REICO funds expected to perform well in 2025, says CEO Dušan Sýkora

REICO Investment Company anticipates a strong year ahead for its real estate funds, with expected returns of at least 4%, according to CEO Dušan Sýkora. Speaking in a recent interview, Sýkora highlighted improving market conditions and strategic shifts in investment strategy as key factors contributing to this outlook.

At the end of 2024, REICO underwent an ownership transition, moving from the financial group Česká spořitelna to RST Asset Management. Sýkora assured investors that this change will have no impact on clients’ investments, apart from a rebranding of the fund names to REICO Nemovitostní and REICO Long Lease. The transition is expected to enhance investment decision-making across the RST region while expanding the company’s reach beyond the Czech Republic.

One of the major strategic adjustments made in 2024 was expanding investments beyond commercial real estate to include the residential sector. This shift, Sýkora explained, is intended to improve portfolio stability by diversifying assets and reducing exposure to fluctuations in the commercial real estate market. Initial residential acquisitions were secured under favorable conditions, which he expects will contribute to higher fund performance in the future.

Looking back at 2024, REICO’s real estate fund met expectations, delivering returns above 4%. However, the Long Lease Fund underperformed due to an excess of liquidity that could not be invested in real estate. Instead, funds were temporarily placed in Czech National Bank repo operations, which brought lower returns. Sýkora noted that much of this liquidity has since been deployed into new transactions, which should lead to stronger performance in 2025.

Sýkora also discussed the impact of financing costs and rental income on the real estate market. Interest rates on real estate loans peaked in 2024 and are now falling, reducing financing costs. At the same time, higher rents, driven by inflation, are expected to remain stable, ensuring strong revenue generation. This combination of declining costs and stable rental income is expected to improve fund profitability throughout 2025.

Among the new investment strategies introduced, REICO has begun investing in development projects rather than acquiring completed buildings. This approach, first tested in June 2024, involves purchasing projects with construction permits and overseeing development. The model allows REICO to share in construction margins with developers, leading to lower acquisition costs and higher long-term returns. Initially implemented in residential real estate, the company is now exploring its application in logistics and office investments.

Looking ahead, Sýkora predicts REICO’s real estate fund will achieve a minimum return of 4% in 2025, with Long Lease Fund expected to outperform by approximately 1%. He emphasized a conservative forecasting approach, preferring to underpromise and overdeliver.

With favorable financial conditions, new investment strategies, and a diversified portfolio, REICO expects a positive year for its funds, reinforcing its position in the Czech and regional real estate market.

Source and photo: REICO Investment Company, CEO Dušan Sýkora