There has never been a better time to sell

Karl Bier, chairman of the management board of UBM Development: The first response was very good. There are some investors who are currently analysing this portfolio and possible transactions are being discussed. The properties are likely to end up being sold for a total of around EUR 700–800 mln, but it hasn’t been decided yet if they are going to be sold in one piece or in three or four smaller pieces. Another scenario is that we sell only 15 or 16 properties in one portfolio. One big transaction has the advantage of requiring less time. And with three, four or five buyers it usually takes longer. Anyway, we are expecting to execute that sale within the next twelve months.

Apart from this big portfolio, you are also selling a number of other assets.

Yes. Meanwhile we have sold, for example, Radisson Blu Hotel in Wrocław. Now is the perfect time for selling projects. There is such huge demand from institutional funds wanting to buy properties. Frankly, I can’t remember such a situation before. Just to illustrate how big the demand is: we bought two plots in December – one is located in Munich and the other in Berlin – and we sold both of them to an international fund the very next day. We will deliver the projects within two years. This is something really strange, but it shows what the buyers are thinking. They believe that it will be more expensive for them to buy in two years than it is now. So we are able to sell some projects as soon as we secure the building permits.

What sorts of properties are selling best at the moment?

We are seeing a great demand for residential, hotel and office projects in those countries where we have the biggest presence, namely in Germany, Austria and Poland. And we are receiving more money from the transactions than we had anticipated at the project planning stage.

How long is this bonanza expected to last?

As long as the European Central Bank keeps printing money. And I think this will go on for the next 18 or 24 months. Also, the debate about Greece and the euro zone is helping us out because people are afraid of what is happening with the banks and are reconsidering what to do with their money to keep it safe. As long as there is no big crisis, such uncertainties only have a positive impact on the real estate market. What is happening in Austria and Germany now is that people bring money to the funds investing into hotels or offices. They are switching from ‘Sparbuch’ to ‘Grundbuch’, as we say in Austria, which means that they are switching from saving money to investing in real estate.

What are you going to do with the money raised from the sales?

We are going to invest some of it in some new projects and the rest will be used to reduce our debts. We have a good debt-to-equity ratio but we can still improve it. So in the upcoming months, in 2015–2016, we plan to reduce our debts by EUR 250 mln.

What will be the main development sectors for you in the future?

It depends on the country we are operating in. In Germany, for example, we still want to grow in the residential sector, because it is really an amazing market. For the moment we are sold out in Frankfurt and Munich. We will be starting new products, but this will take some time. Around 35 pct of the portfolio should be residential.

What about Poland?

In Poland we will go residential again. We are looking closely at this market. We will start some new projects in Warsaw and Kraków. Our latest Polish projects include a new hotel on ul. Twarda in Warsaw, a new office project on ul. Mogilska in Kraków, the third phase of Poleczki Business Park in Warsaw, and the Pegaz office project in Wrocław.

You have already revealed some details about all these projects, except for the one to be developed on ul. Mogilska in Kraków. Could you tell us something more about it?

It is going to be a 13,000 sqm project close to Kraków’s city centre. We have already applied for a building permit. We have Alma Tower, whose commercialisation ended last year, in the same district. Interestingly, we attracted clients for 30 pct more space than we could actually provide in Alma Tower, so we had to turn some of them down.