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Comparison of the Slovakian Real Estate Market with other competing CEE markets

This report compares the Slovakian real estate market with other competing Central and Eastern European (CEE) markets. It examines the strengths, weaknesses, opportunities, and threats in the Slovakian market, as well as the outlook for 2010 in the CEE region. The analysis includes data on office and retail stock, cash flow, yields, investments, transactions, and developments.

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Comparison of the Slovakian Real Estate Market with other competing CEE markets

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  1. Comparison of the Slovakian Real Estate Market with other competing CEE markets Dipl.-Ing. Alexander Budasch, CIS ImmoZert Immobilien Rating GmbH |Taborstraße 1–3 | A-1020 Wien | Tel. +43 (0)50601-51901 | alexander.budasch@irg.at |www.irg.at

  2. 10 YEARS OF YIELD IN EASTERN EUROPE (prime office market)“The story of compression” and “the comeback of the country risk” compression again? compression ~700bp de-compression ~550bp ? ~350bp Source and illustration: IRG Market Research Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

  3. STOCK IN COMPARISON (retail)What does the impact of the crisis mean for the retail industry? 20.000 15.000 10.000 5.000 0 25 50 75 100 125 150 175 200 225 250 275 300 Source and illustration: IRG Market Research Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

  4. STOCK IN COMPARISON (office)Is the provision with office space sustainable? Source and illustration: IRG Market Research Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

  5. KEY MESSAGESStrengths, Opportunities Hot spots in terms of saturation with office space in Europe • • Central location and CENTROPE region • Euro zone member and “industrial arm” of EU • Bridge-head to the east • • Attractive fiscal environment for enterprises • • Potential for post-crisis retail schemes • and logistics on a selective basis • Weaknesses, Threats • Centralized market with significant east/west gap • Mono-industrial risks (automotive sector) • High provision with commercial RE • space in Bratislava • Assimilation of price and rental levels • to be expected Source and illustrations: IRG Market Research Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

  6. OUTLOOK 2010 (applicable to the overall CEE region) • CASH FLOW Majority of markets show corrected rental levels. Nevertheless clean up still ongoing • YIELDS Further stabilization of the Central European Markets, pressure on prime yields • INVESTMENTS Rare chances in the distressed segment, tightened grip on prime assets • TRANSACTIONS On international level more transaction volume for office, chances for retail and logistics seen > less market cycle constrained asset classes • DEVELOPMENTS Negative: Land and projects currently hardly marketable Positive: correction in land price levels and construction costs • POLARIZATION Quality and sustainability works out, but no market for the average and below. • ASSET MANAGEMENT Still potential for cost reductions in the operation of facilities Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

  7. EPILOGUE – something different?Keep one eye on a far away market! Fannie Mae delinquencies increase for single family loans 2001-2010 5% 4% 3% 2% 1% Jan09 Jan01 Jan02 Jan03 Jan04 Jan05 Jan06 Jan07 Jan08 Jan10 Standard & Poor Case Shiller Home Price Index (composite 20) and Moody´s Commercial Property Price Index in comparison(2001 = 1.0) 2.0 1.8 1.6 1.4 1.2 Jan01 Jan03 Jan08 Jan02 Jan04 Jan06 Jan07 Jan09 Jan05 Jan10 Sources: Standard & Poor´s, Moody´s Dow Jones Indexes, FannieMae | illustrations: IRG, Eric Glewis (cartoon) Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

  8. Example 1 WorldWide Plaza New York, Midtown Manhattan Construction: 1989 Price 2007: 1,7 bn USD*) Price Mid 2009: rd. 600 mn USD EPILOGUE – something different?Why is there a commercial RE crisis in US? *) Equity 2007: 15 mn USD (equals approx. 1% !!!) Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

  9. EPILOGUE – something different?Why is there a commercial RE crisis in US? Example 2: „The Best Dead Mall in America 2009“ Dixie Square Mall in Harvey, Illinois, approx. 30km south Chicago see: www.deadmalls.com Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

  10. AND FINALLY … There are no a priori “good or bad markets”, just good/bad assets and right/wrong strategies Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

  11. for presentation and further information visitwww.irg.at Disclaimer: This presentation was prepared by IRG and is incomplete without reference to the oral briefing provided by IRG. Neither this presentation nor its content may be used for any other purpose without the prior written approval by IRG. The information in this presentation is based on publicly available information. It reflects prevailing conditions and our views as of this date. In preparing this presentation, we have relied upon and assumed the accuracy and completeness of the information upon this paper is based. Whilst the information presented and views expressed have been prepared in good faith, IRG accepts no responsibility or liability in connection with such information or views. Comparison of the Slovakian Real Estate Market with other competing CEE markets Bratislava, March, 26, 2010 | Alexander Budasch, CIS ImmoZert

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