IMMOEAST AG, Austria's largest developer, has bought 50 percent of the construction company Caterata to expand in central and southeast Europe.

Caterata is developing 4,500 apartments in Romania, Poland and Latvia with a combined cost of about 600 million euros (US$951 million), according to Immoeast's Website. New Horizon Group Ltd, an Israeli developer, owns the rest of Caterata, Bloomberg News reported.

"Caterata holds a portfolio of outstanding development projects, which are perfectly suited to market needs," Immoeast Chief Executive Officer Karl Petrikovics said in a statement. "It focuses clearly on the mid-price sector for the rapidly growing middle classes."

Immoeast is shifting its 6 billion-euro development program away from central Europe toward growing economies in the Balkans and the former Soviet Union. Half of the company's assets are now in Romania, Bulgaria, Russia and Ukraine.

Immoeast fell 3 cents to 6.14 euros at 11:10am in Vienna, giving the company a market value of 5.1 billion euros.

Caterata may be ready to sell shares in an initial public offering by 2013, Immoeast said in the statement. The company did not disclose the price it paid for the stake.

Residential property is proving the most profitable real estate investment in the region, said Immoeast. Apartments in Belgrade are selling for 40 percent more than originally planned. Residential development accounted for 17 percent of the Vienna-based company's assets at January 31, it said in the statement.