The ARETE Czech investment and real estate group is entering the Slovak, German, and Austrian markets
The ARETE investment and real estate group has successfully completed the notification process in Slovakia, Germany, and Austria. In these countries, it can now actively offer entry to foreign investors to its third fund, ARETE INDUSTRIAL, opened this year. Slovak, German, and Austrian investors should thus have a share of up to 50% in it. This fund invests in completed industrial real estate in Central and Eastern Europe, but will also build new logistics and manufacturing buildings itself. In Slovakia, the ARETE group already owns and develops a range of real estate in Žilina, Nové Mesto nad Váhom, and Košice with a total value of over EUR 50 million. “We consider the Slovak market, in particular, to be very promising. We already have a range of real estate in our portfolio there, as well as our own team and office. Gaining the possibility to actively offer to investors thus represents a logical step in the development of our ARETE group. Slovakia, Germany, and Austria have great potential, and we have already verified that there is demand for investing in our fund in these countries,” said Lubor Svoboda, ARETE group co-founder . “We want to be an international fund working through international standards and with an international investor portfolio. We plan that Slovakia, Germany, and Austria will provide up to 50% of the investors in our fund,” adds Robert Ides, the other ARETE group co-founder. “Although we are also considering opportunities in other Central European countries, we want to continue to buy real estate in particular in the Czech Republic and Slovakia,” he adds. Obtaining all the necessary permits took about two months in total, and required a number of legislative conditions to be met. Investors from countries outside the Czech Republic were already able to enter ARETE funds on their own initiative, but now ARETE can actively address investors from these countries. This activity on foreign markets then falls under the responsibility of the national financial market regulators. The third ARETE group fund, which was the subject of the notification process, has been open to investors since the start of this year. It will invest in completed industrial real estate in Central and Eastern Europe, but will also build new logistics and manufacturing buildings itself. The target value of its portfolio should be close to CZK 12 billion, and the portfolio should include over 600,000 m2 of leasable areas and more than 300,000 m2 of building land for further construction.
Arete invests up to 80 million euros in industrial real estate in the CEE region
The Arete investment and real estate group has signed a loan agreement with Raiffeisenbank for up to EUR 80 million. The funds will be used to refinance the existing real estate portfolio of the second fund (Arete Invest), and as an investment in the new construction of industrial real estate. The original article in Czech, including the comments of the fund's founders, can be found here: https://skypaper.cz/novinky/arete-investuje-az-80-milionu-eur-do-prumyslovych-nemovitosti-v-regionu-cee/
ARETE group successfully refinances its fund portfolio during the pandemic and now has a bank loan of up to EUR 80 million available
Prague, 3rd June 2020 – On 30th April, the ARETE investment and real estate group signed a contract with Raiffeisenbank for a loan of up to EUR 80 million. The funds will be used to refinance the existing real estate portfolio of ARETE’s second fund (ARETE INVEST CEE II sub-fund) and to invest into new industrial real estate construction while preserving a safe ratio of bank financing to fund asset value. For ARETE’s second fund this ratio is currently 43%, one of the lowest of all the qualified investor funds on the market. “Our real estate portfolio is high quality, with high value and profitability. The provided credit line of EUR 80 million shows that our fund is stable and resilient even in the current situation when the provision of new loans by banks is stagnating – the confidence shown in us by Raiffeisen is definite proof of that. Financing with such an amount at a time like this is really an exceptional success,” said Lubor Svoboda, ARETE group co-founder. “The funding brings our fund high stability and the certainty of sufficient capital backing. Yet it also brings new potential for portfolio growth, as the loan will be used flexibly based on our actual needs. This will allow us to take advantage of new opportunities on the market. At the same time, we want to keep the bank loan to asset value ratio at a safe level. It is at times like these that our strategy of lower indebtedness proves to be an unequivocal competitive advantage,” adds Robert Ides, the other ARETE group co-founder. The preparations for the refinancing and provision of a new credit line took a few months and the final agreement was made on 30 April. The goals of the newly signed contract were to simplify the administrative load arising from the eleven separate existing loans, and to enable higher flexibility for the funding of new construction. The legal aspects of the entire transaction were supervised by experienced law firms – Kocián Šolc Balaštík for ARETE and Clifford Chance for the bank. The second ARETE fund was established in 2016 and is gradually building up a homogeneous portfolio of industrial real estate in the Czech Republic and Slovakia. The total cumulative gross return for 2019 reached 115%, while the gross return for the previous year was 8.9%. The value of the managed assets at the end of 2019 exceeded CZK 2.4 billion and will grow further in 2020 thanks to halls currently being completed. This fund was closed for the entry of new investors in 2018. A third ARETE group fund opened for investors at the beginning of 2020 that will not only invest into completed industrial real estate in Central and Eastern Europe but also itself construct new logistics and manufacturing buildings. The portfolio target value should come close to CZK 12 billion, and the portfolio should include over 600,000 m2 of leasable area and over 300,000 m2 of building land for further construction.
