Immoeast announced acquisition of the 75% stake in the development retail project in Moscow and the remaining 25% is expected to be acquired upon completion, which is scheduled for November 2008. Property provides 146,000 sqm of rentable space.
Our view: We see the Russian market as very attractive for real estate companies, as it is hugely underdeveloped and provides substantially higher yields than in CEE and higher than in SEE countries as well. Prime yields in Moscow stood at 8.5% in 2Q07, while in CEE below 6% and in SEE countries around 7%. Although there is yield compression expected in Moscow to continue as the Russian market attracts more and more investors, however we don’t expect these to converge all the way to average Western European levels as the risk in Russia is higher. Therefore we would expect yields could decline by another 150-175 bps.