The Irish Key

Your company, Keyinvest, seems to be quite new on the Polish market

- We started Keyinvest in April 2001 and then we were almost pulled out of the business by September 11th. Before that day the Irish investors we work with were coming over to Poland. After that day they all disappeared. Then at the end of 2002, when Ireland voted for the Nice Treaty for the second time, investors started returning. Since then the property transactions we have closed and will be closing by April 2004 - I mean a large retail centre in Warsaw among others - will reach an amount of about 100 mln Euro. They are all off-market transactions. If there were the right product at the right price here we could do a lot more.

So what does Keyinvest do, exactly?

- We represent various Irish individuals and syndicates of Irish investors. We find them a product and then we take care of the whole process from start to finish: we find lawyers and engineers, we secure bank financing for them, and so on. We can offer two options: to be paid a fee or become a shareholder in the investment as well. We show our clients products we would invest in ourselves. A lot of investors are not full-time property people, and they can't come here all the time, so they rely on us for everything to go smoothly.

It looks like your Irish investors have to trust you, so how do you introduce yourself to them?

- I am a member of the Institute of Chartered Accountants, which gives them some comfort. A lot of my contacts are the result of recommendations and my track record. Previously I worked for Bank Austria, when I came here in 1995. Then I worked for Bank Współpracy Europejskiej. After that I started Keyinvest because I knew many people back in Ireland could see Poland going into the European Union, so they wanted to get in and invest before anybody else did. After September 11th the whole risk profile scared people. They didn't want to get into developments and just wanted to buy buildings that were already rented out, which means buying the cash-flow.

What is the size of the investment transaction your clients can accept?

- We are currently working on two transactions, each of them valued at EUR 50 million. They can handle more than that, but it's difficult to find such a product. In case of bigger transactions you have all the big funds coming. Anyway, from the beginning the idea was to concentrate on smaller ones. Then we came across a few transactions which were bigger and rather off-market, which means that we closed them before the owner went to the big agents.

But the market is rather curious who these mysterious Irish investors that you represent are.

- They aren't mysterious! They just don't like to advertise who they are.

You often keep your investors' names confidential, but they are not necessarily property people, are they?

- Wealthy Irish people have not invested in stocks and shares and government bonds. Property has always been the investment of choice for Irish people with access to cash, because property prices in Dublin and around the country went up by four to five times from 1990 to 2003. So what they do is go to the bank manager with the small mortgage they've had since 1990 and say "my property value is now Euro 500,000, the mortgage is 100,000, so give me 200,000 and I'll invest in another building". They invest and the value goes up again. First of all they invested in the UK because the law is similar and the language is the same. They are also interested in the accession countries. They have been active in the Czech Republic for a while, but it always seemed there were more products available in Poland. They are in Hungary too, buying apartments. Actually in Warsaw, Keyinvest will also be doing business with some Irish residential developers. We have just bought a plot of land. We will purchase another two later this month and begin the first development this year. We see the residential market picking up.

So you have changed your strategy. We saw your presentation at a conference in Dublin in 2003 and you were rather discouraging people from investing in the Polish residential market.

- Then I was killing residential. But now look what has happened since September 2003. Developers have stopped giving discounts and other incentives. Apartments in good locations are selling now, and prices are going up. There is confidence in this market. People can take more mortgages. Also banks are more competitive with the rates they offer.

Let's talk about a hypothetical situation: an Irish investor with 100 million Euro comes to you and you decide to work for him. How would you advise him to divide the money among particular market sectors?

- I would split it into about 60 percent in retail and 40 percent in offices. In retail there is still a bit more supply in the market, while it is very difficult to find office buildings to buy at decent prices. Also the advantage of retail is that the leases are a bit longer. I would suggest commercial in Warsaw and retail in other big cities like Kraków, Wrocław, Poznań, the Tri-City - cities that really have a future, that will grow faster than others.

How do demand and supply in investment look at the moment in Poland?

- For every building, there are six or seven people looking at it seriously. I could have guys coming every week with 10 or 15 million Euro to spend, but there is nothing for them to buy.

But what about other ways of investing money? Why not get involved in the development process?

- Most investors don't want to take the risk and are rather passive, not full-time property developers. They don't have time to do it, and they don't have the expertise to do it.

But your company would take care of it for them.

- Yes, we could, but is the future retail or commercial? I don't know. If an investor came in and said "I own a plot of land over there - would you build me a building?" I would say that it's not a problem, but if he asked me to find him tenants it would be difficult for me, because of competition. All agents have their own databases and they know about companies leasing space, moving to other buildings etc. They have this worked out and that is why it's difficult to compete with them. Everybody is chasing existing tenants, but the key is to find a tenant who is coming here, and to approach them and land them. Also it's hard to compete with developers who have been here for years and know how to do things, know the contacts and that sort of thing.