Youth and Experience

Ewa Andrzejewska, 'Eurobuild CEE': The new company has very ambitious plans: retail, hotels and logistics. How was the idea for Real2B born?

Jarosław Fijałkowski, CEO and founding partner of Real2B: I had known Marek for several years. One day we met and started talking about our business plans. Marek suggested that, with my experience on the commercial property market, I should draw up an investment plan for the large property portfolio he held. This was how our cooperation started.

Marek Falenta, joint partner in Real2B: I hold a 50 pct stake in this company. Jarek’s team commercialises my property portfolio. He prepares investment plans, looks for investors and deals with the development of these projects. Daniel Pałasz deals with the financing. Besides that, basically I will invest my own capital where it is worth doing so and the returns are sufficiently large. However, our ambition is for the company to finance itself and to be self- sufficient. My speciality involves engaging in a given business at an early stage and subsequently increasing its value. This was the case here.

Ewa Andrzejewska: For Jarek Fijałkowski this involves returning to his roots, but for you this is something entirely new. Where did the idea for getting involved in the commercial property market come from?

Marek Falenta: I have been connected with the property market for a long time, but my activity had been limited to the sale of land for retail, office buildings or apartments. We often purchased such sites from banks and then sorted out their legal and administrative situations, thus providing developers with areas ready for investment. For example, we sold 170 ha near Wrocław to Leszek Czarnecki, where Vratislavia Residence is to be built. I believe we have a professional team, the best staff who have been working in the business for many years – and I am convinced we will succeed.

Ewa Andrzejewska: You mentioned quite a large land bank. What does ‘large’ mean in this context?

Marek Falenta: I have more than 100 ha of land located in some of the largest Polish cities. For instance, in Poznań I have 20 ha in a strategic spot in the city, on the site of the former Rolling Stock Repair Works, which we will develop together with the city and PKP, the Polish State Railways. In Wrocław we also have a plot for an international hotel chain, while in Warsaw we possess 80 ha and several dozen hectares more in Zgorzelec, near the German border. I estimate the value of the portfolio at several hundred million złoty. Moreover, we are buying new plots all the time, while Jarek looks for areas for commercial projects.

Jarosław Fijałkowski: And property prices will only go up now, so we will continue to look for attractive plots. We are actively on the lookout for bargains.

Aneta Cichla, 'Eurobuild CEE': What will be built on these plots?

Jarosław Fijałkowski: Let’s start with retail projects. We have two concepts that we would like to develop. The first is a chain of retail parks. We want to build 50 over the course of seven years. These will be facilities with an average area of 2,500–10,000 sqm and tenants numbering from 10 to 40. Our centres will be built on estates near large residential centres because only such locations guarantee lease contracts with chain tenants. Around 80 pct of the tenant mix will be repeated in all our retail parks. Their grocery operators will vary. The first such retail park will be built in Cieszyn and we are also considering Pyskowice in Silesia. The minimum population of a town suitable for our projects is 20,000.

Aneta Cichla: So what will the project in Cieszyn be like?

Jarosław Fijałkowski: It will be a typical development for this concept: a one-storey building with a leasable area of 2,400 sqm, including a supermarket with an area of 1,200 sqm. There will be around 110 parking spaces. We expect the site development conditions to be issued in May this year and the building permit should follow in November. So we will buy the plot in December and start the construction work in Q1 2015 with the aim of opening the centre in Q3 next year.

Aneta Cichla: What name will this centre operate under?

Jarosław Fijałkowski: We are still thinking about it, but it will be one name for the entire chain.

Aneta Cichla: What about your second concept?

Jarosław Fijałkowski: Our second concept involves the construction of integrated retail and transport centres. In order to do this we have signed a contract with a transport operator – Israeli company Mobilis, which has acquired 36 locations near PKS bus stations in tenders organised by the Treasury Ministry. The first two centres will be located in Piotrków Trybunalski and Sierpc. In Piotrków the centre will be built near the PKS bus station and the PKP railway station, on one of the largest streets with an urban square and a public transport terminal. It will have three floors, including one underground with a supermarket and service space. Its zero level will include regular shops, while a cinema and entertainment section will be located on the first floor. The leasable area will amount to 9,800 sqm. We expect to obtain the site development conditions at the end of Q3 or early Q4 2014 and should be able to start work in Q2 2015. Thus the opening will take place in Q3 2016.

