Palmer Capital comes to Poland

The kind of properties the fund is interested in include shopping centres and retail parks in towns and cities of over 50,000 people, with areas of between 10,000 and 20,000 sqm gla and in a price range of EUR 5 mln to EUR 30 mln. The company is looking for well-located and established centres with grocery anchors that can generate returns of around 8 pct per annum. The first acquisitions should take place in the summer. These are the kind of properties that Ben Maudling, a managing director and shareholder of Palmer Capital, believes institutional funds have not yet begun to target. “We hope to take advantage of being one of the first. I hope this segment will be relatively free of competition for two or three years,” he explains, but also concedes that other players could come onto the local scene much sooner. These plans seem quite ambitious when you consider that Palmer Capital has only just entered the Polish market.

Already in the region
The company has a much larger presence in the Czech and Slovak republics, mainly due to the 2012 purchase of Middle Europe Investments, a distressed Belgian company that has subsequently been rebranded. Since that time two buildings have been sold from the acquired portfolio and nine buildings have been purchased, leaving Palmer Capital with 80 properties under management (mostly comprising office buildings) in 34 towns and cities worth app. EUR 300 mln. The restructuring of the former Belgian company has been so successful that investors have requested the life of the largest fund to be extended from 2016 to 2018.

Not going it alone
So why has Palmer entered a JV with Warburg-Henders? “Warburg has a pool of investors and we weren’t sure we could raise adequate money for the fund without Warburg,” according to Ben Maudling. The fund already has EUR 50 mln in verbal commitments with an equity target of EUR 100–150 mln. Eventually it will have a 50 pct debt-to-equity ratio, with negotiations already having begun with three undisclosed German banks. The gearing is low because German institutional funds, especially insurance and pension funds, tend to be particularly conservative when it comes to risk assessment. “We would like to have a two- to three-year investment period and hold the fund for ten years with the first sales to begin after eight years,” he explains. Palmer Capital’s entrance onto the Polish market has been facilitated by Bywater Properties selling its holdings on the Polish market to concentrate on its business in the UK. It has thus inherited Bywater’s former Warsaw office, some of its previous employees, and the Maris office building in Szczecin (app. 5,000 sqm).

More than just one fund
Over the coming year the company intends to concentrate its efforts on the management of the Central European Retail Fund, but eventually at least one other fund managed by the group, the Palmer Capital Emerging Europe Property Fund, which is listed on the Euronext market of the Amsterdam Stock Exchange, is expected to also start investing in Poland. The company also intends to market its asset management skills to third parties, though it admits that such services in the Czech Republic account for less than 10 pct of the business. Palmer Capital’s target is to grow to a size of EUR 500 mln in assets under management within three years and should be hiring five more staff by the end of the year with experience in asset management and acquisitions. Ben Maudling stresses that the quality of personnel is of the utmost importance, because Palmer Capital sees itself as offering “an international fund approach to asset management with local expertise,” he says, and then explains that to do this the company needs people “very much on the ground.”