A strong debut

interview by Beata Socha [caption id="attachment_66477" align="alignleft" width="221"] Radosław Świątkowski CEO at REINO partners[/caption] Until recently, individual Poles had very few possibilities when it comes to investing in commercial real estate. This is about to change. REINO Partners has launched its first close-end dividend real estate fund REINO Dywidenda FIZ, which purchased Skanska’s latest office scheme in Kraków, part of the Kapelanka 42 complex. It is but a first step towards creating a viable investment alternative for Poles Do you think Poles are ready to invest in commercial real estate? Unlike investing in real estate development, purchasing and managing a well-situated property that brings stable leasing returns is a very safe investment. We believe this is definitely the best alternative to deposits and treasury bonds. In mature markets, wealthy individual investors locate a sizable part of their financial surpluses in real estate. There is no reason why Poles shouldn’t do the same. It’s only a matter of time before they start doing it, provided they are presented with a good offer. Particularly those interested in long-term investment. The forecasts for the social security system and the recent regulatory changes in private pension funds [transferring over a half of their assets to the social security system and prohibiting them from investing in bonds thus forcing them to rely on more risky instruments] clearly indicate that in order to ensure a decent pension, we need to look elsewhere. Also because, for inexplicable reasons, Polish pension funds do not invest in real estate. REINO Partners was created particularly for the purpose of providing Polish investors with an opportunity to make money on Polish real estate. We are one of the most attractive commercial real estate markets in Europe, but thus far, only foreign capital has been making a profit off it. Polish investors are interested in real estate and are ready to entrust their money to experts. Why did you decide to launch the fund now? The current combination of circumstances is extremely conducive to such endeavors: bleak scenarios for the pension system, coupled with historically low interest rates as well as recent negative experiences with corporate bonds and uncertainty on the stock market (also related to the recent changes in private pension funds). Another reason for investing in a real estate fund is the scale of transactions, as evidenced by the fund’s first purchase, which usually exceeds the means of even a wealthy individual investor. A fund is the best option for someone looking for more than a small retail unit or an apartment for rent, including in terms of risk, costs and yields. Many of our clients have analyzed these options and chose to invest in a fund. What kind of investors does the fund target? The REINO Dywidenda FIZ is a dedicated product, created for wealthy individual investors, who are clients of private banking services. If you want to raise enough money for the purchase of a property such as the Kapelanka office scheme and you want to do it through a non-public offer, i.e. targeted at no more than 149 investors, the individual investor has to put in no less than €50,000-€100,000. It’s basic math, and you have to remember that not everyone who is invited to join the fund actually goes through with it. How many investors did you get for REINO Dywidenda FIZ? Over 50 investors entrusted us with their savings in our first fund. We are hard at work to prove that they made the best possible choice. For instance, we purchased the Kapelanka 42 scheme within only three months of the fund’s registration. [negative]“Financial product retailers will have to expand their offer with alternative assets, particularly real estate. We should expect an influx of such projects next year.[/negative] Do you have plans for more funds? We want to create more funds straight away. Our next project is scheduled for Q1 2015. We believe that the number of investors will increase. Retailers of financial products will also have to change their strategy. With interest rates so low, the total sum of deposits is still far to big. Why do you think it is so? Are Poles too risk-averse? There is simply not enough variety in financial products offered. Yes, there is strong competition when it comes to traditional asset classes. But no reasonable investor will ever invest all their savings in equity and corporate bond funds. The risk is too great. Meanwhile, real estate-backed products bringing stable returns are a perfect middle ground between open-ended funds and deposits. Financial product retailers will have to expand their offer with alternative assets, particularly real estate. We should expect an influx of such projects next year. Sure, their cumulative value will still be nowhere near the value of foreign investment funds, but the next three to five years should bring a significant change. The success of funds raised among wealthy individual investors should then force changes in private pension funds, as well as be a catalyst for other projects combining private money with pension savings. Real estate is an ideal asset for that purpose. How big a yield can the fund bring? The projected annual yield will amount to at least 5 percent. That is also the hurdle rate, that is any bonuses will be paid only from the surplus over the minimum of 5 percent. This is a novelty on the Polish market and we believe it should become the standard. Your first purchase, the Kapelanka scheme is a strong core-plus scheme. Are you going to continue in that asset class or perhaps pursue higher returns in more opportunistic investments? As far as dividend funds are concerned, we are not going to look for niches. Foreign funds are not only our competition, but also the most likely future buyers of our assets. Exiting an investment is as important as purchasing the right asset. Naturally, acquiring assets in wia market dominated by large foreign players isn’t easy. However, few foreign investors usually have a strong, local team. Meanwhile, keeping apprised of the market situation and identifying potential investment is a key element for success. Creating the right investment vehicles and raising capital are also important. These are the reasons why many major international players are currently talking with REINO about strategic cooperation.