We want in!

Generali and the European Bank for Reconstruction and Development led the way by announcing their "Accession Fund". Institutional investors will subscribe to a SICAV, a Luxembourg company set up make investments on behalf its shareholders, to bring capital equity to Euro 300 million. This will then be leveraged to give a total investment capacity of Euro 1 billion. GLL Estate Partners, partly owned by Generali, will manage the fund following a broad strategy that includes all the Central European countries that entered the EU on May 1st plus potentially Romania and Bulgaria. Most types of property are likely to be included in the portfolio including warehousing and logistics property. Gerald Kramer, a managing partner of GLL, says that they are targeting an IRR of 15 pct. Also in February, Skarbiec Investment Management (a Polish firm which is part of the Commerzbank group) announced that it too had plans for a fund. However, negotiations are not completed and a formal application will be made in early summer. No further details are currently available.

'Aiming at a niche'

A hitch-free 1st May, and enlargement of the EU, set the scene for three more announcements. Only four days after Poland's accession BZ WBK unveiled its "Arka Property Market Fund", the first in Poland to be open to the public. Pension funds and individuals are to invest up to Zł 350 million, which will give Zł 1.15 billion to invest after leveraging. A detailed investment strategy was outlined - with at least 50 pct of the funds to be invested in offices, the remainder being spread amongst other types of real estate. To avoid competition with large overseas funds, as well as BZ WBK's Polonia Fund, the maximum value of each transaction will be Euro 15 million. "We're aiming at a niche just below the big funds," said Joseph Borowski of Knight Frank, the firm chosen as consultants. Warsaw and its vicinity will represent at least 25 pct of the portfolio, though other major Polish cities will account for a minimum of 25 pct. Investments in Hungary and the Czech Republic will be possible up to a ceiling of 20 pct of the fund. BZ WBK has set the benchmark annual rate of return at 10 pct.

Endurance

Invesco Real Estate and Orco Property Group have got in on the act too by joining forces to create the "Endurance Real Estate Fund for Central Europe". The strategy will be to acquire, develop and refurbish office and retail properties in the Czech Republic, Hungary, Slovakia and Poland. The fund will be structured as a Luxembourg Fonds Commun de Placement (FCP) and is slated to raise Euro 150 million of capital or an investment capability of Euro 500 million. A net leveraged IRR in excess of 17.5 pct is said to be the target.

Bullish about retail

May ended with ING Real Estate's news of their 12 year, Euro 600 million fund devoted to Poland, The Czech Republic and Hungary. Though the portfolio will not show any bias between office and retail property, Peter Davies, managing director for Central Europe at ING Real Estate revealed he was bullish about retail property. ING's existing retail developments will probably feature in the portfolio, including Warsaw's city centre Zlote Tarasy project. The fund will be 60 pct leveraged and aims to achieve an internal IRR of 13.5 pct The coming months can only see more announcements as fund managers seek more exposure to the higher yields still available in Poland and the region. However, will they find enough suitable investments in which to put their money? As our previous article outlined, the stock of quality buildings isn't currently large and investors may have to change their tactics in order to compete in the hunt for good assets.