TONAGRO's parallel development

Tonagro is now planning to expand its operations from land sales and project development to general construction  and owner representation. Since the beginning of June, Tadeusz Haładaj the company's new President, has been charged with these fresh challenges.  He also faces having to bolster the company's image, after several negative press articles.

- Does your appointment as President of TONAGRO,  mean you will be changing  the company's strategy?
- This is a unique company because it is almost completely owned by the State Treasury Agency of Agricultural Properties [Agencja Własności Rolnej Skarbu Państwa (AWRSP)]. The strategic goals of TONAGRO will therefore remain unchanged. However, the standstill on the real estate market has forced us to look in new directions.

- Do you mean to activity outside the property market?
- We want to offer investors: preparation of land for their investments, investment supervision, general contracting, owner representation and help planning urban space. We are very experienced in these fields but until now we have not offered such services to other companies.

- Does the company plan to give up its core operation? That is, acquisition of agricultural land, preparing it for investments and selling it? Development   has been becoming more important for you for a while now.
- These have to be parallel activities for us. The Agency (AWRSP) still has land which needs to be commercialised  once it is turned into investment plots. But the company must have the capital to do that.  Development is improving the company's cash flow and we are  going to extend it given  the experience of our company Agroman, developer of the "Brzeziny" housing estate in Warsaw.

- How does the company acquire land? Not only through tenders.
- Since the company was founded, the Agency has brought 622 hs of land into TONAGRO and the TONAGRO group (TONAGRO SA and dependent companies) has purchased 1,9 thousand hs of land through tenders. As far as the land brought in by the Agency is concerned, we have sold 158 hs, and out of the land purchased by the group - we have sold 446 hs. Land is also traded via orders and this amounts to most of our plots.

- What do you do with the profits from selling land acquired in a tender, and what is the procedure in the case of land brought in by the Agency (AWRSP)?
- The profit accumulates within the company, it is divided, and the company's owners acquire the part assigned to dividends. It doesn't matter if the profit comes from land purchased by us or from land brought in by an in-kind contribution. If the Agency makes an in-kind contribution, the capital belonging to the owner increases. When we purchase something ourselves, the assets  increase. Moreover, part of any profit must be invested in new purchases and specific development projects.  Revenue, (and therefore   profit as well), is  generated by the sale of land  ordered by the Agency and its branches. For such orders we receive a commission.

- Apart from the territorial branches of TONAGRO, there are the following companies: Holdton, Agroman, Investon and Warton. Agroman is building the Brzeziny housing estate, Investon has begun construction of a two-star hotel chain. We do not know anything about the other two companies.
- There are no territorial branches of TONAGRO - only dependent companies in which 99 percent of the shares belong to TONAGRO SA and 1 percent to the Agency. Warton, established 3 years ago, provides a base from which to launch new business, such as: preparing investments, general contracting and construction supervision. In that respect, the company renders services to Investon but we would like to develop this potential and use it outside the Group. However, we need time: to give us experience, recruit staff, win orders and  increase  capital. Holdton was created for new undertakings but   isn't as yet involved in any ventures.

- Will new companies be created in the near future?
- Quite the contrary!  We have started the consolidation process. We are at the advanced stage of a merger between NP and Lubusz from Zielona Góra, whilst one involving the Wroc?aw and Âlask (Silesia) companies is under way.  The same will happen with the companies in Gdafsk, Olsztyn and Szczecin in the future. These companies will become economically stronger as a result.

- Your predecessor,  President Jan Podobas,  launched the search for investors.
- A specialist American firm is analysing the TONAGRO group's attractiveness for potential investors. It could, however, be in The State Treasury's interest to consider the minority investor option, despite the possible obstacle,  (which we know from   experience), that foreign investors seek majority interests and are used to them. Of course, we are not excluding the possibility of a domestic investor.

- The company owns 3 floors and the mezzanine in the Belvedere Plaza building, that is in the office part of the Hyatt Regency Hotel in Warsaw.  Last year's transaction cost  USD 4 million. You also have nine suites in  ul. Gwiaździsta , with an area of 90 to 200 sqm.
- The logic of these purchases was clear. In the case of the office building (1,400 sqm.), the company was convinced that it was buying very attractive space. We were to lease the space,  recoup our outlay quickly and  secure a continuous inflow of funds. Unfortunately, the opening of Belvedere Plaza was delayed a year and a half  and the market situation changed. Therefore, we leased one floor to other companies and the mezzanine houses the accounting office serving the whole group. The two remaining floors are for the company's headquarters. But we are not obliged to occupy those offices and they can be sold or leased at any time. It is just a matter of  the profitability of any transaction and   satisfactory financial conditions. The purchase of the suites in ul. Gwiaździsta  was also a capital investment. The suites have been leased and are regularly bringing  income to the company. TONAGRO manages all the properties directly.

- We hear about the planned dissolution of the Agency (AWRSP) more and more often. How might this affect TONAGRO?
- This is a hypothetical question. I can only say that  the Agency has yet to exhaust its statutory aims.