February CIJ e-Journal offer

The February, digital version of CIJ is now available!

It’s the action issue, with new projects, project financing, bankruptcies and distress all featured! We bring you news of new transactions from Poland, Hungary and the Czech Republic, new development trends, and all the latest leasing news. Take advantage while there’s still time!

TMW and Aberdeen worries

It’s being reported that Aberdeen’s open ended Degi Global Business fund has taken a write down of €68m, which translates into a NAV fall of 21.6%. It’s blaming 65% of this on a pair of buildings it owns in Zagreb and Bucharest. Apparently as a reaction to that, TMW Pramerica has closed the fund to trading, having only re-opened it in December.

Danone sells Polish headquarters

Danone has completed a sale and leaseback transaction on its Polish headquarters building in Warsaw, according to Cushman & Wakefield, which acted for the vendor. The buyer of the 5,000 sqm building on Redutowa Street was described only as a private equity fund. Danone employs more than 1,400 in Poland

IVG sells Horizon plaza in Warsaw

In a deal that’s not yet been officially announced, IVG has sold Horizon Plaza to an as yet undisclosed buyer. The buyer has been present on the Polish investment market for a while now, but the Horizon Plaza purchase is being described as its first acquisition of a Polish office project to date.

The building sold at an allegedly strong yield, but details have not as yet been released. Horizon Plaza is a 35,000 sqm office project, delivered in June 2009 by a joint venture of Curtis Development and IVG. Shortly before the building received the occupancy permit, Curtis sold its 50 percent stake in the project to IVG, which became the sole owner. CB Richard Ellis has been acting for the seller.

Alexis Juan outlines Orco’s survival strategy

The Czech business news publisher E15, carries a fascinating interview with Alexis Juan, a member of the board at Orco. Juan was brought on board to comply with demands from the French court overseeing the safeguard procedure at Orco. It insisted that  a majority of the board members be independent of the developer, and Juan was proposed back in June 2009.

And to be fair, Juan goes to considerable lengths in the interview to establish himself as being independent. For example, when explaining why, when he was the head of Komercni banka,  he didn’t lend Orco a single crown.

“Jean Francois Ott often came to me and said, ‘look, CSOB lends me money, Erste Bank lends me money, and you don’t want to. I told him, look, I’m not going to lend you money for two reasons. Your debt is too high, and I can’t accept that.’ Another important reason was within the Societe General group, developers weren’t given loans. We didn’t have experience with it.”

KB did eventually lend Orco money, after he left, and he was eventually involved in getting that loan refinanced, arguing that the developer was paying interest on time.

“KB’s position was that the loan was supposed to be paid back in September 2009, and they didn’t want to extend it. I told them they weren’t financing a normal development project, you’re financing something like La Defense in Paris. That takes many years of work. In the end, they understood.”

Juan points out that Orco managed to lend from 33 different banks. The journalist asked the most basic of questions, “how did it manage to do that” and got a laser straight answer.

“Because the company was a fairy tale story of success, because the market was going up, demand for residential and offices was rising in the region, because – and now we’re at the cause of the financial crisis – it was simple to get money. Lots of money. Cheap money with little collateral. Now we have to be patient.”

He also outlines what he calls a new solution to the bondholders, who rejected Orco’s latest offer on January 20.

“Two weeks ago, we gave the court a new solution: a ten-year payment calendar. The company will of course continue to pay interest, but will return the principle according to a payment calendar. One percent the first year, 5% for years two to six, 10% in year seven, 20 in year eight, and 25% in the ninth and tenth years. In all, €553m, including the capitalized interest. During this time, the company will be able to carry out its restructuring plan.”

If nothing else, it’s a remarkably candid sounding interview and there’s a lot more. It’s not that what’s being said is so shocking, it’s just the openness of the tone from such a senior figure. Is this the beginning of a new strategy?

If you read Czech, the interview is here. If not…well, you can’t expect a full translation for free, can you?

Hungarian economic progress report

Amid all the speculation on sovereign debt that came up last week, isn’t it interesting which country isn’t on the endangered species list? Greece, Spain, Portugal…but not Hungary. It’s clear that if the country hadn’t taken some serious measures last year and shown a commitment to sticking to them, it would have been in the same mess. It didn’t hurt the cause, according to Gyorgy Folk at waz.eurobserver.com that the prime minister, Gordon Bajnai, announced he’d do his job for a symbolic HUF 1  per year.

He started off by making a similarly important gesture: Lowering the salaries of the top managers in state-owned companies…In its crisis-solving agenda, the minority government reckoned with a 7.5 percent GDP loss in 2009-2010, leading to its decision to cut expenditure once again by 1000 billion forints (€3.7 billion).

Following the decisions of his predecessor Ferenc Gyurcsany, Mr Bajnai prolonged the cap on public wages for 2010, stopped 13th month pensions and cut social welfare for families. He raised the pension age 65 and limited the parental allowance payment period from three to two years.

The author figures Hungary’s is still only half-way there. But maybe the Greek government should be taking notes.

Unibail-Rodamco lands Simon Ivanhoe’s portofolio at €715m

There’s been confirmation of a deal that CIJ reported was coming up in the January issue. Unibail-Rodamco has acquired the European portfolio of Simon Ivanhoe at a price of €715m. Simon Ivanhoe is a joint venture of Simon Property Group and Ivanhoe Cambridge.

The portfolio consists of six existing shopping centers in Poland and France, including Warsaw’s biggest mall, Arkadia, its retail area exceeding 100,000 sqm.

Unibail-Rodamco also entered into a 50-50 joint-venture agreement with Simon Ivanhoe in which Unibail-Rodamco will develop five retail projects in France. Click the link to see Unibail-Rodamco’s press release on the deal.

Prague Congress Center faces bankruptcy

The Prague Congress Center may have made a “profit” of CZK70m last year, but that’s not helping it pay off the 2 billion or so it owes on the reconstruction carried out back in 2000. If it doesn’t come up with €3.3m by April, bankruptcy will likely to be declared. Sort of ironic that the city went into debt to reconstruct the building so that the World Bank and the IMF could come to Prague and talk about the magic of global finance.

Gallerie Moda deal off?

Gallerie Moda is that shopping mall you see flying into Prague where no cars are ever parked, because it never opened. Originally called Airport Outlet Center, the project failed to beat out its competition, Fashion Arena. Two years ago in CIJ, we wrote how the project’s investors had changed the name to Gallerie Moda, but that apparently didn’t help it either.

Last year, it was supposedly bought out by the Italian developer Premium Retail, which went back to the original idea and rebranded it as Praha Outlet Village. The transaction is even counted by some in the end of year figures. Sources say, however, that the deal is now off. This is unconfirmed,  so we’ll be seeking more information on this, however the project is no longer listed on the company’s website. The brochure’s can still be seen here, though, for those who are interested.

CBRE revenues rise

Revenues at CB Richard Ellis rose 1% in the fourth quarter of 2009 to $1.3bn, the first increase in seven quarters. Even more encouragingly for the company, it’s now predicting 6% to 8% annual growth, as it moves into what it calls a more “normal” business environment. There are some analyst comments in an LA Times article on the news.

Real estate brokerages are among the first to see changes in corporate bosses’ moods, analyst Craig Silvers said. CB Richard Ellis’ projection of more revenue suggests that companies the brokerage works for are starting to look for more space. ”This shows things are starting to turn,” said Silvers, president of Bricks & Mortar Capital. “If corporations were in a hunker-down mode, they wouldn’t be looking for space.”