Railways bring dowry to investor suitor

PKP – the Polish state railway corporation – holds a very substantial portfolio of properties and has talked openly about cooperation with investors and developers. The trouble is that these declarations have never assumed material shape. But the Euro 2012 European Football Championships seem to offer a a real opportunity – according to Jarosław Adwent, PKP board member and property managing director

z Karol P. Bogusz, “Eurobuild Poland”: Is it true that we will be catching trains from modern stations in just a few years?

Jarosław Adwent, PKP board member and property managing director: We shall be focussing our efforts on Warsaw’s East and West stations and Katowice. But the central stations in Wrocław, Kielce, Szczecin, Sopot, Łódź Fabryczna, Częstochowa and Chorzów Batory are also in line for modernization. We also want to improve the appearance of Warsaw Central station, focusing on renovating the underground sections.

These were neglected for so many years. It would be a miracle were these plans to prove successful.

It wouldn’t be a miracle at all – merely the implemention of PKP’s strategy for developing railway properties which was drawn up in February, or rather the speeded up implementation of that plan. The first thing which provided a greater impetus was Euro 2012 and the special decree connected with this event which has given us greater room for manoeuvre. The second factor was the rising demand from developers and property investors for our assets. There was a multitude of companies eager to purchase our old, defunct Katowice station, so PKP recently sold it for PLN 45.5 mln.

z That means PKP will not be repairing these stations by themselves, but instead by working with private business – public-private partnerships?

Not within public-private partnerships, but through the cooperation of two players operating on the market. We shall contribute the land, and our business partner the capital. These investments will proceed in the same fashion as the office building in Katowice city centre. First a seminar will be staged at which we shall inform investors of our intentions for the investment, after which interested parties can present their proposals, and some will later enter into negotiations. Finally, the best offer will be chosen. The matter is quite simple: we contribute the land around the station which the investor will develop commercially while simultaneously upgrading the station. When the project is finished, we shall hold on to the station and the multi-storey car park which is invariably built to accompany it. We shall hold shares in the company managing the complex, commensurate with our contribution of land. The next negotiations over an investment project are to be held in the Warsaw district of Praga near Warsaw East station, an excellent location near Warsaw city centre. The area of the land to be developed within this project amounts to around 16-ha, near the planned National Sports Stadium.

z How much land do you actually have – similar to that in Praga – which can be put to commercial use, combined and for which the ownership has been established?

Around 10,000-ha throughout Poland – the majority of which has been joined or merged together. Cooperation has begun with the majority of interested local governments over the procedures for transferring to PKP those properties which do not belong to us and which could hinder investing. Several local mayors have already assured us there will be no problems should an investor be found. That depends on the specific character of a city. Katowice mayor Piotr Uszok has even declared he would allow access to 2-ha of land next to the plot we own should the need arise.

The 10,000 hectares I mentioned also contain sites at considerable distances from the stations, like that in Warsaw on ul. Ordona, where we are building a housing estate with PKO Investments.

z Could you estimate the value of the investments you spoke about, and what would be built on these sites at railway stations. There would surely not be only shopping malls like the one at Warsaw Wileńska station?

It would be difficult to give an approximate value of all the investment. The Katowice and Warsaw projects could have a value of even several hundred million euros, but potential profits will be much greater since millions of customers annually pass through Upper Silesia’s main station. But we shall be talking mainly in terms of contributions in the form of land. The investor will have to deliver hard cash for the investments, some of which will probably come from EU funds or from the Polish national budget under the terms of the special Euro 2012 decree.

The developer/investor will have the final word on the functions to be performed by sites around the stations. Even so, I would imagine these to be services in the widest sense of the term: entertainment, bowling alleys, cinemas, restaurants, cafés, shopping and also, surely, office buildings. You must bear in mind that PKP’s main stations are situated in key, and often the best, parts of the metropolitan areas and cities. This means modernizing railway stations and adjoining land will have a positive impact, not only on the appearance of the railways proper – which is bound to increase the number of travellers – but also on the image of such cities as Wrocław, Warsaw, Poznań, Katowice etc. These investments will also lead to new jobs being created.

z You paint a truly marvellous picture of the future. The trouble is that national elections have just taken place in Poland. Will these projects be shelved if the Civic Platform – the new ruling party – changes PKP’s managing board?

We are carrying on just as usual and taking things as they come.

z So there will be no changes?

No, because we shall have to cope with Euro 2012. That apart, PKP will be profitable and will continue to do so when cooperating with investors, and also when projects are completed as shareholders. My company sees this as a source of earnings. In addition, everything concerning the land and buildings which we shall deliver to investors will be absolutely transparent. To ensure that this is the case, we shall draft five independent estimates for each project and also be employing auditors from outside the city where we intend to start negotiations concerning the station, as well as bringing independent real estate consultants into the picture.

z You mentioned the tender for the old Katowice railway station. To conclude, may I ask whether you still have such properties you wish to sell?

PKP have offered 16 small stations for sale so far and the process will continue – at least for economic reasons. Other stations, such as Zgorzelec-City, Sycze, and Nowe Czaple are also being prepared for selling off. The projects we sell are mainly closed down stations, but should they be situated on operating railway lines, we insist that their passenger-servicing function be maintained should such a need arise. We have already transferred 17 stations into perpetual usufruct – mainly to local governments.

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