SHIFTING towards hotels

WBJ: UBM has been restructured and rebranded. What has changed at the company?

Sebastian Vetter: Over the last two-three years, UBM has gone through a number of changes. The biggest change was our merger with Strauss & Partner, formerly a subsidiary of construction company PORR. PORR used to have a 40 percent stake in UBM, but currently it does not hold any direct shares in the company. We also renamed and consolidated our various subsidiaries and now operate as UBM Development in all the markets where we are present. The restructuring and rebranding process took a lot of time, but it is now complete.

What was the aim of the process?

The main aim was the optimization of costs across the four European markets in which we are active. Also, we aimed to achieve better cooperation within the company. Our new slogan is “One goal, one team, one company.” In general, the restructuring of the company allowed us to refinance ourselves and to reduce our net debt. We have secured a better market position, which is reflected in the share price that has increased significantly since the moment the process was started.

Did the makeover also entaila change of business strategy?

Yes, we are focusing on our three core markets of Austria, Germany and Poland and we are still active in the office property market, but our main focusis currently on the hotel sector.

Why?

There are two main (related) reasons for that. On the one hand, there is a company in our group that is called UBM Hotels, which has been active in the hotel sector for many years now. This means that we already have a lot of experience; we have the know-how and proper people on board. We are now building a total of more than 3,000 hotel rooms across Europe and we are one of the leading European hotel developers. So, growth in this sector is one of our strategic goals. This is also reflected in the pace of finished projects per year. While before, we developed 50 hotels in 25 years, we are now actually developing 12 hotels in three years, which is an increase from two to four projects per year. On the other hand, with UBM Hotels being part of the group, we are able to exit a hotel investment at a very early stage, which is an option that not all developers have. We complete a hotel project and UBM Hotels takes over the management of the scheme even before a stable yield is achieved. By comparison, in the office market, you can usually only sell a completed development for a good price when it has already been fully leased out. This, of course, takes some time.  

What will the shares of the particular asset classes in your portfolio look like?

Europe-wide, offices, apartments and hotels will account for approximately 40 percent, 30 percent and 30 percent of the portfolio respectively. In Poland, hotels and offices will account for around 70 percent and 30 percent of the portfolio. We will no longer have any residential projects in the country.

You are currently developing a hotel scheme in Gdańsk. When will it be completed?

The 240-room hotel will open in June next year. It will operate under the Holiday Inn brand.

What will be your next hotel project in Poland?

We are planning a hotel project in Katowice which will be located in the very center of the city, close to the main railway station and the Galeria Katowicka shopping mall. The four-star hotel will offer 268 rooms and will operate under the Mercure brand. We are now awaiting a building permit for the scheme and hope to be able to launch the construction work in the first quarter of next year. The hotel should open for business 22 months later, at the beginning of 2021.

Are you currently looking for more hotel sites in Poland?

Yes, we are now looking at a very prestigious site in the center of Kraków which could house a four-star hotel. In Poland, we are only focused on the construction of three- and four-star hotels. In Warsaw, we are currently looking at two sites, both of which are located in the CBD. We also see Poznań and Łódź as interesting markets, although we have not secured any sites there yet. In total, havewe can spend around €18-20 million on hotel site acquisitions by 2019, which translates into three-four new projects in Poland.

As for office projects, will the Poleczki Park complex be expanded?

Yes, the next phase of the complex, which will comprise 7,000 sqm of GLA,is now being designed. We want to start building it next year, but we need to sell some of the existing buildings first. The complex is over 95 percent leased out and the sale process is already underway.

What about your other office plans in Warsaw and the biggest regional cities?

We are looking at the center of Warsaw; we are interested in launching a project there, which would combine office and hotel space. We are now also discussing a potential scheme in Wrocław, which we view as a very attractive office market.