Slovakia Investment Property

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Slovakia Investment Property Newsletter
May 2006 - Issue # 20
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The sun and summer temperatures are starting to attract
large shares of visitors to Bratislava, a preview of what
is likely to be the best tourist season in the city's
recent history. If you are planning to visit this summer,
don't forget to book your hotel well in advance!

Continuing with an overview of Slovakia's commercial property
markets our focus this month is on the booming retail segment.
In the June and July issue we will bring an overview of
the industrial segment as well as the largest real estate
transactions in Slovakia that resulted in a complete sell
out of all new business and retail centres and industrial
parks to international real estate funds and institutions.

And, in case you've missed any of our previous newsletters,
they are available for you here:

www.slovakiainvestmentproperty.com/newsletters.php

In this issue you will find:

1. Ready for the Tourist Season
2. Shopping Centres: Slovakia's New Retail Boom
3. Your Questions Answered
4. Tell Us What You Think!

===================== FEATURE EDITORIAL =================

1) Ready for the Tourist Season

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In June commuters between Bratislava and Vienna will be
able to rely on a new transport way besides the traditional
rail, bus or car travel. Twin City Liner is a high-speed
(60km/h) catamaran service with a capacity of 106 passengers,
connecting Vienna and Bratislava city centres. The fully air
conditioned boats will offer comfortable experience including
flat screen TVs, panoramic windows, buffet and drinks. With
ticket prices from €15, the Twin City Liner is certain to
prove popular with both commuters and tourists.

* * *

Slovakia based Sky Europe Airlines are experiencing a
massive passenger boom. The low-cost airline has transported
nearly 1.9 million passengers in 2005, a million more than
in the previous year. Since its fundation in 2002 Sky Europe
have transported 3.4 million passengers.

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2) Shopping Centres: Slovakia's New Retail Boom

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Slovakia's economic success is having a positive effect on
employment, wage growth and, consequently, purchasing power
of local consumers. The strong increase in private consumption
as well as growth in bank lending has led to higher retail
sales.

Currently the country has 18 retail/shopping centres (with at
least 30 tenants) and 83 hypermarkets (supermarkets with over
5,000 m2). Retail rents in shopping malls range from €15 to
€35/m2/month in Bratislava and €10-25/m2/month in regional
capitals. In hypermarkets the m2 rents are €7-20 per month.

In terms of hypermarkets Slovakia has the second highest
saturation in Central Europe, after Czech republic. In Jan
2006 there were 15 hypermarkets per 1 million inhabitants.
The Bratislava region leads with 150 m2 of hypermarket sales
area per 1,000 inhabitants, Trnava, Trencin, Nitra and Kosice
regions have 80 m2 per 1,000, Zilina and Presov regions 60 m2,
while Banska Bystrica region has only 40 m2 per 1,000 people.

Until late 1990's small independent retailers have dominated
the underdeveloped Slovak retail market. By the turn of century
they have given way to supermarkets and hypermarkets. Today
over 75% of Slovak households do their grocery shopping in
large retailers such as Tesco, Billa, Carrefour, Kaufland,
Delvita, Hypernova, Metro and Lidl.

The first private retail project in Bratislava was created
after the end of communism by sale of the Prior chain to US
investor Kmart. In 1994 Tesco has arrived (today the largest
and fastest expanding retailer in Slovakia).

* SHOPPING PARK SORAVIA *

The first modern shopping centre, Soravia Shopping Park, cost
€ 14 million and opened in 1998, with 10,000 m2 of leasable
area in the proximity of Bratislava airport.

* DANUBIA SHOPPING CENTER *

In 2000 Danubia SC was opened in Petrzalka, featuring anchor
tenant Carrefour and 40 shops and services.

* POLUS CITY CENTER * (www.poluscitycenter.sk)

In late 2000 the developer TriGranit delivered Polus City
Center with 180 shops and services, cinemas, bowling and a
large food court. One of Bratislava's most popular malls, the
€ 78 million investment offers 40,000 m2 of leasable space.

