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Fprop CEE Snapshot
Q3 2016

GDP growth (one of highest in Europe):
2015 (E): 3.6%;
2016 (F): 3.6%;
2017 (F): 3.1%.

2015 (E): -1%;
2016 (F): 0.6%;
2017 (F): 1.5%.


Interest rates:
PLN benchmark rate: 1.5% pa. since Mar-2015, an all-time low;
10 year government bonds: c2.7% pa., having narrowed from c6% pa. 2007-12.

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

Government debt as % of GDP:
Low at 52% (constitution limit = 55% then 60% of GDP).

EUR 1/ PLN 4.3 – towards weaker end of range (4.15 to 4.45) since 2012.

Strong economic performance may slow in due course due to populist policies of newly elected (Oct-2015) government. Investor concerns are reflected in FX and yield on 10 year government bonds (which would otherwise be lower given high GDP growth rate). But the government is showing pragmatism by implementing its policies on generally milder terms than first proposed.

GDP growth (one of highest in Europe):
2015 (E): 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% pa. since May-2015, an all-time low, down from 12.5% pa. in May-2005;
10 year government bonds: c2.9% pa., having narrowed from 12% pa. in 2009.

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

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


EUR 1/ RON 4.5 – relatively stable since 2012.


Private consumption continues to be the main driver of the economy, fuelled by the cut in VAT, increasing salaries and growth of the credit market. Retail sales up 16.8% in first 5 months of 2016 vs same period in 2015.
Prime yields now sub 6% in Warsaw’s CBD, despite continued new development and mid teen vacancy rates (= continued tenant’s market: rents = c€24m2 per month for prime central CBD, and €13-16m2 per month for outer locations);
Prime yields in major regional cities at c6.25%.

Yields range from sub 6% for large prime assets in Warsaw and major regional cities to 8-8.5% for smaller assets in smaller towns;
New development slowing despite low vacancy rates.

Transaction volumes:
1H = >€2bn, c2.5x 1H 2015

Prime yields c7.5%;
Overall vacancy rate for Bucharest offices c13% but varies widely between sub markets (CBD & West <10%, Pipera >30%).

Prime yields c7.25%;
Occupier demand growing, boosted by rising retail sales growth. >50 new international brands have opened sales units in Romania since 2014.


Secondary - mismatch persists in pricing expectations between buyers and sellers.

Transaction volumes:
1H = €340m, nearly 2x 1H 2015 (€180m). Included €100m paid for a shopping centre in Sibiu, central Romania.

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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