Livening up the market

Radosław Świątkowski, partner and the president of the board at REINO Partners: We are first of all a management company. Since the very beginning our ambition has been to create opportunities for making money out of Polish properties for Polish investors. Lack of interest or capital is certainly not a problem. Investors simply have to be presented with good product and distributors have to include this in their offer. The current circumstances are extremely beneficial: the lowest interest rates in history, and much negative experience still fresh in the mind of corporate bonds and insecurity on the share market. The value of deposits points to great potential and it would be naive to assume that the most capital will flow to share and bond funds. Thus REINO Partners is planning to establish subsequent funds for Polish investors and will do this straight away. So our next issue is planned for Q1 next year.

Your first fund invested in an office building. Is REINO also interested in buying retail properties?

Apart from offices, retail properties are a natural goal for dividend funds. So probably one of our next projects will be related to this class of properties.

And what is the value of projects targeted by REINO?

Foreign funds are not just the competition but also the most likely buyers of our funds’ assets. Exiting an investment is at least equally as important as purchasing a given property. In the case of office projects, a real estate value exceeding EUR 25 mln is a significant criterion of interest for many foreign funds. We have to take that into consideration.

What rates of return do investors expect?

For dividend funds we offer no less than 5 pct per year. We believe that it is extremely difficult to find a better proposal, particularly for a fund denominated in euro. If we include a potential premium resulting from a higher sales price in our calculations, the average annual profit could get close to 10 pct, which is frequently a better result compared to share funds, the risk of which is incomparably higher. Polish investors’ expectations are sometimes higher, but this is understandable. For the vast majority of them the experience of such low interest rates is relatively new.

What is the amount of bank financing used by REINO?

The acquisition of a leased office building involves credit of around 60–65 pct of its value – and the purchase transaction of the Kapelanka building by REINO Dywidenda FIZ, which was financed by Nordea Bank Polska (PKO BP now), was no exception in this respect.

Where do you fish for investors?

Our approach to Polish capital is mainly designed for affluent individual investors and private banking clients. Single investors find us directly, but the scale of our fund requires professional distribution through private banking and wealth management institutions. We are talking about the large transaction market, which is unavailable for the majority of individual investors. The implementation of projects such as REINO Dywidenda FIZ results from a certain need and it was only a matter of time. However, their success depends on the quality.

And the quality is based on..

Five characteristics are particularly important. Firstly, a fund that invests in properties that generate a fixed income should regularly share its revenue with investors. Secondly, issues should in principle serve a specific purpose. Investors are reluctant to invest on the basis of a leap of faith. Thirdly, the system of remuneration for the administrator should be beneficial for the investors. Fixed remuneration should be determined by the amount of capital entrusted and bonuses for successful performance must really result from success. Fourthly, the administrator should be able to make flexible decision on when to exit properties at the best moment. Finally, independent, specialist and experienced companies should take care of the administration rather than teams established for the needs of a given fund.

What value of assets would REINO like to manage over the next few years?

A fund such as REINO Dywidenda FIZ could successfully carry out a number of similar transactions within 2–3 years and manage net assets of around EUR 100 mln. In the same period it should be possible to efficiently and without any conflict administer at least three such vehicles, for various classes of assets and with various strategies. Both the market’s and REINO’s potential go considerably beyond the first fund for Polish investors. And after all, we are not planning to neglect our foreign partners. Combining Polish and foreign capital in the same vehicle is also an interesting challenge. We are curious ourselves as to what the value of the managed assets will be.