With economic growth comes demand for new buildings of all kinds—offices, retail, community services. As more buildings go up, quality of life improvements often follow—more jobs, convenient access to quality, affordable food, medicine and consumer goods. Economic growth also spurs demand for improved housing.
IFC investments are helping to meet this demand for social improvements, as construction is often a bellweather of economic improvement. IFC projects are also focusing on increasing the supply of affordable, quality housing, enabling more low income citizens to become homeowners for the first time.
- IFC has invested $352 million in commercial property development across all emerging markets. Our experience and contacts within the sector ensure that we are well placed to act on most opportunities within the industry.
- The rapid rise of urbanization is translating into high growth rates in real estate supply, particularly in emerging markets (with rates as high as 30% in India). Areas experiencing the most rapid growth include EastAsia, Eastern Europe, and India.
- Increased liquidity is putting downward pressure on interest rate margins.
- Looking ahead, the global real estate industry is expected to accelerate from its current value growth position. With ananticipated compound annual growth rate of 2.6% during 2005-2010, the industry is expected to reach a value of $518.9 billion (up from $456.4 billion in 2005) by the end of 2010.
- Real estate investment trusts have recently experienced strong growth (24.5%) and are gaining greater prominence in select emerging markets.
IFC Investments in the Commercial Property Development Sector
- Eastwood (Philippines): Loans of $20 million in 2002 and $12.5 million in 2005 to finance two phases of expansion of a commercial mixed use facility, including an ITpark, in Manila. IFC provided financing packages with a longer repayment schedule than local commercial banks could typically provide.
- Sofia Kiev Hyatt (Ukraine): A $17.5 million loan ($14.5million for IFC’s own account) and quasi-equity of $2 million in 2005 to finance the construction of a business hotel in Kiev to be operated by Hyatt International. In addition to employing more than 200 people, the investment improved infrastructure in the capital city, fostered competition among hotel operators in the country, and encouraged other companies to pursue investment opportunities in Ukraine.
- Astana Towers (Kazakhstan): A $5 million loan in 2002 to finance the development of a business and shopping center in Astana. In addition to providing long-term financing,IFC’s investment signaled confidence in the development of private sector activity in Astana, a region that had low levels of business activity prior to the investment, as well as private investment in Kazakhstan. The project helped meet the growing need for modern office space in the newly established capital city and attracted international investors.
- Ramstore (RussianFederation): A $71.5 million loan package ($52.7million for IFC’s own account) to fund hypermarket, supermarket, and shopping mall expansions in Russia. IFC was able to help the country transition from its tradition of open-air markets to efficient, modern retail centers that offer consumers a wider selection of quality products. IFC also helped the company restructure its financial operations and facilitated competitive commercial bank lending.
- Panari (Kenya): A $7.3 million loan andquasi-equity investment to refinance construction loans and upgrade environmental standards of a multipurpose hotel and shopping center. IFC’s investment helped mobilize additional long-term financing from Kenyan banks for a local sponsor making its first investment in the country–this had proved difficult without the support of a multilateral agency. Our involvement also raised the safety standards of the property, facilitated the hotel’s marketability, reduced insurance expenses, and established a positive precedent for other hotels in Kenya.
