Posting a profit

Anna Pakulniewicz, ‘Eurobuild Central & Eastern Europe’: Poczta Polska, which has a history going back several hundred years, has many redundant but excellently located properties. What are they exactly?

Radosław Wawrzyniak, the deputy managing director of the infrastructure division responsible for real estate turnover, Poczta Polska:
This is all true. As an enterprise of strategic significance we have not only more than 456 years of history but also own a lot of real estate. This is mostly buildings in good locations with plots in city and town centres. To be precise, the Polish Post currently has over 2,200 own properties while it leases out more than 3,000 commercial units. As far as land is concerned, the company holds over 5.2 mln sqm. The useable area of the properties held by the Post exceeds 1.7 mln sqm, while the leased units have a combined area of 350,000 sqm. At the same time we have put up for sale over 200 properties. There could be more as a result of the optimisation and they will be gradually added to what we are selling if they turn out to be unnecessary for the company’s operations.

Are there any successful sales yet?

The current sales process has been underway since 2011, firstly through an analysis of how best to utilise our properties, sorting out their books and ascertaining their market potential. In recent years we have put into place an organisational structure designed for the management of our real estate portfolio including a separate sales structure. In 2014 we put up for sale app. 190 properties and organised over 430 tender procedures. We sold more than
80 properties. As can be seen, the improved professionalism
of our teams has produced measurable results. Of course, we are still working on the effectiveness of preparing our real estate to sell it.

Perhaps the success is the result of the low prices you are offering?

The prices are in line with the market values estimated by property valuers and are in accordance with the legal regulations the company is obligated to follow. We pay particular attention to the property sales process in order to make it diligent and transparent. At the same time we are undertaking activities aimed at improving the attractiveness of properties and increasing their values as a result. These include active cooperation with local authorities in terms of the zoning plans, the division of the properties to suit the local demand, legal analyses of the documentation, and environmental and technical studies.

How did you decide on which properties to sell?

It is not only the completely unutilised properties that have been earmarked for selling, but also those that are being partly used. For example: we have a larger building that includes a post office occupying some of the ground floor area. An economic analysis indicated that it would be more profitable to sell the property and then rent the service area. In my opinion it is better not to take on the costs of operating properties that are unused to such a large extent and instead leave it to an investor who will do it to suit their own needs and ideas. As I have just said, the decision to sell such properties of course depends on the economic analysis.

Are there any gems to be found in the list of properties for sale?

The most interesting and the valuable properties are not necessarily the most expensive ones, such as a plot we have on ul. Chmielna in Warsaw, a building near the railway station, Neinver’s shopping centre in the centre of Katowice and a building in the heart of Kraków – near a shopping centre and the railway station. On top of this there is also a 3 ha plot in central Wrocław and an interesting historic building on ul. Powstańców Śląskich, also in the centre of Wrocław. We also offer smaller properties in excellent locations, such as a building on ul. Św. Barbary in the centre of the capital city, which could be converted into a small office project or a boutique hotel.

Ul. św. Barbary is a quiet street in the very heart of Warsaw. Perhaps suitable for a residential project?

The zoning plan being drawn up does not currently allow this property to be used for residential purposes. While we are on the subject of local zoning plans, I will also mention our latest transaction – in Rzeszów, where were actively engaged in talks with the local authorities for changes to the zoning plan. It is an empty logistics facility, located on a 14 ha plot near an economic zone. A section of the property with an area of app. 9.3 ha has been purchased by a subsidiary of the Panattoni Europe group. The final deal to buy it was signed in December 2014. The property in question was purchased some years ago for a logistics centre for Polish Post, but following an analysis it turned out that the company needed only 4,000 sqm in this region, so we didn’t actually need a 14 ha plot. The remaining part of the property, app. 4.5 ha near the economic zone, will also be offered for sale soon.

What other plans does the Post have in connection with its own logistical side? Will other facilities of this type also be sold and partly leased back?

The Polish Post’s dispatch and settlement hubs are located on its own land, in its own properties. There are a few large examples of these in Poland and we are planning additional distribution centres in other regions needed to for the basic operations of the Polish Post, which we have been investing in and developing. As far as I know, we are not planning or analysing the sales potential of existing logistics centres.

Coming back to the properties you have that are available for sale. We are now in a historic building, which is also in an excellent location, on ul. Świętokrzyska in Warsaw. Will this also be put up for sale?

We have to focus on the main postal business and the development of our services. So we are working towards transforming assets frozen in real estate into those that would help the growth of the business of our company, as we continue to invest in the development of our basic operations. The majority of this ul. Świętokrzyska property is currently occupied by back office units. According to our analysis, maintaining an administrative service in the city centre is not economically justifiable. At the same time, we certainly want to keep our main, flagship post office open here. If we decide to sell it, we will lease back the area on the ground floor for our purposes anyway. We cannot imagine there being no post office on ul. Świętokrzyska. But the main value of the property does not reside in the building and its walls themselves. It is a listed building, but it is the location that is most important here. The underground railway lines cross here and the Museum of Modern Art is to be opened here in the future. This is where the centre of the city will move to and the main passenger transfer hub is going to be located. If we are looking to bring in an investor, it would have to be an organisation that would not just buy it but would also be able to create a finished product that could compete with the space available in modern office towers for another twenty years. But this is possible.

And what about your former plans for a head office on ul. Chmielna?

Some time ago a concept was put on the table for building a tower on this plot. However, the current trend is not for huge palaces housing separate company HQs. Now we need x amount of space, but tomorrow this could be larger or smaller, so it is necessary to be flexible. The construction of a fixed head office would require funds that should be invested in the development of the company. In addition, we would have a fixed area that would have to be filled somehow, something would have to be done with it. Leasing office space for the needs of the company’s head office is a more effective and more flexible solution.

