Upvest and Lincoln Property Company have bought the five-story administrative building, Zirkon Office Center, in Prague, Czech Republic.
The property, boasting more than 11,500 square meters of leasable space was sold by Českomoravská Nemovitostní (ČMN).
Zirkon Office Center, which has a leasable area of over 11,500 square meters, is earmarked for redevelopment. The price has not been disclosed.
Zirkon was one of three properties in Prague’s Karlín district that ČMN acquired in 2021 from the London-based Revetas Capital. The transaction value at that time exceeded 2 billion Czech crowns. While the Corso and Apeiron buildings were incorporated into the NEMO real estate fund established by ČMN, Zirkon Office Center is now changing hands.
Zirkon Office Center stands out due to its location
Radek Stacha, ČMN Chairman of the Board, says, “Karlín is a unique and highly sought-after location in Prague for office properties. With the acquisition of this portfolio of three properties in this modern district less than two years ago, we obtained two high-quality office buildings suitable for our NEMO fund. Zirkon stands out due to its location right by the metro, and it offers significant value that needs to be extracted through suitable redevelopment. This goes beyond the core of our business, which involves owning and managing the highest-quality properties in Prague. Therefore, we decided to entrust Zirkon to top-notch partners and their architects and urban planners, whom we highly respect.”
Proceeds from the sale will be used for further expansion of the portfolio, which comprises nearly 140,000 square meters of leasable space in nine modern administrative buildings.
Mr Stacha adds, “The period of high interest rates is at its peak, and the expected decline in the coming year will lead to an upswing in real estate market activity. ČMN is well-prepared for new acquisitions thanks to the resources in hand. We aim to capitalize on the current absence of strong foreign capital, similar to what we did in 2020 when the short-lived market uncertainty provided us with two unique acquisition opportunities in the form of CityWest and Churchill Square buildings.”
Financial partner
For Upvest, the acquisition of Zirkon Office Center marks its second such project, following last year’s acquisition of a brownfield site at the entrance to Železná studienka forest park in Bratislava. Upvest is participating in the project as a financial partner alongside Lincoln Property Company, which will be responsible for the day-to-day management of the project. Upvest has been part of the Komerční banka group since last year, with the bank holding a 96% stake in the company.
David Musil, CEO of Upvest says, “As a financial partner, we select projects where we have a high degree of confidence that they will deliver returns commensurate with the risk of the project, in this case, redevelopment. We seek opportunities that we perceive as having factors significantly derisking the realization of goals. There are several factors at play with the Zirkon project that align with this strategy. Lincoln Property Company is a suitable partner for our strategy, primarily because they are currently completing a similar project on the Palác Karlín building.
“We are already finalizing a future lease agreement for 25% of the future rental income. The Zirkon building, last but not least, meets the criteria for high-quality real estate with a location in the heart of historic Karlín, boasting the highest occupancy rate in the Prague office space market.”
Modernization
The future modernization of the building will be carried out under the guidance of the joint venture formed by Upvest and the American commercial real estate investor and developer, Lincoln Property Company. With nearly six decades of experience, Lincoln Property Company has completed developments exceeding 15 million square meters and currently manages assets worth $94 billion worldwide.
Štefan Puci, Investment Director at Lincoln Property Company, says, “We plan to sensitively reconstruct the Zirkon Office Center in the coming years to meet the ESG requirements of future tenants and investors. Thanks to its exceptional location right by the metro station and tram stops, efficient floor layouts, and, not least, the building’s authentic history, we will be able to offer a highly desirable product in Karlín. In the last five years, during the reconstruction of the nearby Palác Karlín building, we witnessed strong interest from Czech and international companies in office and retail spaces in this location, resulting in a rental growth of over 40%. Demand in Karlín continues to exceed the supply of leasable space even today, which was one of the key reasons why we, along with our partner, Upvest, decided to acquire this building.”