* AUPARK * (www.aupark.sk)

Slovakia's most popular shopping mall - Aupark - followed
a year later (€ 108 million; developer: HB Reavis). Aupark,
untypically for Slovakia, doesn't rely on an anchor tenant
but offers a mixture of shops, services and entertainment,
including fitness centre, squash, bowling, roulette, disco,
cinemas and an extensive food court. Aupark also hosts events,
festivals and competitions. It welcomes 30,000 visitors a day.

A welcomed addition in 2005 was Aulandia, an aquapark and
spa, located on the top floor and rooftop of Aupark. Water
attractions include pools, tubes, waterfalls, summer beach;
among spa facilities are 60 massages, saunas, health treatments,
ice cave, and more. (www.aulandia.sk)

This year HB Reavis will undertake an extension of Aupark that
will increase the number of shops to 260, over a leasable area
of 58,000 m2 (currently 43,000 m2). An office tower is also
planned for 2007.

* AVION SHOPPING PARK *

Ikea has developed Avion Shopping Park (near Bratislava
airport) in three phases. Phase I (2002, 34,000 m2) included
a new Ikea store, phase II opened in 2003 and in 2006/7 an
18,000 m2 extention will increase the total leasable area to
66,000 m2 and number of shops and services to 121. The area
benefits from unique tenants such as furniture and homeware
giants Ikea, Kika, Hornbach as well as large sport retailers.

* SHOPPING PALACE * (www.shoppingpalace.sk)

Created in 2004 by enlargement of the earlier Shopping Park
Soravia, the Shopping Palace houses its anchor tenant, the
largest Tesco hypermarket in Slovakia, as well as shops and
eateries over an area of 55,000 m2. The Austrian investor,
Soravia Group, plans further enlargement to 75,000 m2.

* YOSARIA PLAZA * (www.yosaria.sk)

The most anticipated shopping centre development is Yosaria
Plaza, to be opened in 2007 after total redevelopment and
extension of the communist-era OD Ruzinov department store.
As a contrast to Bratislava's American style malls, Yosaria
will be the country's first vertical shopping centre (Asian
type) with 5 overground and 4 underground floors.

A € 62 million investment, the mall will consist of 300 shops
and services as well as a hypermarket, restaurants and cafes.
A large relax centre will include fitness, squash, tennis court,
saunas, massages, ice rink, bowling, and a 25m swimming pool.

Its convenient location in the heart of Bratislava's second
largest city part Ruzinov should guarantee Yosaria's success.

*MIXED-USE SCHEMES*

Responding to local demand, most of Bratislava's new and
planned A class business centres also feature retail space
on the ground floor.

Extensive retail space will also be part of upcoming city
centre redevelopments of the main rail station (developer:
IPR Slovakia) and the main bus terminal (HB Reavis), and
further out in the mixed-use River Park (J&T) and Eurovea
(Ballymore) projects.

In the heart of the city centre a Slovak-British investor
plans redevelopment of the Tesco department store and nearby
hotel Kyjev into a mixed-used project with 40,000 m2 of
retail space.

* HIGH STREET *

Due to 50 years of communist planning Bratislava does not
have a high street or main shopping area. Independent shops
and signature boutiques are spread around the city centre
(Old Town). Retail space in the centre is in high demand and
Bratislava has seen the highest increase in retail rental
values in CEE year-on-year. (Rental rates in the city centre
range from €15 to €40/m2/month depending on size and location.)

The most promising retail area in central Bratislava lies
between Obchodna ulica (street) and nam. SNP (sq.) where
Tesco department store is located. A new high-end addition
to this area will be the 1,700 m2 Galeria Delta (by Cresco
development).

Other regions of Slovakia
-------------------------

Since 2004 the shopping boom has been spreading from the
capital to other areas of Slovakia. Two shopping centre
brands are, in particular, undertaking a serious expansion
to larger regional cities: Aupark and MAX.

