Waltz on the Danube

Equity (finance), Rate of return, Yield (finance)

Answer 1
Is there and adequate market in Gyor? Are rents adequate to support this development?

Gyor was chosen as the primary project site by ECE after careful consideration, under the assumption that its market was sufficient to support the project. Phillip von Wilmowsky base assumption were that Gyor enjoys strong demographic and economic potential, high accessibility and minimal competition. And more specifically, these were the main rational points underlined by von Wilmowsky assessment: •Hungary’s Macroeconomic Condition † As of the case date, Hungary is in the midst of integration with the EU economy. Hungary enjoyed several years of high GDP growth, high employment rates and an appreciating currency. Hungary has still half the GDP per capita as Germany, but enjoys high purchasing power (labor and good costs are still relatively low). •Area’s Demographics † The site has a projected catchment-area of some half a million inhabitants. Gyor has a higher income per capita and employment rate than the Hungarian Average. •Competition † Gyor has no current competing projects, and most of its retail sector is dispersed in the city center. However, improving economic conditions in the area will probably facilitate entry of competition in next few years. •Accessibility † The site chosen for the project is highly accessible within the city for pedestrians, public and private transport. However, Hungary has a low ratio of car ownership per capita, which inhibits it’s accessibility to potential buyers from the rim of the catchment-area. Review of these points might facilitate von Wilmwosky’s assumption that the site could reach a market demand share of 8%-12%.

ECE has had no experience in operating commercial sites in rural Hungary, so von Wilmowsky had no good comparable data in order to assess the potential rent rates. Von Wilmowsky estimated the retail annual net productivity, based on comparables in Budapest and other locations in Europe to be 2,812 Euro...
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