Finger on the pulse

Aneta Cichla, ‘Eurobuild Central & Eastern Europe’: In March Invesco Real Estate opened its Polish branch. Does this mean that for you the significance of Poland as a business location has grown?

Anna Duchnowska, the director of Invesco Real Estate in Poland : Invesco Real Estate has been active in Central and Eastern Europe since 2000. Our first purchase in Polandwas the Euromarket office building in Kraków. So, we have been operating here for fourteen years, with all assets being managed by our dedicated team based in Prague. These transactions and asset management specialists managed all our assets in Poland, the Czech Republic and Hungary. Due to the growing interest in Poland among investors, we have now decided to accentuate our presence in Poland, with the purchase of Galeria Kazimierz in Kraków in December 2013 being one of the catalysts. Retail properties are very demanding in terms of management, which is why Invesco Real Estate decided to open another local office in the region in order to add further value to the real estate portfolio located in Poland. The company wanted to have the Polish facilities under closer control to help build their value and generate higher returns for clients. Invesco Real Estate operates in a similar way all over the world with “boots on the ground”. In Europe we manage properties worth USD 7.6 bln. In the US our portfolio has a value of USD 21.6 bln, while our AUM in Asia is USD 5.5 bln. Invesco has been growing vigorously in Europe. Our 144 assets are managed by local specialists from eight European offices. We currently have more than 100 institutional clients, mainly pension funds and insurance groups from Europe, the US and Asia, who are becoming increasingly interested in our local market. Poland accounts for a considerable portion of the more than USD 500 mln that has been invested in the region so far, and we believe this will continue to grow.

You have been appointed head of Invesco Real Estate’s Polish branch. What are your plans in your new capacity?

My responsibility is the management and supervision of Polish assets, in particular cooperation with clients and tenants, and the development of the company within the region. Our plans are ambitious. First of all we want to be a long-term player on the Polish market. We are interested in new, strategic business proposals, as well as new contracts and negotiations with developers and new cooperation possibilities on interesting projects. In line with Invesco Real Estate’s philosophy, I am also close to our tenants, both in the office and retail sectors. We keep in touch with them all the time, so I often visit our facilities – I know what happens there and I keep my finger on the pulse.

What does Invesco’s Polish portfolio look like? Are you planning to extend it?

We currently have three office buildings. All of them are located in Warsaw: Zaułek Piękna, Raiffeisen Business Center and Crown Square. In Kraków we have a shopping centre with an area of more than 38,000 sqm, which is located in the well-known Kazimierz district. We also have a portfolio of logistics centres. Our hotel strategy includes three hotels in Wrocław and Gdańsk. We are a very active manager, and are working on additional latest large property purchase deals in Poland.

Is the acquisition of the Plac Unii City Shopping mall in Warsaw one of the two transactions?

I cannot comment on these rumours.

In December 2013, before the Polish office was opened, Invesco purchased Galeria Kazimierz in Kraków from GTC and Avestus. What is the strategy that you have adopted for this centre?

Galeria Kazimierz will be modernised. With international architects we have drawn up a new design concept for it. Next year the centre will celebrate its tenth anniversary and we want to have it renovated by that time. This will involve a remodelling of the interior of the building, while the car parks and toilets are also being renovated. The results of this should be visible in autumn 2014 for the latter renovations through to autumn 2015 for the interior remodelling. A recommercialisation is also planned, involving a change in the profile of the centre. There will be new brands, and a new marketing campaign – the aim of which will be to attract even larger numbers of customers and offer them something new and inspiring. The process should be completed by the end of next year. As far as any significant extension work is concerned, this has not been planned. We believe that 38,000 sqm is an optimal size, one that is comfortable for our customers

You are now planning future purchases. What buildings are Invesco’s clients most interested in?

This depends on the actual money our investors have at their disposal. As I have already mentioned, we manage funds with over 100 institutional clients. Our clients have predominantly been core investors and the types of properties they are looking for are in good locations, well leased and with a secure long-term cash flow that generates constant revenue. However, we do have clients who are willing to invest further up the risk curve in core-plus and value-add For these clients, we are prepared to undertake joint venture enterprises with reliable and experienced developers.

What is currently worth investing in?

Logistics centres seem to be an interesting product at this time. This year we sold two logistics assets at very attractive prices; we will now be selling a third and will be buying some others. Warehouse facilities can be purchased with decent yields and they often have long-term lease contracts. Polish logistics used to be considered a risky product until recently, but now more and more investors are appreciative of the stability provided by several-year lease contracts in logistics facilities, the ease of selling them and – as is usual – the good size-to-needs ratio. At the moment it is a relatively liquid product. The office market, particularly in Warsaw, is difficult at this time due to the huge supply and the growing vacancy rate. In reality this has reached as much as 15 pct, although this is not yet feeding through into market reports. Furthermore, it is a competitive sector and, after all, there are not that many properties in Warsaw that would be suitable for institutional investors. The supply of new facilities is putting pressure on rents, widening the difference between effective rent rates and base rates. With such an oversupply, many of the products – with some exceptions – may not guarantee a stable return to institutional investors. As far as regional cities, such as Kraków and Wrocław, are concerned, they are interesting but the number of transactions concluded in these markets indicates that they are low liquidity locations – and good liquidity is a basic condition for institutional clients. However, with all these investments in this marketplace it is important for investment managers to have local people on the ground who know the local market well and can gain access to the best deals for their investors. ν