Real estate funds of the ARETE Group rank at the top of the market in terms of returns
Prague/Bratislava, 20th of April 2022
ARETE INDUSTRIAL announced the purchase of a second industrial hall in Slovakia. The Belushi site, like the previous acquisition in Kežmarok, also boasts a long-term tenant with highly specialised production. The fund's ability to capitalise on its own investments is among the highest in the region. The next strategy will be to look for purchasing opportunities in new markets, says Lubor Svoboda, founding partner of ARETE Group.
The target value of ARETE INDUSTRIAL has been communicated at EUR 400 million. Where are you currently on the road to this goal?
You are right, we are targeting our fund to have a value of assets under management of EUR 400 million. We are currently about a quarter of the way there. The momentum in terms of capital raising and investment opportunities gives me a clear signal that we should reach our target within the set timeframe. In any case, we always pay attention to the quality of the assets we buy, the tenants and, of course, the return on the fund that we communicate to our investors. And because ARETA's key managers are also investors in the fund, we want to achieve an appreciation of over 10% p.a. That is our main objective.
The demand for industrial real estate is growing and so is the yield on it. Does this complicate the search for acquisition opportunities?
Liquidity in the industrial property market is good. The positive mood is also reflected in the massive year-on-year increase in the number of transactions. Objectively, there are fewer buying opportunities on the market. On the other hand, we are recording the highest volume of acquisition opportunities for our fund in recent years. This is due to the fact that we are able to find investment opportunities outside the open market and that we are able to develop new industrial parks ourselves. Our comprehensive approach has benefited greatly from the very strong demand for rental space in industrial properties.
What are your fund's immediate acquisition plans?
Unfortunately, I can't be too specific. In any case, we would like to double the value of the assets in the fund in 2022 compared to the end of 2021. I can also reveal that the Czech Republic and Slovakia will continue to be our key markets. We would also like to add one or two industrial parks in Germany or Austria.
How is investor interest in putting money into your funds changing?
ARETE funds are among the most profitable in their segment in Central Europe. I am pleased that the interest in investing in our current fund is continuously very good, even after the beginning of the Ukrainian crisis. Investors are looking for products that target above inflation, which our product fulfils. At the same time, it comes with very low volatility and a readable economic prospectus. The combination of the above is attractive to investors. This applies to private and institutional investors at the same time.
Has the war in Ukraine affected the perception of Slovakia by foreign investors?
We are dealing with various partners and investors from practically all over the EU and so far we have not encountered any of the entities changing their view of the stability and prospects of Central Europe, especially the Czech Republic and Slovakia, in a negative way.
What was the Fund's appreciation in 2021 and what is your forecast for this year?
Thanks to the excellent work of the entire portfolio management team, we achieved a high appreciation of more than 24% last year alone. Given the above, it is difficult for me to predict the appreciation for this year, however, all the newly executed transactions and the portfolio as a whole meet the investment parameters and strategy of the fund. Thus, I believe that 2022 will once again be an above-average year in terms of asset appreciation.
At the end of last year you established cooperation with Partner Asset Management. Why are institutional investors and distributors important to you?
The fund targets both institutional and private investors. The cooperation with Partners Asset Management, which we value very highly, is a logical outcome of our activities aimed at increasing the involvement of institutions both in direct investments in the fund and in the distribution of the fund's investment shares. In my opinion, we are making the most of the potential of the combination of private and institutional money. Increasingly, we are turning our attention to investors from German-speaking countries.
The postcovid time war period and the current crisis in Ukraine have greatly destabilised supply chains. Do you see an increased need to build up safety stocks?
Definitely yes. To give an example. Prior to the development of one of our industrial parks, we agreed with the tenant that only the first phase of the project would be implemented and that the second phase would be implemented within approximately two years. Just before signing the contract documents, the tenant's representatives informed us that they needed to expand the warehouse space immediately. As a result, both phases were implemented at the same time. We have several analogous examples. At the same time, in certain regions, we register a really significant excess of demand for storage space over supply. The consequence is that rents are rising.
Do you see the high prices of building materials or the lack of them as a bigger problem?
We currently have several industrial parks under construction, and so far the supply companies have managed to secure materials in sufficient quantities. Although we believe that the problems in the materials and raw materials market are short-lived, higher prices are likely to persist. We have already reflected this in our capital budgets. Given the size of our portfolio and the fact that only a portion of our properties are newly developed, higher prices for certain materials will not have a material impact on the performance of the Fund's portfolio as a whole.
How do you implement sustainability principles into your investment strategy?
We are preparing a comprehensive ESG policy at the level of the entire ARETE Group, which we would like to fully implement by the middle of this year. However, ESG principles are already fully integrated into portfolio management activities and new construction. We are working closely with our tenants in this area. All our halls are currently undergoing the BREEAM certification process. We have made the most progress in environmental protection, with the use of renewable resources, energy conservation and a focus on reducing our carbon footprint being our priority.