How has coronavirus affected real estate demand?
Nemovitostní trh pocítil první dopady celosvětové pandemie. Velmi se ale liší podle typu nemovitosti – nejvíce jsou koronavirovou krizí ovlivněny hotely a maloobchodní prostory, naopak nejméně průmyslové a logistické nemovitosti. Jak rychle se podaří vše dostat do stavu ze začátku roku bude záviset nejen na uvolňování restrikcí u nás a v zahraničí, ale i na struktuře vlastnictví příslušných nemovitostí. U logistických objektů je znatelný dopad nárůstu e-commerce, u těch průmyslových je pak ve střednědobém horizontu možný i strategický přesun části výroby z Asie zpět do Evropy. I to vyplývá ze závěrů odborné on-line konference o realitním trhu v současné době, kterou společně v první polovině května uspořádaly investiční a nemovitostní skupina ARETE a poradenská společnost JLL. Celý článek zde: www.estate.cz/lifestyle/jak-koronavirus-ovlivnil-poptavku-po-nemovitostech
Experts say coronavirus has changed demand for certain real estate
The real estate market has felt the first effects of the global pandemic. Yet not all segments are seeing the same changes – hotels and retail premises have been hit hardest, while industrial and logistics buildings have been spared the worst. How quickly everything returns to the normal situation from the beginning of the year will depend on the easing of restrictions domestically and abroad, and also on the ownership structure of the relevant real estate. Logistics buildings are seeing an increase in e-commerce and the owners of industrial real estate may move some production back to Europe from Asia as a new medium-term strategy. This is the conclusion of an expert on-line conference on the current real estate market jointly held in the first half of May by the investment and real estate group ARETE and the real estate consultants JLL. “Investments have obviously slowed due to the coronavirus – when people cannot meet, transactions are suspended. However, we expect this direct impact to be reversed within the next six months at most. Compared to real estate investment horizons, this is actually a very short time,” says Hana Kollmannová, director of capital funds at the JLL real estate consultants. “Keep in mind that certain countries are still seeing a lot of transactions. In Germany, for example, pension funds have purchased real estate at prices higher than those six months ago,” says Robert Ides, co-founder of the ARETE investment and real estate group. The rates of return from real estate have remained at the same level, except for retail buildings and hotels – these two segments have been hit hardest by the pandemic. We are not seeing such drastic impacts in other segments. The general problem on the Czech market is a lack of industrial real estate suitable for investment. “We expect investors to focus on long-term leasing of real estate to solvent tenants. We believe that the industrial real estate segment will return to normal first, including the volume of transactions, while hotels will probably be last,” says Hana Kollmannová from JLL. Compared to 2018, last year we saw a lot of interest from Czech investors in offices and hotels, but less in industrial real estate. This could change significantly. We are now witnessing a trend of leasing industrial real estate to e-commerce companies. The immediate demand for warehousing and distribution centres is strong. “We can expect the manufacturing segment to follow the same path over the long term – companies will be considering a strategic move from Asia to Europe over the medium- and long-term to reduce and stabilize their distribution networks. The current situation has clearly shown that a number of companies have suspended production because of a lack of parts and components produced outside the European Union, not due to the restrictions,” explains Robert Ides from ARETE. Generally speaking, we assume that the value of industrial real estate will rise, in particular in the Czech Republic. The value of industrial real estate in Europe has grown between 12% and 31% in the last five years. Central Europe has seen the least growth – only 15% in the Czech Republic. “Global demand is continuously increasing and will continue to do so in the future because of the growth of the global population. Consumer behaviour cannot be changed at will – goods must be produced and stored somewhere. The coronavirus has just shifted consumption over time,” explains Robert Ides from ARETE. The average rent for industrial real estate in the Czech Republic stabilized at EUR 4.75 per m2 per month at the end of the last year. “Currently, at the end of Q1 2020, the industrial real estate vacancy rate has risen slightly from 4.1% to 5.3%, but this is still far from the levels seen between 2008 and 2011. We think this is a mere fluctuation. If the restrictions are successfully eased, we expect a decrease in the vacancy rate due to the low level of speculative construction,” adds Hana Kollmannová from JLL. The ownership structure of the real estate and owner behaviour will probably be the key factors. There is a big difference between the current crisis and the one from 2008. Back then, German funds represented a large part of real estate. However, Czech capital has gained a larger share over the years. “We can clearly see the influence of market demand in exchange-traded funds. Investors may quickly close their positions and force the funds to sell a part of their portfolio. This could introduce interesting opportunities for profitable transactions to the market. Non-publicly traded funds are not exposed to the effects of financial markets – the only thing that matters is the independent valuation of assets. So far we have not seen any differences in valuation, nothing has changed. The new valuation will become clear after transactions have been affected,” says Robert Ides from ARETE. The change in the banking sector policy has definitely been important. “The ratio of bank financing to fund asset value will play an important role. Less indebtedness is currently a major advantage,” says Robert Ides from Arete.
