Deka to show its hand
Until now, its investments in the Central and Eastern Europe region have been confined to the Czech Republic and Hungary. But all that is about to change and its arrival in Poland is imminent.
"From the legal point of view, we could not invest in Poland because of the legislation regarding our fund," says Professor Willi Alda, Chairman of the Board of Deka Immobilien Investment GmbH, explaining why Poland has till now come third on its Central European investment list. Caught up in a legislative web a few years ago, Deka in Germany was prohibited from investing in 'shared' assets whilst 'direct' investment was forbidden to them in Poland. This situation has now altered but in the meantime the fund took to investing in properties in Poland's neighbors.
"We are on our way to investing in Poland as soon as possible," insists Prof. Alda, who adds that, "from the market point of view (Poland) has always been our first priority, because of its size, both in terms of its population and capital but also because, though we are long term investors, the best entry and exit strategy is always provided by a large market."
Loic de Villard, of Cushman & Wakefield H&B, is fully aware that German open end funds are on their way to making significant investments in Poland, but suggests that retail projects, particularly in regional cities, hold out more promise, believing that the office sector could well be a missed opportunity by now. Professor Alda, however, is adamant that the latter is exactly where Deka Immobilien is intent on injecting its cash, though he doesn't dismiss investing in shopping centers either.
CBD office space in Warsaw is where the fund's attention will initially be focused, and then perhaps regional retail property. To the notion that Deka Immobilien might be about to enter the Polish office market a little tardily, Prof. Alda responds: "We first have to look at the yields and then at the rents, and the latter have fallen significantly in recent years in Poland, and continue to do so."
This certainly has a negative influence on potential investment says Prof. Alda, arguing that although the lack of decent product has depreciated yields, it has at the same time increased the value of property. "I would not say we have missed our chance. As long term investors, we are looking for good quality buildings, though there isn't as yet an adequate supply of fully-let class A buildings in Warsaw."
On this point, Prof. Alda's outlook would seem to concur with de Villard's, who summarises the investment market as one where, "the problem is not so much money, as product". Despite this, however, Deka Immobilien remains undaunted that an office building will inaugurate its presence in Poland. "The office investment market is easier to understand than either the retail or the development market," says Prof. Alda.
Deka Immobilien's strategy within its portfolio management is to acquire property in as many countries as it can, so in Poland, it would be looking to invest up to five percent from two of its big funds and some of its lesser funds for smaller properties. "As market leaders, we have a big enough appetite but we will only pay the market price," says Alda. The company's two biggest funds, Deka ImmobilienEuropa and Deka ImmobilienGlobal command zł.47 billion (E10 billion) between them; of this, Poland will be on the receiving end of roughly zł.2.3-2.8 billion (E500-600 million).
One of Deka Immobilien's firmest policies is to ensure that it develops a thorough understanding of the local market before it enters uncharted territory, a strategy which would seem to emphasize caution rather than boldness. Investing in property is one branch of its activity, developing it is another, but not something it is about to rush into in Poland. Getting a Warsaw, downtown, class A office building into its portfolio is its most pressing task and, according to Prof. Alda, will certainly happen this year. Neither will any acquisition necessarily coincide with Poland's accession to the EU: "We will not wait for this. We are already in the last phase of making an investment and I expect it to happen very soon," he says.
Gaining an understanding of the Polish market doesn't, however, entail opening up a representative office here: in fact, Deka Immobilien believe that precisely the opposite is necessary for that to be achieved. "It is a clear part of our strategy that our asset management services will be carried out by locals," says Prof. Alda, who adds that Deka Immobilien has no representation in any of the countries it has invested in, apart from Germany. That includes countries such as the UK and France. Why? "If I were to send our people to Poland, I could not depend on them to gain real local experience, which will come, of course, from Polish people themselves."
Deka Immobilien specializes in capital cities and has its eye on the highest quality buildings in the very center of town. In France they haven't as yet ventured outside Paris whilst in the UK, London is unequivocally their center of gravity. This habit they intend to apply to Poland as well.
It was, however, outside the CBD, albeit just, that buildings in the Polish capital filled up last year. A lot of product, right in the center, went vacant. This hasn't, however, diverted Deka Immobilien from its course. "Our experience worldwide is that it is better first of all to rely upon the CBD, then get more familiar with the market and then look at more suburban locations," says Prof. Alda.
