Learning by trial and error

Marek Łukaszewski, President of the Association of Investment Funds stresses that it is no easy thing to promote such a product as a real estate fund: "It is very difficult to sell a new fund without any results to boast about. There is still a notable lack of persons willing to take that risk. Moreover, a large section of investors prefer short-term investments" he says. Though the pioneers - Skarbiec Nieruchomości and CA IB FIZ Sektora Nieruchomości - were unsuccessful, that has not discouraged the next investment funds companies (TFI) to appear on the market with similar products. And if that were not enough, those who had painful encounters when trying to sell real estate investment certificates, still do not want to throw in the towel, promising that they will soon present new and better proposals.

Skarbiec - second time lucky

Jarosław Bauc who is President of the Skarbiec Investment Funds Company (TFI Skarbiec) and also head of the Skarbiec Asset Management Holding, announced at a January press conference: "We shall submit within the next three months an application to the Stock Exchange Committee to set up a real estate fund. In our opinion this is an excellent time for real estate investing, taking into account the relatively low prices". The head of Skarbiec preferred to say nothing about the finance the fund intends to obtain as a result or about the fund's strategy. May we remind that the reasons why the first Skarbiec Nieruchomości fund collapsed was its badly elaborated investment strategy (e.g. it was intended to purchase land and housing properties), poorly defined marketing and addressing the offer to individual investors, first and foremost. Jarosław Bauc announced firmly that this project will be quite differently organized, which is why the chances for success are very great, he remarked.

Recruiting professionals

The sooner the better for TFI Skarbiec, since Kredyt Bank competitors are also drawing up a fund investing in real estate. A project managed by BZ WBK AIB TFI is also well advanced. Krzysztof Szamotij, President of TFI, stated the fund will invest in commercial real estate, mainly office buildings and retail projects. A part of its assets may also be used to purchase warehouse space and also committed to housing construction. The fund intends to obtain at least PLN 200 million from investors. Representatives of the TFI have been seen for some time at real estate events in Poland and abroad, for instance at the Expo Real investment fair in Munich as well at a conference organized by "Eurobuild Poland", which dealt with real estate management. Moreover, persons committed to setting up the fund are in close contact with the Knight Frank agency which specializes in investment consultancy, among others. The Poznań-based TFI is also investing in specialist management personnel, for instance Agnieszka Jachowicz, a former employee of the DTZ agency investment department for many years, starts working in the society in mid-February.

Icarus from CA IB

The Polish market may be young and inexperienced but it hungers for knowledge and new projects. What is meant here is creation and management of real estate funds as well as such investors as are gradually emerging from their safe and conservative shell. Rafał Mania, President of CA IB Investment Funds Company, whose CA IB Close-ended Real Estate Fund did not gather the minimum amount of PLN 160 million at end-2003 remarked: "I am still convinced there is a demand for such a product". In his opinion, the failure of the project lay in several factors, but definitely not in investor aversion. It was due to the feverish period before the year's end and also the competition put up by other-anti-taxation investment funds, e.g. securities. Rafał Mania explained: "Our misfortune was also the long time it took for institutional investors to decide, with pension funds in mind at this point. Investing in real estate was still unknown territory to them and though we were promised certain amounts under gentlemen's agreements, they ultimately did not make it in the subscription time with official confirmation. We also had talks with the European Bank of Reconstruction and Development which also was interested in our offer. But that also could not save our project - there was just not enough time." On the other hand, individual customers mobilized by BPH bank behaved admirably! All of which gives ground to believe that a demand exists for a close-ended specialised investment fund. No decision has yet been taken by CA IB TFI to try again to enter the market with a similar project. But according to Rafał Mania it is highly probable that will happen. He remarked: "We shall then employ our experience and it is likely we shall continue to cooperate with Celtic Asset Management, the real estate market firm which was our partner in our first approach".

Competition from the West

It proved a wise step to engage a firm from the real estate sector to establish the CA IB fund, an option which was rejected by the creator of the first Skarbiec Nieruchomości. Let us hope that the next such will ask real estate specialists for advice, since the Polish market is already being penetrated by foreign funds, institutions which have millions of dollars to spend in Poland and also in the Czech Republic and Hungary. They are being assisted by cohorts of consultants with an excellent knowledge of Poland's real estate market. This offers serious competition for such Polish products, not only because of the experience and big money backing those "arrivals from the West". Yet another issue is that investing in the real estate market is recognized as safe and long-term - so most funds are on the lookout for risk-free deposits of their shareholders' money. But there is not much real estate in Poland allowing such purchases to be made. The kind of real estate - office, retail or warehouse - makes no great difference here, what with demand exceeding supply. That, in turn, means fierce competition among purchasers and the need to apply flexible investing principles to each situation. And that would be another piece of advice for new funds.