announced acquisition of Office Park Project in Moscow, Russia. The project is scheduled for completion in 4Q2010 and should provide NRA of 75,000 sqm. development cost are estimated at approximately EUR 200m.
In our view Russian market provides good opportunity for value creation in the real estate segment. The fundamentals of the market are sound, when the vacancy rates in South-Eastern Moscow fluctuate around 5-6%. Rents are substantially higher than in CEE region and in non-prime Moscow locations reaches around USD 60/sqm/month (EUR 43/sqm/month). Similarly to other cities in CEE and SEE region, Moscow witnessed compression in yield. Prime areas reaches yields of 8.5% and non-prime areas about 9.5%. There is consensus for further yield compression as more money are targeted in the region, however it would be unreasonable to expect that yields would decline to similar levels as in CEE region. Fundamentally the project seems positive at first glance, however we would like to see some progress of ECM’s projects in Russia, e.g.. Ryazan shopping centre and how is able to deal with the bureaucracy issues. Russian market is dominated by local developers and has been difficult market to penetrate even for more established players. As a result we would be more cautious about fully positive opinion.