"We find Warsaw very attractive from the point of view of office buildings, as our general strategy is more or less focused on commercial properties, whereas in the retail sector we would also look to other Polish towns."
"From the legal point of view, we could not invest in Poland because of the legislation regarding our fund," says Professor Willi Alda, Chairman of the Board of Deka Immobilien Investment GmbH, explaining why Poland has till now come third on its Central European investment list. Caught up in a legislative web a few years ago, Deka in Germany was prohibited from investing in 'shared' assets whilst 'direct' investment was forbidden to them in Poland. This situation has now altered but in the meantime the fund took to investing in properties in Poland's neighbors.
"We are on our way to investing in Poland as soon as possible," insists Prof. Alda, who adds that, "from the market point of view (Poland) has always been our first priority, because of its size, both in terms of its population and capital but also because, though we are long term investors, the best entry and exit strategy is always provided by a large market."
Loic de Villard, of Cushman & Wakefield H&B, is fully aware that German open end funds are on their way to making significant investments in Poland, but suggests that retail projects, particularly in regional cities, hold out more promise, believing that the office sector could well be a missed opportunity by now. Professor Alda, however, is adamant that the latter is exactly where Deka Immobilien is intent on injecting its cash, though he doesn't dismiss investing in shopping centers either.
CBD office space in Warsaw is where the fund's attention will initially be focused, and then perhaps regional retail property. To the notion that Deka Immobilien might be about to enter the Polish office market a little tardily, Prof. Alda responds: "We first have to look at the yields and then at the rents, and the latter have fallen significantly in recent years in Poland, and continue to do so."
This certainly has a negative influence on potential investment says Prof. Alda, arguing that although the lack of decent product has depreciated yields, it has at the same time increased the value of property. "I would not say we have missed our chance. As long term investors, we are looking for good quality buildings, though there isn't as yet an adequate supply of fully-let class A buildings in Warsaw."
On this point, Prof. Alda's outlook would seem to concur with de Villard's, who summarises the investment market as one where, "the problem is not so much money, as product". Despite this, however, Deka Immobilien remains undaunted that an office building will inaugurate its presence in Poland. "The office investment market is easier to understand than either the retail or the development market," says Prof. Alda.
Deka Immobilien's strategy within its portfolio management is to acquire property in as many countries as it can, so in Poland, it would be looking to invest up to five percent from two of its big funds and some of its lesser funds for smaller properties. "As market leaders, we have a big enough appetite but we will only pay the market price," says Alda. The company's two biggest funds, Deka ImmobilienEuropa and Deka ImmobilienGlobal command zł.47 billion (E10 billion) between them; of this, Poland will be on the receiving end of roughly zł.2.3-2.8 billion (E500-600 million).
One of Deka Immobilien's firmest policies is to ensure that it develops a thorough understanding of the local market before it enters uncharted territory, a strategy which would seem to emphasize caution rather than boldness. Investing in property is one branch of its activity, developing it is another, but not something it is about to rush into in Poland. Getting a Warsaw, downtown, class A office building into its portfolio is its most pressing task and, according to Prof. Alda, will certainly happen this year. Neither will any acquisition necessarily coincide with Poland's accession to the EU: "We will not wait for this. We are already in the last phase of making an investment and I expect it to happen very soon," he says.
Gaining an understanding of the Polish market doesn't, however, entail opening up a representative office here: in fact, Deka Immobilien believe that precisely the opposite is necessary for that to be achieved. "It is a clear part of our strategy that our asset management services will be carried out by locals," says Prof. Alda, who adds that Deka Immobilien has no representation in any of the countries it has invested in, apart from Germany. That includes countries such as the UK and France. Why? "If I were to send our people to Poland, I could not depend on them to gain real local experience, which will come, of course, from Polish people themselves."
Deka Immobilien specializes in capital cities and has its eye on the highest quality buildings in the very center of town. In France they haven't as yet ventured outside Paris whilst in the UK, London is unequivocally their center of gravity. This habit they intend to apply to Poland as well.
It was, however, outside the CBD, albeit just, that buildings in the Polish capital filled up last year. A lot of product, right in the center, went vacant. This hasn't, however, diverted Deka Immobilien from its course. "Our experience worldwide is that it is better first of all to rely upon the CBD, then get more familiar with the market and then look at more suburban locations," says Prof. Alda.
"We find Warsaw very attractive from the point of view of office buildings, as our general strategy is more or less focused on commercial properties, whereas in the retail sector we would also look to other Polish towns."
