Working with IKS KB, an investment company, Komerční banka put together new closed-end real estate fund for qualified investors intended solely for its Private Banking clients. Realitní fond KB is focused on investment directly into commercial properties.
“A traditional asset class, commercial properties are, thanks to their specific characteristics, a natural component of long-term investment portfolios. The new real estate fund is therefore intended for long-term investors and its purpose is to offer broader diversification of clients’ investment portfolios through investment in assets outside financial markets, i.e. assets whose value is, to a considerable extent, independent of the development of the prices of ordinary financial instruments,” says Petr Slabý, director of Komerční banka´s Private banking.
Investors’ money are invested in the acquisition of three commercial properties in Prague. The fund manager selected premium office and retail buildings in a wider centre of Prague, in the case of which the high quality of tenancy agreements can be expected to be sustainable. “This means that the money will not be invested in riskier development projects or shares in development companies,” adds Petr Slabý.
Realitní fond KB is a closed-end mutual fund, and its clients therefore hold their share in the fund throughout the expected life of the fund, which has been set at 9 years. The minimum amount of investment is CZK 3.75 million and is based on the requirements of Czech law (at least EUR 125,000).
Realitní fond KB responds to the developments in the Prague property market. Yields from office rents are now much higher here than in many other European cities: while in Prague they are 6%, in Vienna, Frankfurt, Berlin, London or Paris they are below 5% (source: CBRE, 1st and 2nd quarter of 2015).
The fund’s first acquisition was the building at Olbrachtova 9 in Praha 4. The 12-floor Class A office building was completed in 2002 and offers 19,000 sq m of office and retail space. The main tenants in the building currently include Státní fond životního prostředí ČR, Opel, Provident Financial and Raiffeisenbank.
The second acquisition was the building at Pařížská 3, Praha 1 - neo-baroque building renovated in 2014 with 2,000 sq m fully let to one of the most prestigious brand in fashion industry – Louis Vuitton.
The third building bought in the fund is located at Hvězdova 2a, Praha 4. Main tenants of this Class A office building with 8,500 sq m and are O2, AXA and W.A.G.