Puls: Zlota 44 rep taped demanding payments

In his blog, Orco CEO JF Ott has been making crystal clear that the Zlota 44 residential scheme in Warsaw has had cogs thrown in its wheels from all sorts of directions. Not just from bureaucrats messing up the planning process, but from seven neighbors that have been protesting every step of the way. In a post from mid-July, Ott went so far as to equate what they were doing as blackmail. Ott was in Warsaw July 16 meeting various officials, requesting support for the speeding up of issuing the necessary permits.

This week, the daily newspaper Puls wrote it had obtained a recording of a conversation held by an Orco representative and the lawyer for the seven protesters. In it, allegedly, the lawyer says the protesters would stop their attempts to block the project if Orco would buy their flats for PLN 20,000 per sqm. We haven’t heard the recording, of course, and we can’t know how rigorously Puls authenticated the voices on it. But they put it in their newspaper.

ProLogis Poland releases QI-II numbers

ProLogis employees in Poland will likely argue with anyone who says the industrial market is as dead as it ever has been. In the first six months of the year, the company leased 15% more space than it did in all of 2009: 351,000 sqm. As with most landlords in most asset classes, the majority of this leasing action was extensions of existing deals, but ProLogis will doubtless for each of the 123,500 sqm it managed to shave from its total Polish vacancy figures.

“These results confirm ProLogis’ market leading position in Poland and that the situation in the Polish and European warehouse space development markets has slightly improved,” said Ben Bannatyne, ProLogis MD for Central & Eastern Europe. “The Polish market as a whole has experienced several warehouse facility sales as well as an increased number of both tenders for build-to-suit projects and signed lease agreements. As such, the market is perceived by foreign investors as increasingly more reliable, driving further growth of our industry.”

Using interest rate swaps? Careful…

The FT carried a warning about problems that could arise from financial reform, as a crackdown on derivatives is probably underway. The idea is to make most derivatives be cleared by central counterparties. The derivative counterparty would be required to keep as much cash on hand as the potential liability under the contract.  This could help reduce systemic risk by curbing the activities of hedge funds, but the FT warns that under EU regulations, real estate fund managers are being classified the same as hedge fund managers.

Unlike other industries, in the majority of cases, derivatives used by property companies are secured against the physical assets of the business. It goes without saying that a number of property companies will be unable, or unwilling, to put forward large amounts of cash as margin when the swap is already secured against the property itself. These companies will then have two options: either they restructure the hedging (by converting to fixed-rate loans) or they liquidate. The banks, of course, should be delighted with these alternatives as about the one thing they will value more than being able to impose higher margins in a restructuring is actually getting their money back.

This would fundamentally change the way in which property companies manage their risk. Companies will have to choose between funding themselves on a more expensive and less flexible basis, probably ill-suited to their business plans, or not hedging at all. The latter assumes, of course, that the banks would be willing to provide funding on an unhedged basis.

Anybody concerned?

Takko signs up at Galeria Victoria

Galerie Victoria in Walbrzych is 500 sqm closer to full after the decision by German fashion retailer Takko’s signature on a lease in the soon-to-be-opened mall. The developer Keen Property Partners Retail began construction in February 2009 and plans a grand opening for October 16. A Cinema City multiplex along with 180 shops are to be built in the two-storey structure, along with a 6,000 sqm retail park.

US agency numbers pick up in Q2

Nothing like a bit of positive news these days. CB Richard Ellis and Jones Lang LaSalle have both released profits for the second quarter of 2010, as fundamentals in the US market improved.

Sales of investment-grade U.S. commercial real estate rose 32 percent over the first quarter to $20.6 billion, according to preliminary data by real estate research firm Real Capital Analytics, which measures sales greater than $5 million.

“In the U.S., we saw a very strong pickup in property sales and leasing, reflecting recovering market conditions,” Brett White, CB Richard Ellis chief executive, said in a statement. His company posted a second-quarter profit $54.8 million, or 17 cents a share, compared with a loss of $6.6 million, or 2 cents per share, a year ago.

