PKT moves into real estate

By Aleksander Nowacki

Tobacco distributor Polskie Konsorcjum Tytoniowe (PKT) is moving into the real estate sector, with a wide range of projects in various parts of the business, particularly in shopping and entertainment centers. The company's core activities are to be drastically reduced in scale and confined to a small subsidiary company.

Paweł Mikołajczuk, PKT president, dismissed criticism that the market for commercial development has reached saturation.

"That is not at all true of the cities where we have property," he explained. According to Mikołajczuk, there is a great difference in the level of development in the Warsaw market as compared to cities such as Zielona Góra or Białystok. In the latter city, PKT wants to build a commercial and entertainment center.

"It will be on a different scale than the capital's Galeria Mokotów but we are thinking along those lines," he said. Mikołajczuk envisages involvement in an impressive range of development projects, such as a commercial center specialized in construction and housing materials in Zielona Góra, in the southwestern part of the country.

PKT is also in talks with a foreign firm interested in developing a logistics center on the company's property in Kłuszyn, near Mińsk Mazowiecki to the east of Warsaw. The East-West motorway is to run through the very heart of the 20-hectare site, Mikołajczuk said.

Contrary to earlier press reports, Bancroft private equity fund is not interested in the project. The fund's president, Mariusz Stolarz, said that it was not customary to comment on its relationship with its clients. He preferred not to see the fund associated with PTK's real estate projects, as "leaving Bancroft out of the picture altogether would correspond to the reality (as opposed to the earlier press reports)." Mikołajczuk confirmed this, saying that the company had previously held negotiations with the fund on issues unrelated to its current plans.

Mikołajczuk explained that an examination of the western European markets showed that now is the last call to start investment.

"We have found that real estate is where institutions want to put their funds," he said. "However, should we wait any longer, the moment will have passed."

PKT is looking at private equity funds that may be interested in the real estate market and it has already secured the support of a large international player.

"It is a serious investor with a lot of experience in commercial development," Mikołajczuk said. "The letter of intent has been agreed on but I prefer to stay tight-lipped about the partner's identity until late next week."

PKT would remain as the parent company with a real estate subsidiary and a smaller trading firm.

"We want to use our experience in trading by separating the trading unit from the core activities (which are to be developed)," he said. The company will not continue in the tobacco distribution business, which currently accounts for 70 percent of its revenue.

According to Mikołajczuk, multinational cigarette producers are able to dictate terms on the market, while the domestic firms specialized in distribution have a much weaker negotiating position. The level of distribution charges does not allow for a profitable business in the sector, he said.