A billion under the hammer

Investment & finance
In the next two years Orange Polska is planning to put up for sale 1,500 properties with a total value in excess of PLN 1 bln. We discussed these plans with Paweł Buchman, the property director of Orange Polska

Rafał Ostrowski, ‘Eurobuild Central & Eastern Europe’: Orange Polska is not just a communications company but also the owner of quite a sizeable portfolio of properties: as many as 2,500 – buildings with a combined area of 1.5 mln sqm as well over 1,000 ha. Where do all these assets come from?

Paweł Buchman, property director, Orange Polska: It is a result of the company’s long history. Providing services all over the country used to require a large number of buildings, which included telecommunication infrastructure, such as switchboards and transmitting stations. Thus we had a large number of properties spread throughout Poland.

The company no longer needs these properties?

That’s right, we have too many of them. This is due to the dynamic development of telecommunication technology. In the 1980s, enabling the residents of a large estate in Warsaw to use telephones required an area of over 2,000 sqm for telecommunication devices. Nowadays we need only 100 sqm to deliver much more advanced services to the same number of clients. Another reason is centralisation. Our large data processing centre in Łódź is one example of this. And that’s why our needs have changed considerably. We need significantly less space but it must provide much higher technical standards.

Still, it is not only about selling industrial properties. For example, there is a complex of historic townhouses worth app. PLN 80 mln on ul. Długa in Gdańsk’s Old Town – only 200 metres from the Neptune Fountain.

Historically, telecommunication facilities were located in the centres of large and small cities and towns. Thus we have properties in excellent locations, practically in all provinces, e.g. on ul. Bernardyńska in Wrocław, ul. Ordona in Katowice, ul. 23 Lutego in Poznań and ul. Dolnych Wałów in Gliwice. The largest such complex on offer from us is the set of office and technical buildings with an area of almost 13,000 sqm on ul. Długa in Gdańsk. Historically the facility served telecommunication functions but it could be the ideal place for offices or a hotel. The location is the greatest asset of the property, which is reflected in its valuations.

In Warsaw you own a plot on ul. Grochowska, near the Gocławek tram terminus. Not a bad location considering that it is quite a large plot – 1.7 ha.

In my opinion it is one of the most attractive properties, where a shopping centre could still be built. Such a project could be built under the local
zoning plan. There used to be a Poczta Polska (the Polish Post) sorting office on the site as well as a logistics area for Orange Polska’s technical infrastructure and offices. Due to our joint ownership, we are selling the property together with Poczta Polska. Thanks to this an investor can buy the entire plot straight away without having to negotiate separately with the two companies. This makes the matter much easier and is a good example of cooperation between two co-owners over the sale of a property.

There are also plots outside the city, such as 66 ha in Konstantynów, 100 km outside Warsaw – and Warszawianka on the outskirts of the capital city.

Konstantynów is a plot designated for transmission infrastructure. Such a large area is no longer needed for a transmitting station, which is why the sale of the site will not harm our business. We have entered preliminary negotiations with an investor interested in the plot, because it includes a power delivery point – which is important for locating a wind farm on it. Warszawianka could be a recreational or development site. The nearby shopping centre and the opening of a link road to the local expressway add considerably to the investment attractiveness of the plot. It is a very large, green area, which would fit in perfectly with the trend of sustainable residential projects.

Have you already advertised all your best properties – or will there be some other interesting plots made available for potential buyers?

We have not put all the properties up for sale yet, but some more will be in the future. We do hold some more attractive assets, for example, in Kraków, Warsaw and Wrocław.

When will we see the new properties that you’re offering?

The sales project is planned to last until 2017 and we are at the beginning of implementing it. We currently offer more than 450 properties with a total value of PLN 700 mln. Even though the sales preparation process is time-consuming, we are planning to make available for sale more than 100 new properties every quarter. By the end of 2016 we are planning to have included 1,500 properties in the sales process.

What proportion of these are going to be office properties?

Out of the total of 2,500 properties earmarked for sale around 200 are used as offices.

Some of these are leased to external tenants?

Leasing is a good form of obtaining additional revenue. Our office building on ul. Cieszyńska in Białystok is a good example: a dozen or so people work in a building of more than 5,000 sqm. That is why we want to lease the vacant space.

There are some properties that still include Orange’s offices. Are you also interested in going down the sale and leaseback route?

We always ask a buyer about their intentions and investment plans for each property. This also applies to the leaseback option. The aim is to increase the attractiveness of the facilities sold. We cannot use this formula for all the locations, which is why we are approaching each one individually. When selling a property we ensure the continued functioning of any active Orange Polska infrastructure in order to secure our core ICT operations. As opposed to the majority of the market, we follow the provisions of the Civil Code when it comes to limited property rights. This is a simpler formula compared to commercial leasing, enabling investors to obtain financing faster and also has additional benefits. One advantage of this approach is fixed revenue for Orange Polska. When we vacate the area we occupy, the investor also gains the additional space without any extra cost.

The current headquarters of the company – in Miasteczko Orange on Al. Jerozolimskie in Warsaw – is not owned by Orange. Does this mean that you do not want to own your own offices?

Orange Polska is a company that specialises in providing tele-communication services. The preparation of the high quality office space we use is something that we leave to the developers. As far as we are concerned, it is important for our employees to be able to work in a quality and friendly workplace. By leasing these premises in Warsaw we have obtained the use of modern offices. We would like to do the same in other cities.

Are you selling your properties individually or have you drawn up some strategy for a portfolio sale?

A portfolio sale is an option. Based on the client’s individual requirements, our sales team can draw up a transaction for their needs. One unquestionable asset of our properties is their location, the function and number in a given region. Another possibility is a no-bid purchase, which allows the investor to prepare for the transaction better and obtain a tailor-made product.

How is Orange carrying out the sales?

We are placing announcements in the nationwide and specialist press. In addition, all the properties appear on the website. What sets us apart is our own Contact Center, which makes it possible to obtain information on sales and leasing in one place. We also have our own sales team, which can count on the support of local management structures, allowing us to offer selected properties across Poland very quickly. We also stand out from our rivals because of our ‘open source’ format, which means that any real estate agent can work with us provided they sign a contract. Our experience from the last few months confirms that there is a great deal of interest in this form of cooperation. We have already signed more than 100 contracts with agents across the country. An analysis of our 2014 data shows that more than 20 pct of transactions took place with the involvement of agents.

Orange properties in his hands

As the property director of Orange Polska, Paweł Buchman manages a portfolio of 2,500 properties. Prior to this he was the director of the administration division of Telekomunikacja Polska. He is a graduate of the faculty of foreign trade of the Warsaw School of Economics. He holds the title of Executive Master of Business Administration from the University of Illinois. Paweł is a licensed facility manager.