Polish real estate attracts financial investors
Chelverton Properties' sale of three buildings in the Wisniowy Business Park to a joint venture of Heitman International and GE Capital Real Estate last month is a sign that Warsaw's real estate market is now mature enough to attract financial investors, property sources said.
In addition to the Wisniowy sale, Europolis Invest, an Austrian fund, announced plans last week to spend some $70 million to acquire a property in downtown Warsaw. Europolis wouldn't reveal the name of the building, but Chris Grzesik, head of the local office of King Sturge, said the fund acquired the 20,600 square-meter Warsaw Towers on ulica Emilii Plater.
"The deals show that there is demand for good-quality products," said Peter Long, country manager with Chelverton. "Financial investors are interested in real estate."
Two sales to institutional investors in one week is a rare feat considering that since 1998 only two other such transactions have occurred. One of those deals was the U.S.-based Pricoa fund's $40 million purchase of the Atrium building on ulica Jana Pawla.
In the Wisniowy sale, Heitman and GE Capital acquired the complex's C, D and E buildings, which have total rentable space of 21,600 square meters.
Chelverton wouldn't reveal the amount paid for the buildings. "I can't discuss the price, I can't discuss yield either," Long said.
But property sources said that the buildings were sold at a yield below 12%, which would put the acquisition price at about $60 million.
Long confirmed that yields which represent a rate of return on property investment are lower than in 1998, when Chelverton sold the first phase of the Wisniowy complex, building A, to Commercial Union, a U.S.-based insurance company, at a yield of about 13.5%. "Since then yields have fallen substantially," Long said. Yields drop when a market matures and investment in real estate becomes more secure but less profitable, one property source said.
King Sturge's Grzesik said the yield for Wisniowy was below 11.5%, while for Warsaw Towers it was less than 11%.
The three Wisniowy buildings were the last of five to be sold by U.K.-based Chelverton. After selling building A, the developer sold building B to ABN Amro bank last year.
The Wisniowy purchase is the third Central European acquisition for GE Capital and Heitman.
Early last month, the duo bought BB Centrum, a 28,800 square-meter office building in Prague for more than DM 100 million. The joint venture also purchased the Buda Square building in Budapest for an undisclosed amount.
Long said GE Capital Bank and Heitman negotiated with Chelverton for about six months before the transaction was finalized. He added that the deal would now allow Chelverton to invest in other projects around the country. "It's strengthened the financial position of our company," he said.
At the same time, the developer still owns enough land around the business park for another 10,000 square-meter project, he said. But Chelverton is unlikely to start construction of any building until the market becomes more favorable for office development.
Apart from office construction, Chelverton plans to break ground on a large shopping mall in Katowice next May, Long said. The mall, which would have 73,000 square meters of retail space, is planned for completion by 2003.
First data center signs
warehouse deal
Energis became the first company in Poland to lease space for a data center last month when it concluded deals in the Wisniowy Business Park and the Diamond Business Park Piaseczno, said DTZ, the telecom firm's agent in the transaction.
The U.K.-based Energis leased 3,000 square meters of office space in the Wisniowy Business Park and 5,000 square meters of warehouses space in the Diamond Business Park to house its data center operations, popular throughout Europe but new to Poland, said Jeroen van der Toolen, an agent with DTZ.
Marzena Rogalska, a spokeswoman for Energis, confirmed the company's intention to move to new offices and warehouses where it will house its high-tech equipment.
"For me, this was the first time that I was asked to fulfill this requirement," van der Toolen said, referring to Energis's technical needs for establishing a data center. "We have to get an extra power line and new generators."
In developed markets, the booming IT sector has fueled demand for low-cost warehousing where IT companies can store their equipment, property sources said. These firms also use the facilities to manage and transmit data for companies looking to outsource such services.
In Europe, demand for IT warehousing space reached 150,000 square meters last year a figure that is expected to increase to 1.2 million square meters by the end of 2002, DTZ said in a report on IT sector property requirements.
Energis signed 10-year deals in both the Wisniowy Business Park and Diamond Business Park despite their close proximity they're just 15 kilometers apart. Energis did it, van der Toolen said, because both buildings are located along the same railway line. Energis, which has a joint venture with Polish State Railways (PKP), is allowed to use PKP's fiber optics to transmit data.
Van der Toolen said that the Energis deal is likely to be the first of several data centers expected to arrive in the capital. "We're talking to various (interested) companies," he said.
Worldwide, data centers typically require 5,000-10,000 square meters of warehouse space each, property sources said. Warsaw is believed to have a need for four to five data centers totaling 50,000 square meters of warehousing space about 10% of the total warehouse stock in the city.
