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Billion euro babies

Eurobuild Poland 12/11/2005

EUR 20 bln is going to be invested in Central and Eastern Europe – but how much will be channeled into Polish shopping properties?

Assessing weekly outlays on shopping centres in Poland seems to be beyond the scope of market analysts. Not only are developers selling their properties, the secondary market is also building up a good head of steam.

Investors’ attention was still focused on over-the-counter consumer goods. In addition, they have realized that considerable possibilities exist to enhance the value of shopping properties through efficient management. The effect is that 2005 will probably go down in history as regards the value of investment transactions for Polish retail properties. According to Paweł Welo of the  investment department at CB Richard Ellis:

“The information we have received suggests that the value of purchases had exceeded EUR 2 bln by late October. of which one half was on commercial properties.”

Floods of capital

Attempts have been made to estimate the amount of money that has been flowing into the Polish property market. The figures differ widely, but in each case exceed the predictions made by analysts at the beginning of this year. Agata Sekuła, head of the department of retail investments in Central and East Europe at Jones Lang LaSelle, estimates that “investors may have spent between EUR 10 and 12 mln in Central Europe at a conservative assessment, though optimists believe this amount to be as much as EUR 20 bln. Most of that finance has gone into office buildings and retail, of which a significant part has been invested in Poland.”

When asked what they want to purchase, investors give the unusually short and somewhat jocular reply: “Whatever is still available”. And what is still available? There is much talk about Ahold’s sale of its portfolio of shopping centres (in Poland Sarni Stok in Bielsko-Biała and Ogrody in Elbląg, as well as the Karvina Centre near Ostrava in The Czech Republic).Four investors have been invited to participate in the tender, the company having made the most relevant documents available online. The best offer is the one that will win. klif is another portfolio (a shopping centre in Gdynia and a similar one with an office building in Warsaw).

Warsaw’s promenade is also for sale. Rafał Nowicki, vice-president of Apollo-Rida Poland, has expressed interest in one of the mentioned offers, remarking that:” We are still on the lookout for attractive opportunities. We do not exclude purchases of individual investments and of whole property portfolios. Shopping space remains a good market with fine growth prospects. “ Apollo-Rida continues to head the ranking list of investors in Poland after last year’s USD 1.3 bln purchase of 28 shopping centres and hypermarkets belonging to the German Metro. Rafł Nowicki denies current gossip that he intends to sell those assets, stressing that:

“Such an option is not even under consideration in the imminent future, since we are convinced that their value is going to rise.”

From the Vienna SE to Warsaw

Meinl European Land, a company quoted on the Vienna Stock Exchange, is an investor planning large transactions. Ian Elliott, vice-president operations of Meinl European Land Group, declares that :” We have at least EUR 420 mln to spend in Poland and the Lithuanian market, and are ready to purchase individual operating centres as well as whole shopping  chains.”

Up to now, the Austrian company has purchased the Minimal supermarket in Śrem (its first investment In Poland), a portfolio of seven small shopping malls from Echo Investments, three centres from Foras Holdings (Targówek and Reduta in Warsaw and Plejada in Byrom) and Galeria Copernicus in Toruń, which was developed by TK Development. Meinl officials estimate that their financial commitment in Central Europe amounts to around EUR 585 mln added to the purchase of a shopping centre in Lithuania  (the 21,500 sqm Aplis mall in Riga).

This sum includes still non-existent projects. A centre with 80,000 sqm rentable space is to be built in Lublin, with Meinl as the possible purchaser. This property, called Felicity, is to be built for the investor by Gray International. the same company developing the 41,000 sqm Idylla Wrocław. Another centre is to be developed in Białystok (31,500 sqm) by Euro mall Holding in which TK Development is the majority shareholder. Further investments, of which little is yet known, are to go up in Piła and Płock.

Small is beautiful

Investors have, for a long time, been aware that shopping centres constitute good buys, and not only in large agglomerations. “Attention must be paid to small towns and cities,”says Paweł Welo, “since many successful properties with well chosen tenants are already there. Investors are surely able to register higher yields from such transactions.”