Earnings results of ARETE real estate fund: Cumulative return of 115%, year-on-year appreciation of 8.9%
Today, the ARETE investment and real estate group released information about the earnings of its second fund in 2019. The total cumulative gross return on the fund, focused on investment into industrial real estate in the Czech Republic and Slovakia, reached 115%, while the gross return for the previous year was 8.9%. The value of assets at the end of 2019 exceeded CZK 2.4 billion and the fund will grow further in 2020 thanks to its halls nearing completion. A detailed inspection of the results is now being finalized by the auditors of Deloitte Audit. This year, ARETE group opened up a third fund to qualified investors. In addition to industrial real estate, this fund also invests in new construction. “The past year was very successful for us. After four years of operation on the Czech and Slovak market, the second fund has achieved considerable success – we managed to increase the assets in our portfolio and further diversify it and maintain extraordinary returns for our investors,” said Lubor Svoboda, one of the co-founders of the ARETE group. “In the coming years, we want to keep bringing exceptional returns to our investors. And since the second fund was closed last year to new investors, we focused on preparing a completely new, third fund. We opened it to investors this year and we have already seen investments worth tens of millions of EUR. A significant advantage of the new fund is the option to purchase under better market conditions, which can significantly increase the value of investments in the coming years.” Robert Ides, the other co-founder of the ARETE group, says, “We have data from an independent evaluation of the earnings from our real estate funds in the Czech Republic as of 31 December 2019. Our ARETE group fund is earning our investors the highest appreciation over the long run.” The ARETE INVEST CEE II sub-fund lords over the overall long-term statistics – it has had the highest average annual return for the whole term of its existence (20.55%). At the same time, it has one of the lowest ratios of bank loans to assets among all the evaluated funds of qualified investors. “At this time, we think our strategy of lower indebtedness, which has been applied in our new fund, is an unequivocal competitive advantage for us,” says Robert Ides. In 2020, a third fund of the ARETE group opened up to investors. This fund is not only going to invest in developed industrial real estate in Central and Eastern Europe but will also build new logistics and manufacturing buildings. The target value of the portfolio should approach CZK 12 billion and it includes over 600,000 m2 of premises for rent and more than 300,000 m2 of lots for further construction. “At this point, our investment evaluation in the Czech Republic and Slovakia includes real estate totaling more than CZK 8 billion. We consider some of them to be very interesting,” adds Lubor Svoboda.
The fund of the ARETE Group is the most profitable real estate fund in the Czech Republic
According to independent evaluation of Hospodářské noviny monitoring data of real estate funds operating in the Czech Republic, the fund of the ARETE Group has long brought the highest appreciation to its investors. The ARETE INVEST CEE II sub-fund reigns supreme in the overall long-term statistics – it has the highest average annual return throughout the fund's existence (20.55 %). At the same time, the sub-fund CEE II has one of the lowest loan-to-asset ratios out of all the monitored funds of qualified investors with loans. It results from the common project of HN and the Institute for Strategic Investments at the University of Economics, Prague. Since 2017, it provides an overview of data on real estate funds available to Czech investors. Newly published data processed financial information valid at the end of 2019. In addition, this year, as part of its growth and thanks to the interest of investors, the ARETE Group has opened a new fund of qualified investors, ARETE INDUSTRIAL SICAV, which focuses on industrial properties in the CEE region.
