With the upcoming capital increase IMMOEAST has managed to create the conditions for securing its long-term position as a leading real estate investor in Central and Eastern Europe. The three billion euro of liquid funds which are to flow to the company will facilitate real estate investments in the range of five billion euro taking advantage of the leverage effect.
This entire volume of investment is to be transacted during the course of the 2006/07 business year. IMMOEASTs real estate assets are therefore likely to grow to seven billion euro by the end of the business year. Chairman Karl Petrikovics is confident the company will actually be able to carry out the necessary acquisitions during this period: We have secured attractive investments with a total volume of five billion euro and will be able to rapidly and solidly invest the capital inflow from the capi-tal increase. This strategy preparation of operating business first, then raising the financial means on the capital market has proven itself thus far and we will abide by it in the future as well.
As of January 31, 2006 there were already committed investments in the range of 1.1 billion euro. An additional volume of 1.4 billion euro is in the due diligence stage, meaning that a Letter of Intent has already been signed and that negotiations exclusively with IMMOEAST are underway. Further invest-ments in the range of three billion euro have been approved by the executive and supervisory boards and are now in intensive negotiation. Even under the cautious assumption that more than half of the possible investments will ultimately not take place, it is guaranteed that we will be able to invest all of the capital inflow in real estate in the current business year, says Petrikovics.
IMMOEASTs chairman is convinced that in the next three years the long-term positions in Central and Eastern Europe will be taken. For those who are well-positioned in these markets today and therefore have the necessary contacts, commensurate standing and above all a first-rate asset management team with comprehensive Eastern European know-how, this is no less than a historic opportunity to secure a long-term leading position in what is perhaps the most attractive real estate market in the world. IMMOEAST has all of the necessary prerequisites and, with the planned capital increase, suffi-cient capital to take advantage of this opportunity and this we will systematically do.
Petrikovics is also optimistic with regard to the further development of real estate prices in the East. Prices have significantly risen already, yet this is also commensurate with development in the rest of Europe. This means there is still a significant gap between the returns in real estate prices in western cities such as Paris and Vienna and the capitals of the new EU states.
Petrikovics also points out that while the returns are crucial for the current price assessments, for long-term potential the present rent levels also have just as great a significance. With prime rents of 50 euro/m as in Paris and 30 euro/m as in Frankfurt, at the same yield level the risk of price declines is higher and the potential for appreciation considerably less than for example with prime rents of 20 euro/m in Prague and Budapest.