and office space while simultaneously realizing proceeds from real estate sales.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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