So Chmielna will definitely be sold?

We know what the real estate market is like at the moment when it comes to office towers. We had planned a skyscraper of 40,000 sqm on this site. But today the neighbouring projects with building permits are smaller – such as one by Kulczyk Investment with an area of 26,000 sqm, which has been adjusted to the reality of the market. So we are planning an analysis of market absorbency, profitability and the impact on local residents. This should be finished in Q3 or Q4 of this year. As well as selling it, we could also consider entering a joint venture for the construction of a commercial project on the plot. The profitability analysis should provide us with the answer – we will choose the most economically beneficial approach for the Polish Post.

And what if someone is interested in buying it?

We are open to all offers. At the same time, as I said earlier, the decision will only be made after analysing the profitability of the transaction for the Polish Post. Any sale would have to take place in accordance with legal principles and in a tender.

Do you have any actual budget assumptions that need to be implemented this and next year?

Each company has its own budgets and we make every effort to implement them. Apart from raising funds for investment, property sales will make it possible to cut the cost of maintaining redundant locations. The Post’s budget includes plans for how to use sales proceeds and those which result from the cost reduction. The market is saturated with, for example, office projects so things will not be easy in this field. We also have strong competition in the form of the properties of other state entities: the Polish State Railways [PKP], the Military Property Agency [AWM] and the Agricultural Property Agency [ANR]. In addition, the Post has many properties with an ambiguous legal status – we have calculated that the legal status will have to be clarified for around 800 locations.

How exactly does the section responsible for the sale of the Post’s property operate?

in the past these structures were scattered all over the country, they were part of a larger property management structure, so they dealt with everything: the leasing, the sales, purchases and property management. A new structure has recently been implemented divided up into separate sections. Now we are only responsible for the selling side of this and there are no other tasks to distract us. For instance, we now have all the information about tender procedures in the media to make it clear where and when you can find information about all properties for sale. We are obliged to publish sales offers in print in the national media and we publish this information every Wednesday. The legal requirements for selling are stipulated in the legislation relevant to this [the Polish Post Commercialisation Act – editorial note]. We have much stricter limitations than our colleagues from the Military Property Agency, the Polish State Railways or the Polish Airlines [LOT]. In addition, last September we opened a new internet portal for property sales: ww.nieruchomosci.poczta-polska.pl. One of the new features of the portal, which has not been adopted by rival companies so far, is the possibility of accessing a ‘data room’ having signed a confidentiality contract. This also details the sales activities of our sections that I mentioned.

Will you be selling properties to lease back a smaller part of them for your post offices?

If our analysis shows that it is more profitable to sell a property and lease back an area later on, then we will sell such
properties. This approach is exemplified by our property on ul. Pocztowa in the centre of Katowice,which I mentioned earlier. We are selling it with the offer of leasing it back for our post office on the ground floor. Everything depends on the result of the profitability analysis. Such an analysis is also being carried out for buildings to be renovated in the future, particularly when it comes to continuing to use only a portion of their area. However, the state of the market also needs to be taken into account. At this time most of the demand is for investment plots and we do not have too many of such properties. The trend is even more visible as events unfold in Ukraine. Since the crisis there broke out, the demand for land here has been pushed up since it is regarded as a type of property that will survive if everything else is destroyed. The Polish Post mostly owns buildings in good locations on plots in city centres. Sometimes these include the apartments of the Post’s staff, who have occupied these units for many years and according to the existing legislation are entitled to preferential purchases. This means that we do not sell the entire property to one buyer but we sell individual residential and service units separately. On the other hand, if there are no apartments, it is possible to create an investment product – a small ‘convenience’ centre, where the Polish Post could possibly be a minority tenant.

And are you cooperating with any agencies for this analysis?

We cooperate with advisers if it is economically viable and beneficial for us, which means that we cannot do it just using our own resources. At the same time, we are always working with property valuers because each decision over setting the price is made on the basis of a valuation of the property based on the pricing on the market. However, we do not have any fixed cooperation, so we are working with individual consultants for each property following tenders for their consultancy services.

Are you planning to buy any real estate for a change?

We are now locating our new outlets in leased properties on dynamically developing micro-markets. However, any decisions to buy property we take will depend on the outcome of the analysis we are now carrying out. ν

A life in real estate

Radosław Wawrzyniak started working for Polish Post in 2013 as deputy managing director of the infrastructure division for real estate trading and legal status regulation, and more precisely he is the head of the unit responsible for the sale and regulation of the legal status of the company’s real estate. He is the person responsible for choosing the strategy and the path in terms of selling redundant properties from the company’s portfolio. His tasks include: streamlining market practices in the sales process for the Post’s properties. He is a graduate of the Warsaw University of Technology’s faculty of geodesy and cartography. Radosław has worked for his entire professional career in the real estate sector. He has previously been employed as a property valuer for Price Waterhouse Real Estate/Knight Frank Nieruchomości, as a real estate manager for Multikino and as a property portfolio restructuring manager at TP SA and the Polish State Railways as well as for CBRE, where he was responsible for commercial properties and managing the global corporate services department supervising teams involved in trading, leasing and managing projects. The Polish Post is the largest postal operator in Poland with almost 500 years of history. Since its birth it has accumulated many properties. Currently it has a chain of 7,500 post offices and also has a dozen or so logistics centres, i.e. dispatch and settlement hubs. In addition the company has put up for sale app. 200 properties and is working on subsequent sell offs – including a former section of the Dworzec Pocztowy station on ul. Chmielna in Warsaw. The founder and the exclusive shareholder of the Polish Post is the state, as represented by the minister of administration and digitisation. A section responsible for selling properties has been created within the infrastructure division of the Polish Post in recent years, made up of a team of agents, managers, property valuers, lawyers and economists.