See Property Market
SPDI targets high yielding commercial, retail and industrial properties in South Eastern Europe which will benefit the Company on a) high cash on cash return (>10%) and b) a yield compression basis.
Favourable political and economic conditions
- Fast growing economies
- Political reforms
- Emerging Europe part of the European Union
- Steadily growing internal markets
- EU corporates drawn by tax & cost structure
Positive Demographic Fundamentals
- Growing urban population and improving standards of living
- Increasing disposable incomes
- Substanial under supply of modern property units
- Fundamental need/demand outweighs supply
- Majority of existing stock is old, small, and of low quality
- Expected CAP rate contraction similar to CEE
Importance of the Region
- Strong demand from automotive industry in Romania and Serbia
- Chinese investment through COSCO (world’s 4th largest container shipping firm and 2nd largest port operator) in Port of Piraeus (Greece) & various infrastructure projects in Serbia widening Asia’s gateway into Europe
In the last year the Greek economy has been turning around however it still remains in recession. GDP contracted by 0.7% in Q2 2016 amid plummeting consumption and fixed investment. Public debt was 176.3% of GDP in Q1 2016, while discussions with the ESM and EU in relation to debt restructuring are expected to start in Q4 2016. Greek budget showed a primary surplus of €2.7 billion in the January-June period compared to a surplus of €1.3 billion in the same period last year, mainly because the government has effectively stopped paying the dues to third party suppliers. The central government cash balance recorded a deficit of €526 million for the first six months of 2016, compared to a deficit of €1.85 billion in the same period in 2015. Inflation remains in negative territory for the fourth consecutive year, reaching a – 0.7% y-o-y rate in June. The unemployment rate edged down to 23.3% in April, which marked the lowest rate since March 2012. In May 2016, the Greek Parliament adopted most of the prior agreed actions for the first review, as decided by the Eurogroup earlier in the year. As a result, Greece received part of the second tranche of the €86 billion European Stability Mechanism (ESM) programme in mid-June. The second evaluation begins in Q4 2016.
Strong domestic demand led Romania’s GDP to register an impressive 5.9% growth Year-on-year in Q2 2016, the highest among the EU28 countries. Estimates for 2016 suggest the country’s economy growth will be 4.0% to 4.2% year on year, surpassing the EU28 average growth rate for the fifth consecutive year. Annual consumer price deflation was 0.7% in June, while the National Bank expects an average annual inflation of 0.6% this year. The country’s overall unemployment rate fell to 6.4% in June, 0.3% lower than a year ago. Bucharest currently has a ~2% unemployment rate. Exchange rates remained relatively stable throughout H1 2016 at RON 4.45 to 4.50 to the EUR. The country’s budget posted a smaller-than-expected deficit of 0.5% of GDP for the first half, compared to a surplus of 0.6% of GDP a year earlier. The finance ministry had projected the first-half shortfall at 1.9% of GDP. In the first five months of the year, foreign direct investment rose 15% y-o-y to €1.11 billion, while long-term external debt at the end of May 2016 stood at €69.9 billion, down 1% from the end of 2015. Brexit is not expected to have a heavy impact on Romania’s growth potential as there are no direct ties between the two countries. In addition, the Romanian government is in favor of more EU integration and is not part of the so called Eurosceptic group, which means no similar referendum is likely in the near-medium term. However, it is the result of the pending parliamentary elections in November 2016 that will decide the country’s stance for the years to come.
Bulgaria’s economy registered 3.0% growth in Q2 2016, maintaining last year’s performance. Private consumption was the main driver this quarter, augmented by net exports. Bulgaria’s first-half consolidated budget surplus reached €1.57 billion, or 3.5% of the country’s GDP, compared to 1.0% of GDP in the same period of 2015. The increase was mainly driven by tax revenues and a concentration of EU fund inflows. The flow of foreign direct investment dropped by 34.4% year-on-year to €517.3 million in the first five months of the year.
EU-harmonized CPI stood at -1.9% year-on-year in June, while the unemployment rate was 8.4%, recording a drop of 1.2 percentage points compared with a year ago. Exchange rates remained stable throughout the first semester at BGN 1.96 to the EUR.
The recent political crisis in Ukraine was eased with the appointment of the new Cabinet of Ministers in April. The new Ukrainian authorities have reconfirmed their commitment to move the reform agenda forward as was agreed during the formation of the new parliamentary coalition. The turn towards political stability was also depicted in the macroeconomic indicators, as the Ukrainian economy shows minor but still positive performance of 0.1% y-o-y growth. Due to improved tax collections and decelerating growth of fiscal expenditures, the consolidated budget deficit decreased to UAH 3.8 billion (~US$152m) or about 0.3% of GDP for the January-May period. Inflation stands at ~7%, down from 43.3% almost a year ago, mainly due to the sharp deceleration in the growth of utility tariffs. The unemployment rate showed a slight decrease to 9.2% from 9.6% a year ago. Although reaching 27 UAH/USD in Q1 2016, the exchange rate seemed to stabilise at ~25 UAH/USD in Q2. The IMF mission that visited Kyiv in May 2016 concluded that Ukraine has made considerable progress in restoring macroeconomic stability, but that additional structural and institutional reforms are required to turn the recent recovery into sustainable growth. The government expects to receive a partial borrowing disbursement in late September / beginning of October 2016, with another large disbursement by the end of the year. Both of them should help further stabilise the ailing currency.