You’ve recently returned to AFI after spending years in Germany, where you worked for the company previously. How is the German residential market different?
First, you have massive institutional investors – some even managing over 100,000 apartments. The market is heavily tenant-driven, with around 60-70% of people renting rather than owning. What’s most striking is the regulatory environment. Residential leases in Germany are unlimited in duration – tenants can stay 10, 20, even 40 years in the same apartment. In most cases, the only person who can terminate is the tenant, with three months’ notice. There are also very strict rent control regulations, especially for buildings constructed before 2014. Courts are extremely pro-tenant, making evictions nearly(impossible in most cases.
Those threats to nationalize privately held apartment buildings can’t have had a positive impact on investor confidence…
The uncertainty around rent control legislation – particularly the rent cap that was eventually cancelled – really spooked institutional investors. Many investors turned their backs on the German market because they felt they couldn’t plan ahead or guarantee returns. This definitely had a major impact on appetite for German residential investment and contributed to the shortage of new developments.
How do you perceive AFI’s position in the Prague BTR market?
Based on recent market reports, AFI is currently the leading player in the build-to-rent segment in Prague. We own and operate around 900 apartments, which places us ahead of other market participants in terms of scale. According to the data, the gap between us and the next largest operators is significant.We have additional 1,100 units in production, which will bring us to about 2,000 apartments soon. Our occupancy rate is 97% across the portfolio, with some projects like Karlín and Trebešín maintaining 100% occupancy.
What have you set as your growth target?
We’re aiming to reach 5,000 apartments in Prague within approximately five years. That’s an ambitious target, but we believe there’s strong demand to support this growth. The supply shortage in Prague is significant, and we’re seeing very low vacancy rates across our existing portfolio.
AFI Home Karlin
You’ve spoken about streamlining operations through scale. What does that involve?
When you manage 900 apartments, it’s one thing, but managing 5,000 requires different systems and processes. My focus is building the foundation to make this business scalable. This means streamlining administrative processes so our people can spend more time on what really matters – tenant satisfaction, community activities, and services. We want to reduce the administrative burden and focus on the human element that makes tenants choose to stay with AFI.
Do you think you’ll end up acquiring ongoing projects or do you see AFI doing mostly its own development?
We’re open to both developing our own projects and acquiring from other developers. We’ve done both approaches – sometimes buying plots and developing ourselves, other times doing forward funding deals where we buy completed projects. Given our growth ambitions, we prefer not to go through the lengthy permitting process when we can avoid it. We’re looking at projects with a minimum of 100 apartments, though we prefer larger developments.
There’s growing competition in the sector, which I suppose is why you’re building your brand. What’s going to be standard for your AFI Homes portfolio?
We rent fully furnished apartments with high-quality furniture and fit-out. Tenants can literally move in with just their suitcases – everything from dishwashers to beds is included. We also provide extensive services within our developments: supermarkets, gyms, hair salons, coworking spaces we call “homework,” and laundry facilities. We have facility management and security on-site 24/7. What tenants tell us is that they feel much more secure with an institutional landlord – they know their agreements will be respected, rents won’t increase dramatically, and deposits will be returned.
How do you benchmark whether or not the product is working?
We’re tracking retention rates and tenant satisfaction more systematically now. What’s particularly encouraging is that a large portion of our new tenants come from personal recommendations – people bringing friends or recommending our properties even across different buildings. We’re also seeing tenants move within our portfolio as we expand to different locations, which gives them flexibility for downsizing or upsizing.
Do you think there’s a significant ongoing shift from ownership to rental in Prague?
Buying property has become extremely expensive, and many people simply don’t have that option. But there’s also a mentality shift happening. People are starting to see renting as a rational choice – they can invest their capital in other areas rather than tying it up in property. This change is happening naturally due to market conditions, but institutional landlords like AFI are helping by creating trust that tenants can rely on stable, long-term rental arrangements.
How about the increasing competition? Is the pie big enough for everyone, or will you have to fight to maintain rents?
Prague’s BTR market is still very small compared to the overall rental market. The supply shortage is so significant that I think there’s room for multiple players. Each large project can potentially impact rental levels, but there are huge reservoirs of untapped demand. The more people see this type of professional rental product, the more they understand its value.
What’s your approach to rent pricing and lease terms?
We currently use one-year contracts that are renewed annually, though we’re reviewing this internally. We place great importance on maintaining strong relationships with our existing tenants. That’s why we approach rent adjustments with care and fairness. Long-term tenants who contribute positively to the community are a real asset.
Beyond residential, what’s AFI’s broader real estate strategy?
We still have a significant office portfolio in Prague with very low vacancy rates – we’re fully let with one exception. We’re currently not developing new offices, but we’re still very interested in good office opportunities. However, our primary focus is on expanding the AFI Home portfolio. The company strategy is building and holding or buying and holding for long-term ownership and operation.
Karin Shalev Shogol took over as AFI Czech Republic’s new CEO earlier this year
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