Czech It Out: China Heads Further into Europe With $312M Prague Deal

New York was too hot, London might be getting too cold, but it seems Prague was just right for the latest Chinese conglomerate looking for cross-border real estate investments.

Privately held CEFC China Energy last week acquired the Florentinum office complex from private equity group Penta Investments, according to a statement by the Prague-based firm. Local news outlet CTK news agency reported that CEFC handed over $311.50 million for the nine-storey building.

The acquisition by CEFC, which is estimated to be among China’s ten largest private companies, is the latest in a string of real estate deals involving Asian investors over the last two months.

“We see Florentinum as an exceptional business opportunity and as an integral part of our strategy to establish our European headquarters in the Czech Republic,” Chan Chauto, President of CEFC China, said.

The complex boasts 50,000 square metres of offices and an additional 8,000 square metres of retail space. Current tenants include Bank of China, HSBC Bank and Czech financial player RSJ Investment Group. Located in central Prague, the building opened in 2014 and was Penta’s first real estate project in Europe. The Central European-focused firm invested a total of €200 million ($218 million) into the project.

For CEFC, the office building will join a growing Czech portfolio being assembled by the mainland firm, alongside hotels, an airline stake and a brewery.

Making A List, Czech-ing It Twice

While CEFC isn’t a major player in outbound investment, it has carved itself a niche in Czech Republic where it was among the first mainland firms to pump money into the country. It continues to be a focal part of a second wave of investment president Xi Jinping revealed was in the works earlier this year during a state visit.

In 2015, the mainland energy and financial services player spent $78.46 million to acquire a 79.4 percent stake in Czech brewer Pivovary Lobkowicz, the fifth largest beer maker in the country. It also picked up a ten percent stake in Travel Service, operator of airline Smartwings and the second-largest shareholder in Czech Airlines, and purchased Le Palais Art Hotel in Prague for an undisclosed sum.

This year, the firm increased its stake in the Czech-Slovak banking and finance company, J&T Finance Group, to 50 percent. More recently, it received approval from the government to buy the Mandarin Oriental hotel in Prague.

CEFC’s founder and second-ranking tycoon on Forbes 40 under 40 list in 2016, Ye Jianming, followed the sporting lead of several other Chinese billionaires, purchasing a stake in local soccer team Slavia Prague. Ye also bought the team’s stadium, spending an initial €31.1 million (US$35.5 million) while promising to invest another €49.6 million ($51 billion) in rebuilding the facility.

Europe Catches on With Asian Players

Earlier this month, GIC jumped head first into Central Europe acquiring Czech-based P3 Logistic Parks for €2.4 billion ($2.6 billion) from TPG Real Estate and Ivanhoé Cambridge. The deal became the largest European real estate transaction in 2016 to date with the Singapore-based firm acquiring 163 buildings in 62 locations across Europe. P3 has 15 locations in the Czech Republic and 16 other logistics facilities in neighboring countries.

In October, GIC also partnered with global student accommodation specialists GSA to invest in 2,500 beds’ worth of student housing in Germany.

The Singaporean sovereign wealth fund has recently been joined in Europe by its mainland counterpart. In September, CIC teamed up with private investment manager AEW to buy two French malls for €188 million ($206 million) from Grosvenor Europe, in a story first reported in Mingtiandi.