WBJ sat down with Xavier Jongen, management board member at investment manager Catella Real Estate, to talk about the company’s No. 44 rental apartments in Warsaw and the luxury rental property market in Poland
Interview by Adam Zdrodowski
WBJ: The institutionalized luxury rental property market is still almost non-existent in Poland. What was the rationale behind your unprecedented decision to acquire 72 rental apartments in the Złota 44 residential tower in downtown Warsaw last year?
Xavier Jongen: Firstly, we believe that the market in Poland, and Warsaw in particular, has changed a lot over the last 28 years. That Poland is currently still an ‘unidentified institutional residential investment market’ does not change market fundamentals and actually gives a competitive advantage to those investors who do their homework and want to contribute to these fundamental changes. The residential market is fascinating both for historical reasons and for the current stage of where structural market-driven adjustments stand. Indeed, as the Polish people have earned their improved living standards, they can afford to modernize their housing conditions. Clearly, Polish people have slowly started to substitute lesser quality dwellings for more sustainable and better-designed dwellings and also desire a more diversified market that includes room for an institutional private rental market. Importantly, this underlying demand for change is predominantly internally funded, unlike the transformation that occurred in the residential markets of former Eastern Germany. All of this yields great long-term investment opportunities and makes market developments quite robust. Warsaw is already one of the great capitals cities of Europe, even if it is not always recognized as such. Secondly, we think that Złota 44 offered a unique investment opportunity. This is a landmark building that has become part of the Warsaw skyline and is recognizable abroad.
When is the rental service in Złota 44 due to start?
We plan to make the apartments available for rent on September 1. The building has already been completed, but some finishing work is still underway inside it. The first future inhabitants who have bought apartments in Złota 44 will be moving into the building over the summer.
What will the rental prices be and what is the minimum rental period in Złota 44?
We will offer apartments in three different finishing standards. Depending on the standard and the size of the particular apartment, the rental rates will range from approximately PLN 9,000 to around PLN 21,000 per month, which includes access to an unparalleled level of service and amenities. As for the minimum rental period, we want the asset to be in line with our other long-term institutional investments. Consequently, we shall be renting the apartments for at least 12 months, but of course there may be some minor exceptions. However, we will certainly not offer one-night or weekend stays in the building.
How large is the pool of potential tenants?
Luxury rentals like those offered in Złota 44 are great because they offer optionality – a term from Nassim Taleb. We have defined six different market segments which include CEOs and other top managers of international companies, diplomats and top level civil servants, Polish business people who require a second home in Warsaw, Polish seniors who have sold their home and would like to actively retire in a healthy environment, shared living for successful young professionals and the liberal employed like lawyers who seek a perfect mixture between a home and a working space offering unparalleled professional amenities. We estimated the potential demand for luxury rentals in Warsaw and concluded that these segments represent very significant numbers.
Are you planning further acquisitions in the luxury residential property market in Poland?
We do not want to be too exposed to the luxury sector of the market, especially since we have already invested in the best asset. Since the Złota 44 acquisition, we have also made two other purchases in the residential market in Poland – in Warsaw’s Wola district and in Kraków – but those were in a different price segment. We want to continue to be an active investor in rental properties in Poland. We are constantly looking for new opportunities to invest and will probably make another acquisition in the Polish market later this year.
What is the availability of this kind of investment product in Poland?
This kind of product is hardly available in Poland unless you are interested in new developments. We are interested in cooperating with developers on the development of rental apartments. However, with the residential market in Poland now putting up a very strong performance, not all developers want to sell packages of apartments to investors. The prices of apartments sold to individual buyers are higher than the average apartment price in a package sale so in the current market situation many developers find package sales unattractive. However, with us, developers can de-risk their position and raise their corporate brand image, which some of them find a very attractive proposition.
In July last year, Catella Real Estate, acting on behalf of the Catella Wohnen Europa fund, bought 72 luxury apartments located on floors 11 through 19 of the iconic Złota 44 residential tower in downtown Warsaw from investors Amstar and BBI Development. The buyer, for whom the acquisition – the first transaction of this kind to have been signed in Poland to date – marks the entry into the Polish luxury residential property sector, intends to rent the Złota 44 units on a long-term basis under its newly created No. 44 brand.