Doing it right

Interview by Beata Socha Beata Socha: Złota 44 is Amstar’s first investment in Poland. Why this project? Jeffrey E. Stonger: We’d been looking at Poland for several years. We identified Poland as a market we wanted to be in, primarily because of its strong economic growth. No doubt, Poland is one of the strongest performing countries in the EU, evidenced by its ability to avoid a recession during the 2008-2009 global financial crisis. For us, that was a clear sign of economic stability. Poland also has growing wealth trends: a certain population base that is looking for amenities and services. We are all human, and of course we all like nice things. So we looked at this opportunity and we thought, “wow, this is a great concept.” The prior marketing and management of the project had simply not been properly executed. The previous price point was clearly too high and the communication with the market was not transparent. So for us to acquire it for a third of what the original investor put into it – we purchased it for €50 million – allowed us to reset the price point, but still execute the original concept, which is a high-quality, luxury residential tower. BS: How do you want to improve execution and communication with the market? JE: I think that a lot of potential buyers felt isolated before. There was no transparent communication with the market. We want to be much more open with the market, keeping it updated with the progress of the project. We also want the offer to appeal to a larger buyer pool. I think the message before was that you can only buy an apartment here if you are among the wealthiest people in Poland. BS: The top one percent. JE: Exactly. And that’s not the case any longer. Obviously, we’ve reset the price point to be more in line with the market, making it much more affordable now. BS: How do you visualize the client who buys an apartment at Złota? Do you expect clients to be mostly Polish or foreign? JE: It’s going to be both, but we expect 80 percent of our buyers to be Polish. That’s a combination of people located in Warsaw and throughout the country. These are professionals who are in Warsaw for business (e.g. every week), so it makes sense for them to have a second home here in the city. Many buyers will use this as their primary residence, but we anticipate some of these apartments will be second or third homes, investments, or even units for children going to university in Warsaw. BS: How many buyers normally purchase an apartment in a project of this class as an investment? JE: I think all buyers will ultimately look at this as an investment given that the long-term value of it is there. You have a stable asset, and the units will only go up in price in the long term. So it’s inherently a good investment. Some people will buy it purely as an investment asset and some will buy it as an investment to be used as a primary or secondary home. And then the other 20 percent of our buyers will be international: either US, UK, European or even Middle Eastern citizens. These are buyers who either travel to and from Warsaw and would like to have a unit here, or buyers who just see the inherent value. You’re buying a part of a world-class tower, the likes of which you see in New York or London, at a fraction of the price. BS: How much more expensive are such properties in New York? JE: At least ten times. BS: What about Złota 44’s competition? JE: There are other nice projects here, but the lifestyle Złota 44 provides does not currently exist on the Polish market, and we believe the local community deserves the same level of amenities and services that other primary markets in the world have enjoyed for years. BS: You plan to complete apartment sales in Złota 44 within the next 2-3 years. Where do you think the luxury residential market will be then? JE: When I look around and assess the high-end, luxury properties, there really isn’t that much available supply. And when you compare that to a high-rise, there’s nothing on the horizon in the foreseeable future that could match this building. Thus, I think that the luxury residential market will continue to get stronger. When I compare the various offers of luxury residential buildings in Warsaw, I believe Złota 44 is at the top of its class. BS: What are Amstar’s plans for Poland? Any new projects on the horizon? JE: Nothing in the short term, as we are focused on ensuring Złota 44 is a success, but in the longer term, we are looking to build a platform here over the next three to five years. We’re a patient investor. We’re looking for the right opportunity. We’d rather do a few great deals than a large number of average deals. We do everything through local joint ventures, so for us it’s about identifying the best possible local partners first, and then finding the right deal. BS: Which markets are you looking at? Residential or maybe something commercial? JE: Amstar is a global investor, with half of its portfolio in Europe and the largest footprint in Turkey. But we have now entered Poland through our investment in Złota 44, and we will be looking to grow throughout the region, across all property sectors: office, logistics, retail and residential, either through ground development or through distressed acquisitions. BS: What do you think about the office market then? Isn’t Warsaw a little overcrowded? JE: For us, the market is indeed a bit oversupplied at the moment. We’re rotational investors, so we rotate in and out of asset classes and markets throughout a cycle. The Warsaw office market isn’t our fit right now, but we are finding interesting offices in Kraków. BS: What is Amstar’s usual term of investment? JE: It depends on each investment’s business plan. It tends to be between three and seven years. Our goal is to buy, develop or reposition, stabilize and sell. So once we execute our business plan, we look to exit the investment. BS: You said you were looking across the region. Which other countries are you considering? JE: Poland is the primary focus at the moment, given that it’s the largest and strongest performing country in CEE. However, we’ve looked at opportunities in the Czech Republic, Hungary and Romania. I think in the longer term there is an opportunity to do something in those countries as well