This joint venture expects to develop shopping centers in Kalisz, Poznan, Glogow, Gniezno and Grudziadz with a combined value of USD$160 million. The enclosed centers will range in size from 210,000 sf to 360,205 sf and be anchored by grocery stores of at least 60,000 sf. The developments are scheduled to start in early 2004 and should be completed by mid-2006.
Chris Merrill, managing director of Heitman's International Private Equity Group, tells GlobeSt.com that the joint venture will use 70- to 80% leverage to develop the centers, with HCEPP II putting up 60% of the necessary equity and Polimeni putting up the remaining 40%. The JV will borrow in Euros from German and Austrian banks.
"It's an arbitrage play," says Merrill. "We can build these at 300- to 400 basis points higher than the stabilized asset will sell for."
Heitman was an early entrant into the Central European property markets in the mid-nineties, and is now one of the area's leading real estate investment managers with the largest on-the-ground presence. The Polimeni JV will increase Heitman's ownership to 23 shopping malls in Central Europe.
Polimeni is currently involved in the pre-development and leasing phases of five projects in Poland totaling approximately 1.5 million sf and has built an on-the-ground presence there with local offices in Warsaw and Gdynia. Polimeni recently completed development on the "Konin Lakeside Galeria," a 270,000-sf shopping center in Konin, Poland, which is now 98% leased to major tenants such as Hypernova, a retailer owned by the Dutch supermarket chain Ahold; NOMI, a home retailer similar to Home Depot; and a multiplex cinema.
Merrill says the new joint venture's planned centers will incorporate similar concepts."The success of the Konin project has given us confidence in Polimeni's expertise as a retail developer," says Merrill. "Working together, we feel certain that our upcoming projects will be just as successful."
HCEPP II was to invest USD $200 million. Merrill would not comment on the level of invested capital for fund II other than to say that they are well ahead of schedule and will be announcing more investments shortly. Given the level of activity for HCEPP II, it appears that the majority is committed, which is why Heitman has started raising equity for a third fund. Merrill declined to comment on the size of the capital raise for HCEPP III.
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