DEGI Europe Retail invests €140 million in Bucharest

DEGI, part of the Aberdeen Property Investors Group, today announced that it has signed a contract to purchase the Iris Shopping Centre Titan in Bucharest, Romania, for €140 million. The acquisition will be made through a property company which is to be integrated into special property fund DEGI EUROPE RETAIL, a vehicle that invests in retail properties throughout Europe

Located in the Titan district, the city of Bucharest’s most heavily populated area, the shopping complex consists of two attached commercial units. In November 2006, the Auchan hypermarket with a connected shopping gallery was opened, followed by the ground floor of the Iris Commercial Gallery in May 2008.

The coming months will see the opening of the first floor, consisting of a cinema, bowling alley and food court. In total, the retail property has a gross rental area of approximately 48,000 m², and 2,000 parking spaces.

French retail chain Auchan has agreed to lease the hypermarket and the shopping gallery for a long-term period and this will secure the largest portion of the expected cashflow. The rest of the shopping centre is almost completely let to highly credit-worthy institutional tenants. All leases are in euros and fully index-linked. This largely secures the investment against currency and inflation risks.

The Iris shopping center is situated in a clearly visible location on a main road in the east of Bucharest. Around 130,000 people live within one kilometre, while approximately 300,000 are based within five kilometers. Apart from smaller food stores, there are no other competing properties in the area.

Plannedshopping centers are located on the edge of the market area of five kilometers and seek to attract a different type of target customer.

With a population of around 22 million, Romania is one of the largest retail markets in the EU, and one of the region’s most dynamic economies. Gross domestic product growth was 6% in 2006, while unemployment stood at 6.3% at the end of 2007 and has since fallen further. Rising private consumption is one of the main drivers of Romania’s growth story, with an annual increase of 5.3%
forecast up until 2012. Meanwhile, inflation is running at around 5%.

“Romania is one of the countries with the strongest growing consumer spending for private households in Central and Eastern Europe, and quality modern shopping centers will profit from this trend,” comments Bärbel Schomberg, CEO of the DEGI management board.

The 2 million inhabitants of Bucharest, Romania’s largest city, account for around 10% of the country’s population and contribute approximately 23% of its gross domestic product (GDP). The city’s GDP growth is estimated at around 9% for 2007 and at an annual rate of 8.4% for the years from 2008 to 2010 suggesting that it is set to be one of fastest growing locations in Eastern Europe.

“Thanks to its excellent location, Auchan Titan has surpassed all expectations, becoming the first shopping centre in Romania to record annual sales in excess of 100 million euros. This expansion of our investments in Romania will be well worthwhile, allowing us to create significant value for
investors in DEGI EUROPE RETAIL through exposure to the dynamic Romanian economy,” Schomberg adds.

source: DEGI