Letterstone, Starr International Form Eastern Europe JV
- Apr 09, 2008
Real estate investment fund manager The Letterstone Group and private investment company Starr International Co. have announced a JV to invest in Eastern European real estate, with an initial funding of $157 million and plans to acquire approximately $795 million in assets over the next 15 months.The venture, named LS Real Estate Ventures B.V., plans to invest initially in Hungary, Slovakia and Romania, and later in Ukraine. The properties will consist of a mix of multi-sector investments in existing property, properties with alternative use potential and new-build developments.Letterstone had already been investing in the countries for five years, working with local investment players. It has already established three funds, investing in and managing 12 real estate projects in Hungary, Slovakia and Romania. “They are high-growth, emerging markets,” Simon Hill, the company’s CEO (pictured), told CPN. “Many European and U.S. investors are developing here, and we are following that path of growth.” He noted that the company will be particularly filling a demand for office, hotel and industrial space, three sectors that are already fulfilled in other parts of Europe.The upside potential is also great in the country. “We have exposure to both development profits and annual yields,” Hill said. “We’re targeting at 20 percent or more IRR.” He added that Letterstone’s three other funds have been receiving even higher IRRs.Jones Lang LaSalle Inc. advised Letterstone and introduced the company to Starr International, which Hill noted has a very responsive, professional team with a long history in emerging markets. “They’re attune to investment opportunities,” he said.According to NAI Global’s 2008 Global Market report, the Romanian economy is forecasted to enjoy the highest GDP growth of any European Union member for the next three years, and that the market is dominated by international developers and investors who are seeking to develop large-scale projects in all sectors based upon European norms. Hungary is positioned to become a distribution hub for Southeastern Europe, already having served as a logistics gateway between Western Europe, the Balkans and Eastern Europe. And Ukraine is undersupplied in most sectors, attracting investment interest from both the U.S. and U.K.