Flying out of Okęcie

  Since then they have built a significant portfolio in the country with such high-profile acquisitions as the Galeria Madison shopping centre in Gdańsk and the Real Centre in Rzeszów.   David Sharkey, Caelum\'s president, talks to \'Eurobuild\' about the company and the reasons for the change in strategy

David Sharkey, president, Caelum: Caelum has 2 main owners – myself and my brother-in-law Derek who are private Irish investors. Capital Partners is the original Irish company with which we started property investment about a decade ago, but it is through Caelum that we are developing our portfolio, both here in Poland and indeed throughout the Central European area.NN: What differences exist between operating in Poland and Ireland?

  I do not think one would require that much in-house for investment in Ireland.

  We have to rely on word-of-mouth.For instance here there is no clear definition of net operating income from buildings – often these are 15 pct below the estimates of agents and vendors. 

DS: In December 2002 it was clear that Poland would soon be joining the EU. Ireland had been a substantial beneficiary of EU membership, and when we compared the situations of the 2 countries, we could see that for a property of the same value, in Poland there was a 10 pct yield, compared to 5 pct in Ireland.The banking market is more attractive here because property loans are on a non-recourse basis, whereas in Ireland you have to give personal guarantees and other forms of security.

GDP was up, unemployment moving down, exchange-rates moving downwards, free movement of labour... Thus in our view purchasing power had to go up, feeding into the retail market and as such it seemed the right place for us.NN: I understand that your company has now decided upon a change in it strategy. Could you explain why and what this would entail?

DS: We are changing the focus of our activities away from investment and towards development – without giving up pure investment completely – as the yield compression and the increase in interest rates have resulted in the disappearance of the positive yield gap.  Too much money is now chasing too little product – yields are no longer attractive to our company.NN: What are the developments that you have in the pipeline, and which sectors do you plan to focus on?

DS: We have just laid the foundation stone on Galeria Askana in Gorzów Wielkopolski – an 18,000 sqm retail and leisure development that we are very excited about. We are very pleased with the tenant reaction and it is letting extremely well. Construction is going well and we expect to open the centre on time in September next year.

We are also currently developing two 9,000 sqm Praktiker stores in Rybnik and Grudziądz. We are focusing very much on the secondary market – cities with populations between 100,000 and 150,000, as the primary market is now saturated. People will always have to feed and clothe themselves, but it is our view that they have a right to expect to do so in quality centres in these towns. a residential site in Konstancin, and has bought 2,600-ha in the Silesia region, consisting of 80 different plots, which will be the site for logistic, residential and retail developments. The exact nature of what we do with the plots depends on what the market tell us is best – and this is why we are open to co-operation.

Our main focus is going to be to develop retail and residential projects on these sites.NN: But surprisingly for a company with so many projects, you have up until now had a low profile on the Polish real estate scene.

DS: Yes. But we are now generating more and more interest from the market. People are approaching us and asking: Who are you? What are you doing? How come you have so many developments on the market?

Up until last August, our boardroom was the lobby at the Westin hotel. However, we had made a decision the previous  The structure of our company allows us to be very flexible and mobile as it is financed by private capital. We have a fast decision making process combined with a sharp instinct.

The company is now on the verge of an explosive period of growth. We currently have EUR 350 mln in assets. By the end of 2007, we hope to have EUR 1 bln.  We have achieved all our targets and are good at closing our deals – which is why people are coming to us more and more with deals – we are uncomplicated, easy to do business with and nobody works harder than us to close a deal.