Slovakia Investment Property

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Slovakia Investment Property Newsletter
October 2006 - Issue # 25
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Welcome to the October issue of our Slovakia newsletter.
The country has, in the last few years, been attracting
investors large and small, from all over Europe and the US.
Today we will look at the activities and impact of global
institutional investors, who have, recently, been on a
true shopping spree in Slovakia.

Plus, a very exciting news from Slovakia Investment Property!
Read below...

As usual, 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. Slovakia - Full Speed Ahead
2. Global Investors on Shopping Spree in Slovakia
3. Exciting (Expansion) News from Slovakia Investment Property
4. Tell Us What You Think!

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

1) Slovakia - Full Speed Ahead

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After the strong growth of recent years, Slovakia's economy
continues to speed up. GDP grew by a record 6.7% IN QII,
while unemployment rate was just 13.5%, down from 16.2% in
2005 and 18.1% in 2004. Average monthly wages reached
SKK 18,324 (500 euro) in QII (compared to SKK 17,274 in 2005
and SKK 15,825 in 2004).

Slovak koruna (crown) this week reached its historic maximum
with an exchange rate of 36.25/euro. In 2006 the koruna has
appreciated by 4.1% so far. According to a Reuters analysis,
the Slovak currency will likely continue reaching new record
levels. This is in line with the general consensus of a
strengthening koruna until the 2009 euro adoption.

* * *

According to the Slovak Tourist Agency the number of tourists
has reached 3.5 million in 2006, 1.5 million of which were
foreigners. Only accomodated visitors with a minimum of one
night stay count as tourists. As in previous years, 70-80% of
foreign visitors came from neighbouring countries, Czech republic,
Poland, Hungary, Austria, Germany and Ukraine. Numbers of Dutch,
Italian, Russian, French, British tourists are also on the rise.

It's not only Bratislava benefiting from Slovakia's growing
popularity. After a strong winter and summer season tourism
in the Tatras has had its best year since 1989.

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2) Global Investors on Shopping Spree in Slovakia

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Strong economic growth and resulting higher purchasing power
of Slovak consumers as well as increasing corporate demand
for offices, logistics and industrial facilities have been
the main factors behind the recent construction boom in
Slovakia. In 2005 and 2006 the construction sector was one
of the most dynamic branches of the economy.

While transport and water infrastructure construction remains
responsible for most of the output, industrial and logistics
along with the residential segment have seen a strong 2006.

With its booming economy, security of a EU member, and
high returns compared to Western Europe, Slovakia has in
the last two years attracted several international developers,
including, most recently, in the residential segment.

Austrian developers (often in partnership with local companies)
have led the foreign investor pack and were among the first
to enter the Slovak development market several years ago.
Among the largest is the Soravia Group, active in the market
(commercial development) since mid 1990's. In the residential
sector, Austro-Slovak BZ Group is one of the larger foreign
players.

Hungaro-Canadian TriGranit has established itself as one
of the largest retail-administrative developers in Slovakia,
while Skanska has been involved in various segments, including
residential development.

Czech developers Sekyra Group, Geosan and Finep have had a
relatively late start in the country, breaking ground on
their residential projects this year.

The largest newcomer is certainly Irish developer Ballymore
Properties. The company, known for developing part of London's
Docklands, has recently started construction on a mixed use
project on Bratislava's Danube river bank, to comprise over
200 top-end luxury apartments, retail, entertainment and
administrative space, as well as a Sheraton hotel. After
several delays and nearly 3 years planning process, the
Eurovea development is expected to be completed in 2009-10.

The Slovak property market recently went through its first
large wave of acquisitions. Foreign investors and property
funds have bought up everything available, in transactions
reaching nearly 750 million euro.

In a market with little existing investment-grade product,
institutional investors have been focusing on development
projects. Whether retail, office or logistics... investors
are keen to take completed projects off developers' hands.

After a slow start (with just two memorable transactions -
the 60 million euro sale of Bratislava's Radisson Carlton
Hotel and Heitman's acquisition of a majority stake in the
business centres BBC III, IV and V for an undisclosed amount)
global investors' shopping spree reached record levels in late
2005. With the 75 million euro purchase of 50% of Bratislava's
largest shopping centre Aupark by Dutch investor Rodamco
(developer HB Reavis maintained control of the other 50%).

The year 2006 has seen several record acquisitions including
the three largest transactions in Slovakia's history:

acquisition of the fully leased Apollo Business Centre
(Bratislava; developed by local group HB Reavis) by Hannover
Leasing for estimated 110 million euro (early 2006);

sale of the Polus City Center, a shopping and entertainment
mall (BA), including two office towers Millenium Tower I, II,
for which developer TriGranit banked over 200 million euro
from Immobilien Anlagen AG (Austrian group Immofinanz Immobilien);

and, Axa Group's record 250 million euro purchase of a
portfolio of logistics parks in Trnava, Nitra, Dubnica and
Bratislava, as well as the Westend Park offices (BA);
local developer J&T included in the sale an option on
future enlargement of the logistics parks.

After these sales the acquisitions were halted for a while.
The reason is simple - there is nothing left to buy. However,
with several large business centres in Bratislava, logistics
parks as well as shopping centres in other regions of
Slovakia to be built over next 5 years, the market will no
doubt see further record sales in the near future.

Forward transactions are also likely to become more common.
Until now global investors have preferred purchasing completed
and leased projects, however, this is starting to change.
Due to the limited supply investors will be entering into
projects at early planning and construction stages.

Large Slovak developers, however, tend to prefer waiting
with a sale until completion of a project. The reason -
development finance in Slovakia is (for established players)
the cheapest in Central Europe, and a completed and leased
development commands higher sales prices.

Apart from the obvious winners of the recent transactions,
the developers, the benefit to the Slovak property market
is not to be overlooked. The entry of international funds
and investors is expected to increase transparency and
introduce clear rules to the market, something much needed
not only in Slovakia but across all emerging CEE markets.

The record sales prices allow developers to enter into new,
often more speculative projects. This is likely to finally
kickstart construction in the regions (other than Bratislava).
First retail projects completed in Zilina, Trnava and Nitra
were recently sold to global investors (eg. Austria's Meinl
European Bank, GE Real Estate, etc).

While the office market is almost exclusively focused on
Bratislava, new small to medium size retail & entertainment
projects are planned for the regional capitals, along with
further logistics-industrial parks. No doubt these will,
along with the planned Bratislava projects, attract strong
competition from global buyers.

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3) Exciting (Expansion) News from Slovakia Investment Property

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Its been exciting three years since Slovakia Investment
Property started providing services to British and Irish
clients looking to invest in the fast growing Slovak market.

The time has come to think of expansion, and so we did.
I'm thrilled to say we will, after over a year of research
and own experience, enter a second property market shortly.

Similarly to Slovakia, an EU member, with a Central Europe
location, and truly fantastic opportunities for investors
entering the market at this very time. In many ways the
benefits investors can count on here are complementary to
those Slovakia and some other new member states offer. Which
is excellent news for those who've purchased or are purchasing
in the new EU and want to balance their portfolio and risks.

And... the extremely low prices (lowest in Europe in fact!)
of high quality properties are a major plus for anyone
looking for a low risk investment in a safe and established
market, with staggering potential for capital growth in the
medium to long term.

If you are curious what is this exciting market we'll soon
be offering well researched deals in... you'll receive a
more detailed explanatory email in coming week or two!

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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