Opportunities in the middle

Joanna Kowalska-Szymczak Image : KSP

Interview with Joanna Kowalska-Szymczak, investment director at Kulczyk Silverstein Properties

By Beata Socha

Will the transaction volume be higher this year than last year?

Definitely. There might be a shortage of assets available for sale in the two opposite ends of the market, which until recently have been the most sought after by investors: core properties, which are fully-leased and the buyer has little to do other than cut off coupons. Also there is little available to acquire in the opposite end of the market: the distressed assets segment. We have seen many opportunistic funds looking for properties in Poland but most of them haven’t found much to buy.

However, there is a group of properties available that have to be redeveloped, revitalized, commercially restructured and could be profitable if properly managed. I think we will see a number of transactions adopting this rationale in 2014.

Where is the capital coming from now?

German, British and American capital is the most visible. Investors are searching for office projects, some of them are prepared to consider not only newly built assets but also well let buildings which are 10-12 years old. Retail is attracting a lot of attention. After years of stagnation, the industrial sector is also hot.

Will retail prevail once again as it did last year?

In terms of volume, Polish retail investments have the size advantage. All it takes is three large retail deals to make a mark in the annual volume. But in terms of the number of transactions, we will see more office and portfolio transactions this year.

Polish investors are still far from being very active on the domestic market, aren’t they?

No, they’re not. I think a change is coming and the trigger for change is Polish private capital.

Having said that, I admit that the most spectacular transactions are done almost exclusively by foreign funds and the involvement of Polish capital remains marginal. However, it is not the scarcity of Polish money, but legal restrictions which prevent Polish institutional investors from increasing their presence in the real estate market.

One of the reasons why local institutional funds are so scarce when compared to foreign money is the fact that the first Polish institutional investment in real estate had bad timing. Polish funds decided to invest in real estate relatively late in the property cycle. As a result, they were hit by the 2008 crisis during their investment periods.

It comes as no surprise, then, that local institutions are now very cautious about trusting the real estate sector again. Although the cautious approach of Polish institutions helped the Polish economy stave off the crisis, it is now preventing Polish institutional capital from benefiting from the real estate market growth.

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