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Fprop CEE Snapshot
Q2 2016

GDP growth (one of highest in Europe):
2015: 3.6%;
2016 (F): 3.7%;
2017 (F): 3.6%.

2015 (E): -0.8%;
2016 (F): 0%;
2017 (F): 1.6%.


Interest rates:
PLN benchmark rate: 1.5% pa., since Mar-2015, an all-time low;
10 yr govt bonds at c3.1%.

Credit rating:
Moodys: A2, outlook negative;
S&P: BBB+, outlook negative

Government debt as % of GDP: low at 52%: Constitution limit = 60% of GDP.

EUR 1/ PLN 4.41 – at weak end of range (4.15 to 4.45) since 2012.

New populist government (PiS, elected Oct-2015) = increased political and fiscal risks / impairment of investment climate;
Mitigating factors = high GDP growth rate, signs PiS is rowing back on some of its more costly proposals.

GDP growth (one of highest in Europe):
2015: 3.8%;
2016 (F): 4.2%;
2017 (F): 3.7%.

2015 (E): -0.4%;
2016 (F): -0.6%;
2017 (F): 2.5%.


Interest rates:
RON policy rate: 1.75%, an all-time low (since May-2015), down from 12.5% in May-2005;
10 year govt bonds at 3.7%, up from record low of c2.6% in Feb-2015.

Credit rating:
Moodys: Baa3, outlook positive;
S&P: BBB-, outlook stable

Government debt as % of GDP: low at 38%, fifth lowest in Eurozone.


€1/ RON 4.5 – relatively stable since 2012 but at weak end of narrow range (from 4.40-4.50).


Average net wages grew by c20% in 2015. Private consumption accelerating, aided by VAT cuts from 24% to 20%, and from 24% to 9% on food sales;
Anti-corruption measures – 2015 was a record year, resulting in the resignation of former prime minister Victor Ponta, and indictment of 5 other ministers, 21 members of the combined houses of parliament, and the Bucharest Mayor, plus orders to seize €500 million. In recognition of structural progress, oversight by EU to end in 2019.
Capital values:
Prime - consolidating gains of 2015 across all asset classes;
Secondary - stable. Yields still HIGH - c200bp higher than comparable property in UK / Western Europe.

Vacancy rates for Warsaw offices still c14% (= tenants market), but low for retail and industrial. Pace of new development slowing for retail, increasing for industrial property.

Transaction volumes:
Q1 = c€500m. Forecast >€4bn for year, exceeding 2015, itself a post credit crunch record volume year. Expected to be dominated by offices (2015 = retail).


Capital values:
Prime - yields have decreased to 7.25% for retail, 7.50% for offices and 9% for industrial;
Secondary - mismatch in pricing expectations between buyers and sellers still persists.

Vacancy rates for Bucharest offices c13% but uneven between sub markets (CBD & West <10%). Rent levels broadly stable subject to location. Some speculative development of industrial property.

Transaction volumes:
Thin but rising. €180m traded in Q1, 70% in Bucharest. 2015 = c€700m.
Cost of new government’s populist measures may impact the economy in due course.

Illiquidity of commercial property market;
Population in decline.

Fprop Track record in CEE

…has been earning ROE >20% pa. for past several years;

…is ranked No. 1 vs MSCI’s IPD CEE universe for the ten years from the commencement of its operations in Poland in 2005 to Dec-2015, and for the annualised periods from the end of each of the years between Dec-2008 and Dec-2015.

Fprop CEE Investment Strategy & Property Requirements
Investment strategy:
Targeting higher yielding property to generate a minimum IRR & ROE of 15% p.a. (geared).

Property Requirements:
All sectors considered but focus on offices, retail and mixed-use;
Lot sizes of €5m+ with no ceiling;
Minimum 7.5%+ net initial yields - unless partially vacant, in which case lower.
Fprop Diary
Contact Fprop:


Jeremy Barkes
Director, Business Development
+44(0)20 7340 0270

1000 Companies to inspire Britain in 2015  
FPAM funds rank No.1 versus MSCI’s Investment Property Databank (IPD) Central & Eastern European (CEE) Benchmark for the ten years from the commencement of its operations in Poland in 2005 to 31 December 2015, and for the annualised periods from 2005 to the end of each of the years between 31 December 2008 and 31 December 2015.
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