Kleperre, the French foundation that took over a portfolio f centres from Plaza Centers, is not afraid of doing business in smaller towns, having paid EUR 425 mln for 9 properties, including two situated in the Czech Republic. In addition to four existing properties in Warsaw, Ruda Śląska, Kraków and Poznań, it has also taken over centres currently under construction in Rybnik, Sosowiec, and Lublin. Polimeni International. another developer – this time from the USA, is building shopping centers in smaller localities like Gniezno and Kalisz for the Heitman Central Europe fund.

Irish investors are also making their presence felt. Raiffeisen Project Developmnet sold the title deeds for the land and the building permit for a commercial park in Gorzów Wielkopolski to the Caelum company, in which David Sharkey and Mark Turley are the leading lights. The outcome of this transaction will be Galeria Askana (more than 16,000 sqm) to be built by the Irish company at a cost of EUR 25 mln. David Sharkey already has ecperience in operating on the Polish retail market – Capital Partners. the company with which he is connected, purchased the Okęcie shopping centre in Warsaw. Galeria Madison in Gdańsk and an office building in Poznań, It is no secret that this “Dublin duo” is planning further investments. perhaps once again with REPD of Austrai, which has developed one shopping centre up to now – Ferio Gaj (around 11,000 sqm), to be opened in the Wrocław district of Krzyki in late November. Jacek Semeniuk, an REPD board member, reveals that another Ferio is to be built in Legnica, emphasizing that: “Fero Gaj is no one-off venture. It is a product which can be copied successfully in good districts in many towns and cities. We plan to build two or three similar projects annually.”

The stream will not dry up in the experts’ opinion, there will be no cause for complaints over lack of investor interest in shopping projects in the near future. Agata Sekuła o JLL explains why:”2006 is going to be another successful year: I am an optimist. you must remember that the secondary market is opening, investors will gradually be leaving investments, which means property owners are bound to change. “The first harbingers of this shift have already appeared. Dawnay Day Carpathian spent EUR 64.5 mln n the purchase of four shopping centres: Tulipan in Łóź, Osowa in Gdańsk, and Kometa in Toruń and Sosnowiec. These properties were sold by a consortium of firms, made up of GE Capital Real Estate and Heitman Central Europe Property Partners – which bought them in 2002 from Domy Towarowe Casino.

Klépierre

A French firm whose property portfolio is valued at EUR 6.4 bln. It focuses on retail investments, which constitute 85 pct of the portfolio value, the rest being accounted for by offices. It owns most of its shopping centres in France, Spain and Italy. It is also active on the Hungarian and Polish markets (in the latter it took over the portfolio of Plaza Centres).

Fighting, but not at any price

Małgorzata Cieślak, manager of Pricewaterhouse Coopers’ real estate section

The result of earlier investor invest in offices is today’s slump in the supply of properties and the relatively substantial competition for attractive localities. It is natural, therefore, that investors are turning their attention to the other segment: shopping space. Here, too, rivalry among investors is evident, but not au fierce as over office buildings. Investors are open to competition, but are not inclined to conclude transactions at any price. Macroeconomic data (growing GNP and the rising purchasing power of  Polish consumers) give grounds for optimism regarding the profitability of retail investment. It should also be remembered that secondary market transactions will increase in number. Some shopping centres will have to be modernised soon, and in these operations too investors may see possibilities to invest their capital in a profitable manner.  

Apollo-Rida Poland

A company established by two American business. Rida Development Corporation, Houston and Apollo Real East Advisors in New York.

Rida development Corporation is a private development company set up by David Mitzner in 1972. At present, the company is implementing investments in commercial properties, including office buildings, shopping centres, and industrial and residential projects of a total value exceeding USD 1.2 bln.

Apollo Real Estate Advisors was established in 1993 as part of the group under the joint name of Apollo and specialising in investment founds management. Apollo Real Estate Advisors manages four closed property-investment funds. Within these funds Apollo has concluded transactions several dozen purchases in Europe and Japan.

Meinl European Land

A company quoted on the Vienna Stock Exchange, with a history going back to the 1860s. it was established by Julius Meinl, who originally ran a chain of Vienna cafés. The current estimated value of the company exceeds EUR 900 mln (145 properties in 8 Central and East European countries). That value rises to EUR 1.9 bln when the projects to be concluded in the next 2 years are taken into account. The company estimates it will own properties worth more than EUR 4 bln by 2010.

Ewa Andrzejewska

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