Developer and investor HB Reavis is taking its successful
Aupark concept to Zilina (24,000 m2 of leasable area, 130
shops and services), Kosice, Ruzomberok, Trencin and possibly
Piestany.

After the first MAX shopping-entertainment centre (2004,
Trnava) proved to be a winner, investor EuroMax Slovakia
has added new MAX centres in Trencin and Poprad and further
expansion is planned to Zilina, Nitra, Presov, Bratislava
and potentially Banska Bystrica and Kosice.

Dutch investor Redema Group is building Tulip Center, a
smaller shopping centre in the town of Martin (Zilina
region), with 11,000 m2 of leasable area and 60 shops and
services to include fitness and entertainment.

Another regional project - Centro Nitra - opened this
April in Nitra with 19,000 m2 of leasable area (anchor
tenant Hypernova, 65 shops, cafes). The second phase with
another 9,000 m2 will be delivered in late 2006. (Total
investment € 40 million; czech developer Discovery Group)

Next year Centro Nitra will get competition from a new
shopping project, CityPark (Slovak developer ICT Istroconti).

While most regional projects are rather smaller schemes
with under 15,000 m2 of leasable area, one development
under construction in Banska Bystrica is of a scale seen
only in Bratislava: Europa Shopping Center.

Its fate will be closely watched amidst concerns whether
the Banska Bystrica region (one of Slovakia's poorest) will
sustain a shopping of 32,000 m2 and 110 shops, services,
restaurants, cinemas and sporting & relax facilities. Slovak
developer and investor VAV Invest will deliver the Europa SC
in 2007 (a € 43 million investment). Part of the project is
also a 23-storey office block (Europa Business Centre), the
first serious attempt at the office market outside Bratislava.

The future
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The retail boom Bratislava has seen in recent years will
continue spreading into other regions of Slovakia. Several
shopping centres are planned for the regional capitals in
2006/7. Meanwhile hypermarkets, continuing to expand across
the country, will be built in smaller towns as well (over
20,000 inhabitants). This year Slovakia's hypermarket sales
area will surpass 500,000 m2.

With the new Yosaria Plaza as well as extention of existing
malls in 2006/7 Bratislava's retail capacity will slowly
fill out. New projects scheduled for delivery by 2008/9
(Eurovea, new Main Rail Station, etc) will have a significant
impact on the retail market, by strongly increasing the
competition as well as attracting new retailers to Slovakia.

In spite of growing competition the increase of disposable
incomes and purchasing power as well as consumer debt
capacity will continue to encourage development of retail
centres across Slovakia.

In the next issue: industrial segment and logistics.

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3) Your Questions Answered

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"Is it true that a building in Slovakia can be owned by
one party while the land belongs to another owner?"

Yes, while in some countries a building is inextricably
linked to the plot of land on which it’s located, under
Slovak law, the building and the plot can be bought and
sold separately. While this is rarely the case, it is
important to make sure you are buying the entire property
(including land) when ownership is being transferred to
you from the seller. A Slovak solicitor can make all
necessary checks prior to your purchase.

If you have a question you want to see answered here,
please send it to us: contact@slovakiainvestmentproperty.com

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4) Tell Us What You Think!

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We would love to hear what you think of this issue of our
newsletter. We hope you find the information useful and
wish you best success in your investment activities.
And of course, if you have any suggestions for upcoming
issues that you'd like to share with us, please send them!

Just e-mail us at: contact@slovakiainvestmentproperty.com

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We are looking forward to seeing you next month. In the
meantime, if you have any questions or would like to
request further information, please contact us at
info@slovakiainvestmentproperty.com or at
+44 (0)207 152 4014.

Best of success,

Petra Gajdosikova
Managing Director
Slovakia Investment Property
www.slovakiainvestmentproperty.com

Slovakia Investment Property is a trading name of
Alpha Real Estate Investments Limited