Future focus

Nathan North, ?Eurobuild CEE': You've just finalised the sale of the Warsaw Financial Center. Is this part of a strategy for Poland, or was it just a case of an investor coming in with a good price?

Bruno Ettenauer, CA Immo: In terms of the WFC, we had a JV with Pramerica Real Estate Investors and agreed to sell it if we saw an appropriate investment window. We have defined Warsaw as a core market and have a good team in place. This is because of the health of the economy and the quality of the infrastructure. So we don't have a plan to massively reduce our assets in the country. Poland has been doing a good job for the last few years, giving us the confidence that the country will continue in the same way. Trading is an important part of our activities, but will only account for 10-15 pct of our portfolio. For the 50/50 JV we were offered a fair price and it was a comfortable situation for both the buyer and the seller. A window of opportunity opened, and with the current tide of investors coming to Poland we had a good chance to use it. Over the last ten years the appetite for such deals has been both high and low - and so now EUR 210 mln is quite a hefty price for a market in which it is not easy to find buyers. Our JV partners had the same approach, so we had to take advantage of the opportunity.

What are your plans for Poleczki Business Park? Are you selling your holding in this project too?

The Poleczki project with UBM is now in phase III. We have a 25 pct shareholding in UBM and completed buildings with a high occupancy rate. One building was finished just a few weeks ago. Our goal isn't to keep 100 pct of everything until the end of time. We sold one plot there last year where a hotel could be developed, and others could be sold for other uses.

What are your plans for the former Europolis portfolio?

We increased our portfolio with the Europolis acquisition. But Poland is a core market for us - so we won't be exiting from the country. We have a team in place there that has successfully leased properties and will continue to do so. But one should always bear in mind that a portfolio should be strong enough to maintain a position on the market and should be kept in balance. I don´t want to discuss specific transactions, but that doesn't mean that we won't consider them if the opportunity arises. We have quite a large portfolio, and size and quality matters, but we won't be reducing it dramatically. Quite a substantial part of our portfolio is in Warsaw and in the mid- to long-term we will be staying here.

CA Immo has also recently put two Courtyard by Marriott hotels up for sale in Prague. What are your plans for the hotel sector?

Our main focus at the moment is on offices, but we are still active in hotels, logistics and land that is dedicated for use. But hotels aren't currently in our focus, unless as part of a large-scale mixed-use complex, as is the case in Berlin. So we will be concentrating on offices. If there are buyers we will sell, if not then we won't - but we will not be selling in a distressed manner. We will dispose to concentrate on offices if the assets do not meet certain criteria, such as with our hotels in Prague and Plzeň, and if they are not part of a large scale mixed-use scheme. If they are, and if the project can be improved through such inter-
action, then they will not be sold. So if there is no link between those usages, then it is better to focus on a sector where we have a greater market share.

And a number of plots have been sold in Berlin. Is this part of a general asset restructuring programme?

In Berlin we acquired a lot of unzoned land in 2007/8, so we started to zone and develop the land, and were fortunately quite successful in doing so. It makes sense once the zoning is in place to sell it, as this can increase the speed of developing the area down from ten to about seven years. People don't want to live or work in an area where long lasting construction activity is taking place. So this is what we have done in Frankfurt and Düsseldorf, speeding up the development process by selling plots of land to other developers. Given the overall size of such projects it makes sense to do this. Bringing in other developers is always helpful.

What will be your general strategy from now on?

Which sectors will you be concentrating on? Frankly speaking, given the current equity situation we will focus on activities that can be finished in a short period of time with tenants secured. We have quite a strong business model related to development, but this is always related to the market situation. At the moment this means we require 40 pct pre-lease and are not wanting to develop speculatively. We have invested over EUR 4 bln in standing properties, but trading will remain important. Europolis was a big investment and we will have to dispose of some of the properties. In Q1 2009 we managed to obtain a construction loan of EUR 270 mln and later delivered Tower 185 in Frankfurt. All of this helps to build up the trust in the firm. AM and leasing is another successful area for us in the current climate. In Vienna we've just leased 21,500 sqm to Bosch.

And which geographical areas will you be concentrating on?

We are a mid-European real estate company, so our focus remains on Poland, the Czech Republic, Hungary, Slovakia, Austria, Germany and Romania. This is where we have 95 pct of our investment. The other locations include Serbia, Croatia, Bulgaria and Slovenia. We intend to stay in the core markets.

How are these future development projects and investment in standing assets likely to be structured and financed?

Overall, we feel quite confident about this. It is always helpful if you can show that you have been managing things well, and the banks also share this confidence in us. Receiving bank loans at the moment is not an issue for us, given our track record. If we decide to go ahead with a project after we've done all the necessary calculations, we get the loans. The banks have seen that we are able to deliver according to the planned quality and timeframe. ?

A quarter century of CA Immo
1987 - Foundation of CA Immobilien Anlagen AG 1988 - Listed on Vienna Stock Exchange in 1988 1999 - First expansion into CEE region, with an office investment in Hungary 2005 - Buys Warsaw Financial Center (50,000 sqm gla) in a 50:50 JV with TMW Pramerica Immobilien for EUR 92.5 mln 2010/2011 - Acquires 100 pct stake in Europolis for EUR 272 mln 2012 - Warsaw Financial Center sold for EUR 210 mln The company now has 2.6 mln sqm of standing assets valued at EUR 5.354 bln (Sept 2012).