Heitman today announced the establishment of its second European real estate fund, Heitman Central European Property Partners II (HCEPP II). The (euro)175 million (USD 175 million) fund is the firmÂ's second designed to take advantage of increasing real estate investment opportunities in the Central European marketplace.
HCEPP II, which was oversubscribed, is being launched within 24 months of the formation of HCEPP I, a (euro)135 million (USD 135 million) fund launched in the fourth quarter of 2000. HCEPP I is fully invested in more than twenty properties with a gross asset value of approximately (euro)580 million (USD 580 million).
HCEPP II will have buying power of more than (euro)650 million (USD 650 million) and allows the firm to pursue acquistions and development opportunties in Hungary, Poland, Czech Republic, Slovakia, Slovenia, Latvia, Lithuania, Estonia and Romania. HCEPP II specifically seeks Western-style developments that benefit from strong demand by quality international tenants. Heitman will look for strong local partners with proven track records in the region to co-invest in the developments.
HCEPP II will capitalize on the yield arbitrage currently in existence in Central Europe. Properties in the target countries of HCEPP II are trading at yields of 200-500 basis points higher than similar properties in Western Europe. With the prospect of European Union (EU) membership in 2004, these yields should compress more closely toward those of Western Europe.