Ewa Andrzejewska: Retail is not everything. What about hotels?

Jarosław Fijałkowski: We have started working with the Hilton hotel chain. The first centre will be built on ul. Traugutta in Wrocław, near Galeria Dominikańska. The plot belongs to Marek. A DoubleTree by Hilton hotel is being built opposite. Our facility will have one extra star. In my opinion ilton has an interesting strategy – it locates two hotels of its chain in one city, even close to one another, but there must be a minimum difference of one star in their standards because the customer can easily accept the difference between a four-star and a five-star establishment, both in terms of standard and price, but the guests of five-star and three-star hotels are completely different people. Our hotel in Wrocław will have 130 rooms. We are currently in the process of acquiring a permit for switching from an office development to a hotel development. Our hotel will operate on a franchise or a management basis as we are still considering which of these two forms to choose, but we want to start construction on one of the hotels in July. The opening is planned for autumn 2015. The hotel project in Wrocław is the first of a few similar developments we are planning to undertake. These hotels will be built in Katowice and Poznań

Ewa Andrzejewska: You have a lot of plans...

Jarosław Fijałkowski: Yes, but that’s not all. We will also invest in logistics. Marek has a plot on ul. Płochocińska in Warsaw’s Białołęka district. The local zoning plan allows for the construction of a logistics complex. You could build 40,000 sqm of warehouse space there. We want to sell this land as well as some other plots owned by Marek. Our 20 ha plot in the centre of Poznań is worth a few hundred million złoty. Together with Polish State Railways we are planning to organise an urban planning competition for the development of the entire area. A study has been carried out for an office and residential project including a few retail outlets. A new road layout has been developed for the area. We will divide the property into a number of smaller plots and sell them to residential developers, as was the case in Miasteczko Wilanów in Warsaw. The plots will have site development conditions decisions covering them.

Ewa Andrzejewska: What about securing the financing?

Jarosław Fijałkowski: It is much easier to obtain a loan these days. Banks are clearly relaxing their lending criteria and are more eager to negotiate and cooperate. They have a bigger budget for loans. This is, by the way, one of the sure signs of a recovery. Another is tenants’ growing interest, while the increased activity of funds is yet another.

Aneta Cichla: Are you interested in acquiring existing projects?

Marek Falenta: We are not interested in that. However, we have a plan to set up a property fund, the assets of which would be retail parks. The proceeds from leasing out the outlets would guarantee stable annual revenue to private investors.

Shoulder to shoulder

Marek Falenta is the owner of the Falenta Investments fund and of a majority stake in telecommunication company Hawe. He made a substantial profit from the sale of local government financier Electus. He is also a shareholder of rubber product producer ZWG and has invested in Lead-Bullet, which is developing the National Medical Base. Marek is also the co-founder of the Umbrella Institute – a company that obtains and implements new technologies for industry. He is also the largest share holder of the Dom Maklerski IDM stock house and recently also the share holder of Składywęgla.pl. He features on the list of 100 richest Poles compiled by weekly magazine ‘Wprost’. He has previously worked for such companies as KGHM.

Jarosław Fijałkowski gained his experience in companies such as BP Poland, Echo Investment, Plaza Centers and Parkridge CE Retail. He was also a retail director at Lambert Smith Hampton. He helped introduce McDonald’s, Burger King and KFC to the Polish market. He was responsible for the lease of six Plaza Centers malls with a combined area of 200,000 sqm. Jarosław was involved in setting up the Polish branch of Parkridge and was responsible for the development of the company, in which he built up a chain of shopping centres under the Focus Mall brand. After the bankruptcy of the British owner of Parkridge, its Polish branch was also closed down. He then started cooperation with Real2B, where he has carried out projects with a total estimated value of over EUR 1 bln. He graduated from the Poznań University of Economics in management and marketing.