There will be more investment opportunities in commercial real estate. Demand for warehouses increases, says Lubor Svoboda from Arete
The Prague investment and real estate group Arete is a pioneer of real estate funds in the Czech Republic for so-called qualified investors, ie for people who can afford to invest a million crowns or more. This year it is launching the third specialized fund, focused on valorizing money through commercial real estate – mainly industrial and logistics parks and production facilities. Co-founder of Arete Lubor Svoboda in an interview for HN says that the economic slowdown caused by the coronavirus pandemic can reduce some property prices and create new investment opportunities. “We’re ready to buy,” he says. Growing demand for warehouses and logistics areas from online shops and other businesses also helps Arete funds . The whole article in CZ: https://archiv.ihned.cz/c7-66749690-ol906-e45489ee131143f
Speculation on profits disappears now, stability is important
“We have opened a third investment fund. Thanks to the current situation there are interesting opportunities at affordable prices in a more favourable competitive environment. Prices, which were unnaturally high in some segments, will be corrected. When the situation calms down, there will be a very good time for big investments. We are ready,” says Lubor Svoboda, co-founder of ARETE Group. Read more (Czech language version only) The coronavirus epidemic is changing the strategies of real estate investors. Instead of highly profitable projects, real estate investment funds are now primarily looking for stability, which is represented in particular by logistics and industrial properties, whose owners are now significantly less threatened by the economic impacts of the epidemic. Lubor Svoboda is one of the founders of the Arete investment funds, which specialize in investments in commercial real estate and took first place in last year’s Hospodářské noviny ranking comparing real estate funds by performance. According to Svoboda, income properties now represent the most stable investment instrument on the market. Why do you currently consider real estate to be the most suitable investment instrument? Goldman Sachs and other large banks are now recommending a shift from short-term liquid assets, which are stocks, bonds, and the like, to long-term ones, which are real estate. Investments in industrial real estate are particularly suitable, because there are a number of very high-quality companies that will not be significantly damaged by this crisis. For these companies, it is important that they generate cash, and what generates cash these days is absolutely key. Some types of real estate are currently showing great stability compared to other instruments. Are investments in commercial real estate becoming more attractive also because of the state of the stock market? For industrial real estate, two sectors need to be distinguished – logistics and manufacturing. Demand for certain logistics sectors is also growing at this time. This applies, for example, to chains that supply stores with food and other consumer goods. We see huge demand for new space in them, because they need new space due to the shift to e-commerce. Will there come a time due to the epidemic when investment opportunities arise that do not appear every year, for example in the hotel segment? Will properties that would not normally be for sale be for sale? Certainly yes, and this applies to all sectors. We have now opened a new investment fund, the third in a row, and we are very much looking forward to it. New opportunities will appear at affordable prices and there will be less competition, because some competitors will be concerned about maintaining their existing portfolios and will be more willing to sell at reasonable prices. There will be a correction in prices, which were unnaturally high in some segments and properties no longer had such a value. When the situation calms down, it will be a very good time for big purchases. What impact will the current coronavirus epidemic have on commercial properties and on investments in them? In the long term, it will certainly be felt, however, we do not see any short-term, immediate impact now. Industrial properties have the gift of not being subject to consumer behavior like, for example, retail centers or hotels, but are tied to very long-term contracts with individual tenants, which are mostly international companies that are stable enough to overcome a short-term outage. However, it is still unclear how long the current situation will last and how deep the economic downturn will be. Could industrial real estate be threatened by a possible longer production outage? It could happen. If this situation lasts longer, it is possible that individual tenants will start to reduce production. However, this does not mean that they will stop paying rent. They still have a production program and it is part of the supply-demand chain, so they have to maintain some activities. Does this not apply to shopping centers? That is the difference. Shopping centers or, for example, hotels are physically closed or have limited operations. In terms of the long-term perspective, owners of industrial real estate have much greater coverage in terms of bank guarantees or guarantees from their multinational parent companies. “There will be a correction in prices, which were unnaturally high in some segments.” For residential real estate in Prague, there is talk of the impact of the loss of rentals via Airbnb for approximately 15,000 apartments, whose owners may have problems repaying loans and mortgages. How