Opportunities not (yet) exploited
Polish funds investing in real estate
Opportunities not (yet) exploited
Pension funds operating in Poland cannot invest money in real estate investment funds which is the main reason why the Poland has no such funds. According to market sources, other reasons include the specific philosophy of most Polish investors and distrust towards new financial products.
The beginning of the year saw Towarzystwo Funduszy Nieruchomości
Skarbiec (Skarbiec Real Estate Fund Association) attempt to set up the
first Polish fund investing in real estate products. The fund, called
Skarbiec Nieruchomości, collected PLN 20 mln, which is PLN 10 mln less
than required to make a profit.
Representatives of Skarbiec say that this was caused due to a general
recession and the fact that subscriptions for Skarbiec Nieruchomości's
investment certificates were issued at a bad time as investors had
invested a lot at the end of 2001 trying to escape the newly introduced
tax on bank savings interest.
Other unofficial reasons include:
-
An incorrect selection of customers - Skarbiec Nieruchomości' targeted individual investors
-
An unattractive investment programme - as much as c. 30 % of the funds resources were to have been spent on purchasing sites in Poland's larger cities, no more than 20 % on the construction of residential schemes (as profits from this sector are regarded as uncertain) and small high class office buildings, with no more than 30 % on securities (including shares of companies operating in the real estate market)
-
An inefficient promotional campaign, showing unfamiliarity with real estate market rules.
Fuure of real estate funds
Did the pioneers' failure discourage others from establishing a real
estate fund? President of TFI CA IB, Grzegorz Świetlik explains that his
company has other objectives. ,We are focusing on new a product, a
private equity fund, which will invest in shares of non-public
companies. This is an altogether more attractive and easier project. It
does not mean, however, that we are giving up on the idea of a real
estate investment fund. We will probably try to established one next
year, in co-operation with a property agent or developer who will be
able to assist us in valuations amongst other things."
According to Grzegorz Świetlik close-end specialised investment funds
should look amongst institutional investors when looking for clients.
"We will start by analysing their expectations and capabilities. When
we've signed letters of intent with four or five such investors, we can
start a promotional campaign for individual customers."
Specialists agree that pension funds would be great investors in real
estate funds. Their investment strategy complies with the philosophy of
investing in property - securely and for many years. But a combination
of interests is impossible. The current law prohibits pension funds in
investing in specialised close-end funds.
Pension funds dreams
"From a pension funds point of view, investing money in real estate is
an attractive option. We would certainly be glad to do it, particularly
before Poland's accession into the EU and interest rates fall," says
Jarosław Jamka, Investment Department director at ING Nationale
Nederlanden Polska Powszechne Towarzystwo Emerytalne. "I think that
pension funds operating in Poland would find such an opportunity
interesting."
These dreams may soon be realised. The Polish government is looking at
lifting some of the current limitations on pension fund activity.
Several amendments to legislation have been proposed, including
ending
the current ban on investing in specialised close-end funds. Grzegorz
Świetlik expects changes in the law, allowing pension funds to invest
directly in real estate, to come into effect in January next year.
Traditional investors
If, however, the law is not amended, will funds investing in real estate
establish themselves on the Polish market? It is difficult to answer
this. According to Andrzej Chełchowski of law firm Miller Canfield and
Grzegorz Świetlik of CA IB, Poland is still dominated by investors
hoping for quick profits, prefering to invest in the familiar monetary
markets. ,I believe that as soon as the economic situation improves,
investors will become more optimistic and more willing to invest their
money in real estate for periods of 10 years or more," Grzegorz Świetlik
adds. In the meantime Polish real estate investment transactions are
being concluded by foreign funds such as the German Deutsche Grundbesitz
and Austrian CA Immo AG.
