Big league fund buys ECPC's office properties in Romania

Deutsche Gesselschaft fur Immobilierenfonds (DEGI), the real estate investment arm of the German company Allianz, has entered the Romanian market by taking over the entire Romanian portfolio of ECPC for 110.5 million euros – marking the first exit of a major investment fund from Romania.
European Convergence Property Fund (ECPC), which is managed by the UK’s Charlemagne Capital, held three office buildings in Bucharest – Millennium Business Centre (close to the Bucharest Stock Exchange), PGV Tower (located in the Vitan area) and Construdava I (Pipera) – which it acquired for an overall sum of 89.1 million euros between February and July last year.
Under the circumstances, the profit of the British investors exceeds 20 million euros, which, if calculated against the volume of the investments, translates into a yield of around 25% over approximately one year.
The triple transaction is very important for three reasons. Firstly, it is the biggest office space transaction ever closed in Romania; secondly, because it involves one of the biggest German funds ever to enter the market; and thirdly because it marks the first exit of a listed fund.
The yields registered at the time of the sale were 6.40% for Millennium Business Centre, 6.55% for PGV Tower and 7.20% for Construdava I, specified the ECPC representative.
“From now on, Romania will be considered a secondary market, where transactions are fast; trading costs are low and prices are high, but the risks remain lower,” explained Victor Capitanu, partner with the investment firm Capital Partners.
Capital Partners acted as an advisor to Charlemagne during the acquisition and sale of the three buildings. Capitanu says this deal marks the entry of the big league of institutional investors or the so-called “elephants”.
Such investors, which are part of the world’s financial giants, have access to funding at a Euribor rate (currently at 4.52% for 12 months) plus 0.5%, taking into consideration that a Euribor rate plus 1.5% is regarded as a good rate.
These investors usually keep the buildings they buy for 3, 5 or 7 years and seek to manage them at an optimum level in order to derive as high a yield as possible.
“Such big league investors expect zero risks and plan their investments so as to have a satisfactory return,” Capitanu explained.
The adviser to the buyer was real estate agency Eurisko, while the legal counselling was provided by the law firms Badea Clifford Chance and Wolf Theiss, the former assisting the seller and the latter assisting the buyer.
Charlemagne Capital also manages the European Convergence Development Company (ECDC) fund, which is involved in the development of the residential complex Asmita Gardens in Bucharest.