will this affect the market? It all depends on how long this situation will last. The only thing that can be expected in the long term is some price corrections. Investors who put money into these properties will be more cautious. The question is what will happen to the returns, which were very small and essentially only depended on the speculative growth of the apartment’s value. We don’t know what will happen and whether these values will freeze. So the deeper the crisis, the more pronounced will be the differences between the individual segments of investment properties? Yes. Segments that are less resistant to crises are, for example, accommodation services, hotels, guesthouses and the like, they are the first to suffer and the declines tend to be large. We know from the last crisis that half of the pensions I have no doubt that there will be a reduction in production throughout the entire automotive industry chain. It is even possible that part of the chain will stagger and collapse completely, even if large multinational corporations survive. However, the structure of suppliers is changing greatly, and they are switching from human labor to robotics. A lot of investment is being made in the robotization of production processes, which is an irreversible process. I have no illusions that as many cars will be sold in the near future as before. A waiter who cannot work now because his restaurant has been closed will not buy a new car. Maybe in a year or two. How
Arete widens its real estate portfolio in Uherské Hradiště and Košice, with investments reaching almost EUR 20 million
The investment and real estate group, Arete, incorporating real estate investment funds, announced today continuing enlargement of its portfolio. After acquiring land in an industrial zone lying just outside Košice, Slovakia, Arete has begun construction involving investment of EUR 13 million of a specialised production hall covering an area of 12,000 m2 for a leading European steel chimney manufacturer. Arete is also significantly enlarging the existing Forschner production hall in Uherské Hradiště, investment into this project being in the region of EUR 7 million. “After a quantity of acquisitions of functioning, profitable industrial properties that we have made over the past few years, we decided to take on our own development projects. Our pioneer project was construction of a huge warehouse on our own premises in Nové Mesto nad Vahom, which was completed last summer. Together with our current construction project, this demonstrates that we are capable of widening our portfolio, which allows us to significantly increase value for our investors,” explained Lubor Svoboda, co-founder of the Arete investment and real estate group. New Premises in Košice In November, the Arete group completed acquisition of land in the Veľká Ida industrial zone which lies within easy access to Košice in Slovakia. This zone, which even offers the opportunity of receiving government support, has for some time been the focus of interest of foreign manufacturing companies. Arete group is now building a specialised production hall for Steelcon Slovakia, part of the Danish group, Dominion Steelcon, which specialises in the manufacture of steel chimneys. This highly specialised project involving two halls with investments totalling EUR 13 million is proof of just how attractive the Slovak investment market is. Completion is planned for the second half of this year. Production hall extension in Uherské Hradiště Intensive work has been underway since last year on an extension to the existing Forschner production hall and logistics park in Uherské Hradiště. The new hall extension should be finished in April. An important aspect of the construction work is the creation of modern, clean production spaces suitable for manufacturing components for electric cars while meeting the highest international standards, with a constant temperature and humidity. Of course, rainwater infiltration and heat recuperation considerations are also addressed in the construction works. Modern office space and hygiene facilities for staff are integral to the new hall. Class A industrial premises in Uherské Hradiště with excellent road access to Slovakia and South Moravia has been in the Arete portfolio for four years now and it is 100% leased out to Forschner, which has grown from a German family firm into a multi-national corporation. Its focus lies on electric vehicles, production of cable and electromechanical systems and other components intended mainly for the automotive industry. Its clients include Audi, Continental, Daimler, Volkswagen, Philips and Bosch. About the Arete Group: The investment and real estate group Arete was established in 2014 and focuses on investment in real estate. The first Arete Invest sub-fund, which focused on residential properties, completed its investment cycle in 2017, with a gross total appreciation of 120%. The second Arete Invest sub-fund, investing in industrial properties, has been operating since 2016, with a gross total appreciation of more than 90%. In 2020 a third fund has been opened for investors: Arete Industrial. The goal of this new fund is not simply investment in ready-built industrial properties, but also to construct them. The funds are intended exclusively for qualified investors, both natural and legal persons, whose activities are subject to inspection and supervision by the Czech National Bank. For more information, go to www.arete.eu. Find out more by phoning: Ondřej Micka, mobile: +420 724 352 552 Martina Chromečková, mobile: +420 774 135 551 Tel: + 420 251 091 211 E-mail: arete-pr@emcgroup.cz