JLL turned in a profit of $32m with revenues rising 18% to $680.3m. “Business prospects for the year remain good, and we are moving forward with confidence while watching market and economic dynamics,” Colin Dyer, Jones Lang LaSalle chief executive, said in a statement.

Buyer found for Carpathian’s Blue Knight

The embattled real estate fund Carpathian has selected a buyer for its Blue Knight portfolio, a series of provincial retail assets across Poland. Having been selected in a competitive bidding process, the buyer is currently moving through due diligence.

Carpathian also says a buyer has been selected for the Promenada mall in Warsaw and that an ‘extensive’ due diligence process is currently underway. It warns that this process can take months in Poland and that it would be prepared to negotiate with other potential  buyers if the deal fell through (sounds mildly ominous, but it’s probably standard corporate-speak).

One year ago, the Blue Knight portfolio and Promenada were fully cross-collaterized as part of the restructuring of €235m of debt Carpathian with Hypo Real Estate.

Most of the rest of the portfolio is fine, says Carpathian. “Exceptions to this are Macromall (Brasov, Romania) and Antana Business Park (Budapest, Hungary), which continue to struggle with low occupancy levels.”

Iron Mountain takes 8,000 sqm at ProLogis Park Błonie

Iron Mountain has signed up for an additional 8,000 sqm at ProLogis Park Błonie. The data storage company also extended its lease for the space it already occupies at the park. ProLogis Park Błonie is located 25 km west of Warsaw and its tenant list includes Arvato Services (Bertelsmann Media), DC, Interchem, L`Oreal, Mercedes-Benz, New Idea Mebel, Optimum Distribution, PPG Deco, Tradis and Wincanton.

AFI Development refinances Mall of Russia scheme

AFI Development has reached an agreement with VTB Bank on an extension of a RUB 8.448m loan for the construction of the developer’s Mall of Russia project. Originally siged in late August 2008, the repayment schedule has been extended by two years, with the interest rate falling from 16% to 13.25%. A total of RUB 6.378m had been drawn down as of June 30. The mall is due to open in December.

Czech economic confidence at 22-month high

Czech businesses and consumers expressed more confidence in a July poll than they have in nearly two years. A composite index jumped from 5.4 in June to 7.8, the highest reading since September 2008. GDP rose 1.1% in the first quarter of 2010, compared to a fall of 3.2% in the final quarter of 2009. Rising exports are thought to be behind the current (relative) optimism.

Moody’s threatens Hungary with downgrade

It’s unclear still if Hungary’s breaking off of talks with the IMF was just political posturing before local elections. The lesson, however, is that the wider world doesn’t really care about local politics. Deal with your debt issues or the markets will punish you — that’s the only way to read the quick response from Moody’s which put Hungary’s Baa1 rating on notice.

So much for Hungary’s success in staying out of the financial headlines. Some encouraging, or at least constructive words from Budapest would be welcome right now, rather than combative, reform-weary retorts. Where exactly does Fidesz this is going?

Orco vs. Croatia’s privatization fund

Orco will be taking the Croatian Privatization Fund (CPF) to court, claiming the body has launched a smear campaign against it. Both sides are claiming the other breached the terms of a shareholders agreement for Suncani Hvar. The dispute came to light after the CPF took exception to Orco selling off a couple assets of the company in order to pay the company’s employees. Orco claims the CPF has systematically ignored its complaints and has requested the shareholders agreement, along with its correspondence with CPF, be made public.

Syngenta prelease at Office Garden II

Syngenta has inked a prelease deal for 2,200 sqm at Office Garden II in Ujbuda – Budapest, near the Lágymányosi bridge. The building is expected to be handed over in the third quarter of this year and Syngenta should move in by 2011. The lease on its current headquarters building, where it occupies 6 floors, runs out in 2012. The developer claims significant savings will be enjoyed by tenants because of Office Garden’s low operational costs as an energy efficient building. GVA Robertson represented the owner, while Sygenta was the client of Eston International.