Heitman yesterday announced the establishment of its second European real estate fund, Heitman Central European Property Partners II (HCEPP II).

The €175 million (USD 179 million) fund is the firm’s second designed to take advantage of increasing real estate investment opportunities in the Central European marketplace. HCEPP II, which was oversubscribed, is being launched within 24 months of the formation of HCEPP I, a €131 million (USD 135 million) fund launched in the fourth quarter of 2000. HCEPP I is fully invested in more than twenty properties with a gross asset value of approximately €580 million (USD 600 million).

„Heitman was among the first to recognise the potential in Central European real estate,“ said Christopher Merrill, Managing Director of Heitman’s International Private Equity Group and a member of the Board of Directors of both HCEPP I and II. „Investors in HCEPP II include European and U.S. pension fund and institutional investors. This blue chip client base affirms the confidence investors have in Heitman and our ability to identify and evaluate investment opportunities.“

Leading investors in HCEPP II include ABP (Europe’s largest Pension Fund), Immofinanz (Austria’s largest publicly listed property company), the European Bank for Reconstruction and Development (one of Central and Eastern Europe’s leading investors) and GE Capital.

„The first investment for HCEPP II, a €100 million portfolio of four retail centers located throughout the Czech Republic, has already been placed under contract,“ Merrill added.

HCEPP II will have buying power of more than €650 million (USD 670 million) and allows the firm to pursue acquistions and development opportunties in Hungary, Poland, Czech Republic, Slovakia, Slovenia, Latvia, Lithuania, Estonia and Romania.

HCEPP II specifically seeks prime office, retail or warehouse developments that benefit from strong demand by quality international and domestic tenants. Heitman will look for strong local partners with proven track records in the region to co-invest in the developments.

HCEPP II will capitalize on the yield arbitrage currently in existence in Central Europe. Properties in the target countries of HCEPP II are trading at yields of 200-500 basis points higher than similar properties in Western Europe. With the prospect of European Union (EU) membership in 2004, these yields should move more closely in line with those of Western Europe.

Local Team and Heitman’s Expertise

Heitman’s International Private Equity Group, with European offices in London, Warsaw and Budapest, has developed a strong local presence in the European marketplace. With a team of 27, Heitman’s focused investment approach matches capital and transactions with dedicated teams of seasoned real estate professionals.

„Heitman’s service is unparalleled because we operate with a ‚ground-up‘ mentality,“ said Merrill, „ensuring we have solid resources in place to provide the best service to our clients.“

Real estate markets in Central Europe are experiencing positive long-term macro economic growth and an increasing inflow of capital from global investors. This, combined with a move toward the performance and stability of the European Union and ultimate joining of the European Monetary Union (Euro), provides the positive economic and political environment HCEPP II requires to successfully execute its business plan.

„The Central European region is evolving rapidly, the project finance market is active, and the level of institutional grade property is increasing,“ said Merrill. „HCEPP II will allow investors to benefit from strong in place property yields in existence today with the potential of an increase in capital values through yield compression over the coming years.“

Maury Tognarelli, Chief Executive Officer of Heitman, added, „Heitman’s goal is to develop innovative investment products that produce appropriate risk adjusted returns and capitalize on market conditions which will benefit our clients investment portfolios. We are pleased with the progress made by our International Private Equity Group, and their contribution to achieving our firm’s overall objectives.“

Heitman was founded in 1966 and is one of the largest providers of institutional real estate investment management services in the United States. Headquartered in Chicago, with international offices in London, Warsaw and Budapest, Heitman manages $10.3 billion in real estate assets. The firm’s clients include domestic and international public and corporate pension funds, endowments and foundations, corporations and other institutional investors.