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edition 3 (238)
March 2019
Investment & finance

Czechs eye up Slovakia

Interviewer Anna Pakulniewicz

Czechs eye up Slovakia
Tomas Berka, head of real estate at Redside

You have just started with building a new portfolio that focuses on CEE industrial opportunities. At the end of last year you announced your first investment for it and entered into Slovakia, completing the biggest industrial transaction of the year in that country. Can you elaborate a bit more on your strategy and approach? And why are you entering Slovakia?

Tomas Berka, head of real estate, Redside: We at Redside are based in the Czech Republic and manage assets worth EUR 500 mln in five investment funds. We started with building our real estate fund three years ago. It comprises of 50 pct office and 50 pct retail properties and includes stores such as Obi, Tesco, Penny Market and Pepco, as well as class ‘A’ office buildings in Prague. Investors can join the fund by purchasing its shares. The way we saw it, our portfolio was of the right size and structure. However, as a result of feedback from our investors and in order to further diversify, we started looking at and focusing on the industrial sector as well. We’ve now made it real by taking the first step and setting up our new, industrial portfolio with industrial assets in the Czech Republic and Slovakia for now but we’re looking to expand it to the whole CEE region in the near future. That was the reason for the deal in Trenčín last year; to get our new portfolio up and running with some attractive and reasonably large content. Having such industrial assets in our cross hairs, this is the first time in our history we have decided to go abroad to look for investment opportunities. We want to build up a portfolio worth EUR 500 mln of industrial properties over the coming years and thus increase both the number and the value of the assets we manage. And why Slovakia? One of the points on our agenda was to diversify our locations – so, we couldn’t just stay in the Czech Republic. We feel that Slovakia is not totally different nor so far from the Czech Republic. Some things are similar there so we think we can understand the market to some extent. Plus, there is also the question of yields. Yields are higher in Slovakia than in the Czech Republic, so we can get the properties a bit cheaper there and ensure better returns for our investors.

Are you planning to enter any other markets? Other countries? Different sectors?

We are now focusing on CEE industrial assets and to be honest, we are not planning to venture outside this region right now. Our business is doing fine where we are, so we want to keep focusing on it. We will probably have a re-think in a few years’ time, especially if a chance arises to enter and set up a foothold in a new market via a targeted acquisition.

Who are your investors?

There are a couple of banks, Czech insurance and financial institutions, private investors from the Czech Republic and Austria, and also Swiss private banks. In general, we are still actively working on broadening our fundraising opportunities.

What are your plans for the nearest future?

We would like to close two or three deals this year, which is perfectly doable. We want to have more industrial assets under our management, we want to build up critical mass. If we manage this, our performance will go up. Right now, we only have one asset to cover all our fixed costs. Once we have more assets, these costs will be divided between more properties and our returns will be more attractive and our income stream more diversified. This is our goal and a realistic plan, which we intend to stick to.

What do you want to buy next?

We are in the final stages of due diligence to acquire a property in Plzeň right now for a light industrial production property. Size-wise, it is in the ballpark of EUR 15 mln and we’re doing our best to close the deal soon. Combined with the property we purchased in Trenčín in December 2018, our fund will have a portfolio of industrial assets worths around EUR 100 mln. Not a bad start… while all the time, we are keeping an eye out for further investment opportunities. Our plan is to reach EUR 500 mln of industrial assets under management in the next three years or so.

Do you work alone or with an exclusive agent?

We will work with any agent that is reasonably strong has a good presence on any given market; however, we won’t shy away from talking directly to owners to forge an off-market deal if the opportunity arises.

The sale of Trenčín Industrial Park was the largest warehouse deal last year in Slovakia

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