Retail comes back into investors’ view

The largest proportion of commercial project acquisitions in 2015 is expected to be in the retail sector – there are a dozen or so retail assets available to buy on the market. The high share of shopping centres forecast for this year is the result of analysis of the length of time assets are being held in real estate funds’ portfolios. The medium-term investment horizon in continental Europe is 6 years, whereas in the UK it is 7 years and 2 months. Another reason why a substantial volume of retail purchases is expected is that owners have already been observed to be looking for buyers for their assets. It is likely that many of them will find interested parties within this year. The third factor in favour of greater investment in commercial real estate such as shopping centres, are the favourable macroeconomic conditions in Poland, which combined with the easing of monetary policy has pushed up the value of properties, making up for the earlier depreciation right after the credit crunch, and providing a reason to exit investments. In addition (as shown by the RICS Global Commercial Property Monitor study for Q1 2015) the mood and expectations of market participants regarding further value increases are positive. I expect that funds not listed on stock exchanges as well as private investors will be particularly interested in the possibilities of selling assets, making use of the wave of a capital flowing to funds that invest in alternative classes of assets, including real estate.

When it comes to retail assets, it is often not the property itself that is put up for sale, but the SPV company that owns the shopping centre. In such a case the buyer, in order to comply with the law, must obtain the consent of the relevant competition bodies before the actual concentration can take place. Two Polish funds that are listed on the stock exchange have been in a liquidation period for some time and have put up all their assets for sale, including retail ones, such as: Centrum Krakowska 61 in Warsaw which belongs to BPH FIZ Sektora Nieruchomości; Galeria Pod Dębami in Warsaw, which is owned by Arka BZ WBK Fundusz Rynku Nieruchomości FIZ; and Dom Towarowy Dukat in Olsztyn as well as Galeria Łomża in Łomża, which are owned by the ARKA BZ WBK Fundusz Rynku Nieruchomości 2 FIZ.

It should be noted that real estate market experts, in their reports on investment transactions, are in agreement that the capital changes (the issue of new shares and securities) and ownership changes in the capital of companies listed on the stock exchange will not be taken included in forecasts and as transactions of the real estate sector. Two recent considerable transactions – the sale of a significant stake in Echo Investment as well as a previous deal, Lone Star’s investment in GTC together with Lone Star’s planned increase in its involvement to 66 pct shares at GTC’s general meeting in May – will not be included in the statistics. The interest in retail assets applies to the whole of Poland, both shopping centres and smaller scale retail properties, such as retail parks. The latter are the focus of the attention of a new investment fund managed by PKO TFI, known as PKO Nieruchomości Komercyjne, a closed investment fund for non-public assets. The fund operates on the basis of increasing the value of properties over the long term and its aim is to generate a stable income from the leasing of retail assets.

Transaction volumes in Central and Eastern Europe for Q1 2015 are at a similar level to last year, slightly more than EUR 1.4 bln while in the same period in 2014 a level of EUR 1.3 bln was reached. Unfortunately, Polish investment’s contribution to the total has decreased considerably from EUR 0.9 bln to EUR 0.46 bln. This fall in transaction volume is due to the slightly different structure of the deals concluded.

Some of the figures in this commentary are taken from the RICS Global Commercial Property Monitor report for Q1 2015