Immoeast acquired S-Park, office and retail property in Bucharest, Romania for EUR 101.5m. The total rentable space is 45,000 sqm out of which 2,500 sqm is retail area, which implies price EUR 2,255/sqm. The property is scheduled to be completed in August 2007 and 95% of the space is already let.
The property is in northern part of the city, which is the prime target of most of the developers as well as tenants. We see the acquisition price as fair but we remain to be positive about Romanian market, which lacks behind CEE3 capitals in stock as well as rents. The prime rents are expected to stabilize at EUR 19/sqm/month, which compares to CEE3 average of EUR 21.2 and EU15 average of EUR 36.5. With take-up unable to meet the surge in new supply, an increase is expected in the vacancy rates from unreasonably low 2% in 2006 to 5% in 2007 and 7% in 2008. We expect the prime yields to compress further from 7.25% in to 6.25% in 2007 and 5.75% in 2008, which should be benefiting also Immoeast’s Romanian portfolio.