The ING Office Fund has bought an A Grade office building in the Central European city of Prague in the Czech Republic for €37million, approximately $A63.8 million.
Budejovicka Alej is located in the midtown district of Prague 4, approximately seven kilometres drive to the City centre, the property is the first European acquisition for the fund.
The property was secured on an initial yield of 5.8%.
Budejovicka Alej was completed in May 2005 with 11,673 sqm of net lettable area and 164 car parking spaces.
The building has three underground car parking levels and nine above ground floors and is currently has 13 tenants ranging in size from 260 sqm to 2,163 sqm.
IOF’s chief executive Tino Tanfara said the property is an ideal first investment into Europe in one of the highest ranked and most favoured commercial property markets within Central Europe.
“The Czech Republic is a strategic business location and geographic hub of Central Europe, with a dynamic economy that is growing significantly faster than the EU average,” he added.
The Czech Republic has a population of approximately 10.2 million and is a member state of the European Union. The Czech Republic is similar in population size to Greece, Portugal, Belgium and Hungry, and is larger than Sweden, Austria, Denmark, Finland and Ireland.
The country’s GDP growth rate has been one of the strongest within the European Union, consistently exceeding 4% per annum and forecast to growth at similar levels over the long term.
“The property is strategically located on key transport nodes and is tenanted with major multinational and national tenants including Nissan, Shell, Deloitte, AT Kearney and SG Equipment Finance, complementing the Fund’s existing blue chip tenant mix,” Tanfara said.
The total size of the Prague office market, which is made up of four sub markets, is approximately 1.8 million sqm.
Tanfara said the outlook for the Prague office market is positive over the medium to long term
“Forecast GDP growth for the Czech Republic of approximately 4% per annum over the medium term, coupled with significant amounts of direct foreign investment into the country is expected to maintain strong net absorption for well located office space,” he added.
The property was sourced, secured and will be managed by the ING Real Estate Investment Management team in Prague.
IOF has gross assets of $2.4 billion, with a 67% weighting to Australia, 30% weighting to the US and 3% weighting to Europe.
The acquisition was initially fully funded with debt, with the proceeds from the yet to be settled sale of Henry Street, Penrith used to reduce the fund’s gearing in the near term.
By Nelson Yap
