Capital recycling

Artur Lebiedziński
Image : Bartosz Bajerski

Artur Lebiedziński has been at the helm of PHN, one of Poland’s largest real estate groups, for only a few months but is already up to speed with the changes the company is going through. After several years of write-offs, its portfolio has finally stabilized and the firm is poised to make new acquisitions

Interview by Beata Socha

You’ve held the position of CEO at Polski Holding Nieruchomości since September 2013. How do you find your new post?
I started as an interim CEO in September, then in November I was officially appointed as the CEO. I find my job very exciting, particularly now. It’s a historic moment. We have a number of topics we’re dealing with. We are launching new projects, closing deals, and we are in the process of restructuring our portfolio and the company itself. Our entire team is working hard to make PHN shine among its peers.

Can you tell us more about your portfolio restructuring?
phn key dataThe main idea of the restructuring process is what I call “capital recycling.” We are meticulously analyzing each of our 171 assets and identifying those that are under-performing in terms of yields. We want to increase our yield rate, by selling the assets with the lowest economic value added, and reallocating the capital into either our development projects built on our own plots or into assets we want to acquire that fit our portfolio. This is a continuous effort, as we have some 90 properties for sale.
When assessing the “salability” of our portfolio, we also have to consider the outside changes that influence our assets: new projects in the neighborhood, new infrastructure investments, new roads. These changes impact the value of our plots, so nothing is set in stone.
Our situation is comfortable enough so that we are in no way under pressure. We don’t have to sell immediately, we can wait for some assets to increase in value. Besides, among our transactions to-date, all of the assets have been sold above their book value. Last year we sold approximately PLN 70 million worth of real estate, significantly above the book value of these properties.

What kind of assets are you looking for?
We want to buy investment assets, A-class. We’ve analyzed dozens of properties in terms of location, size, transaction potential, tenant mix, etc. We have received the green light from our corporate bodies to proceed with due diligence on selected assets, which we are doing now. We are looking primarily at Warsaw’s office market.
Why Warsaw?
It’s our core market. Over 75 percent of all our business is located in Warsaw. Most of our tenants are located here.
We have a number of tenants who are considering moving from their current offices to modern A-class space. We do not have enough A-class properties and that is why we need to buy more.
Secondly, the Warsaw market has the highest institutional transaction liquidity. Whatever the strategy of our new shareholders may be, they will always have an option to sell these assets profitably.

Any other potential locations?
We are looking at the biggest regional cities, like Wrocław, Kraków, Tri-City. We’re considering other types of assets as well. Our strategy also includes expanding our logistics and retail portfolio. Yet, the first transaction we make will likely be an office project.

What kind of property are you targeting?
We are looking for A-class properties from 8,000 sqm to 15,000 sqm of GLA.

The value of your asset portfolio is currently valued at over PLN 2.2 billion. Is your asset portfolio going to increase? Are you buying more or selling more?
I believe that at the end of the year the value of our purchases will be somewhat bigger than of the sold assets, i.e. PLN 140-160 million worth of acquisitions against PLN 70-100 million worth of disposals.
The value of our existing portfolio is stable and will likely remain that way. The time when we had high write-offs on our assets is gradually coming to its end.

What locations are you considering for your logistics investments?
We already have a logistics park near Wrocław, close to the A4 highway, in a joint venture with Segro. The development of the park is proceeding ahead of schedule.
We are also working on a project located in Parzniew, in the Warsaw agglomeration. We have just signed a letter of intent with an experienced, well-known partner who is going to help us to construct warehouses in this prime location, just next to the A2 highway. We believe that the new park will be as successful as the one near Wrocław.
The two locations will give us several thousand sqm of roofed area.
It’s been a year since PHN’s IPO on the Warsaw Stock Exchange. Was it a good year?
Our company is doing very well. PHN’s shares over the past year were performing above the benchmark. Secondly, we started the process of replacing warrants with PHN shares. The lock-up periods have come to an end and our employees are becoming shareholders.
Finally, being a listed company has introduced an additional layer of discipline and compliance, which is good for the company.

Currently 73 percent of the company’s stock is held by the State Treasury. How is the privatization process proceeding?
The privatization process in on schedule. The virtual data room is in operation and we are in regular contact with the transactional advisers.
We have certain milestones to reach, and we are doing that. As far as our main shareholder is considered, the transaction to sell up to 73 percent held by the Treasury has been set by the State to be completed around mid-year of 2014.


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