Long range opportunists

Ben Habib, founder and CEO, First Property Group: In Poland we have 22 properties, mostly offices. We own Oxford Tower, Blue Tower and Żoliborz Plaza in Warsaw. In Kraków we have Pilot Tower (formerly Alma Tower). We own a number of supermarkets in and around Warsaw. We have an office block in Lublin. We’ve just bought Kraków Business Park – now our largest property in Poland. We own Asseco’s headquarters in Gdynia on ul. Podolska and a small office block in Poznań. We also own two shopping centres, Corso in Świnoujście and Galeria Ostrowiec in Ostrowiec Świętokrzyski. And we also own a small shopping centre in Krasnystaw of 5,000 sqm, and a hypermarket in Łódź. The total value of our portfolio, excluding Kraków Business Park, comes to around EUR 320 mln.

What is your approach to investing in Poland?

We are looking to buy opportunities on the market – and our most recent purchase is Kraków Business Park, which we bought from its trustee in September last year.

What was the price?

The debt level of the park was about EUR 50 mln and we paid about EUR 750,000 for the shares in the companies, so the total transaction price was about EUR 51 mln taking that into account. But the financial position of the park when we bought it was not good. Half of the space was vacant due to problems created by the previous owner. We are now repositioning the bank debt and securing the financial position of the companies we’ve acquired. Then we need to resolve some of the structural issues, such as the access roads and the electricity supply, while certain plots in the middle of the park are the subject of litigation, so we need to see that process through to its conclusion. We also need to reposition the branding of the park and lease out the 24,000 sqm that is still vacant there.

What are you planning to do to achieve this?

It should become a fantastic park. It’s very well located, close to the airport. It has its own train station, which has two trains departing every hour at the moment, but this should double to four by next year. The centre of Kraków is a lovely place to work – but it is very congested, so this park should do well. The local authorities want to develop the area around the airport. So what we are trying to do fits in with the local authorities’ aims for the location. The way we are going to reposition the park basically just involves giving its tenants a fantastic offer. What we are doing at the moment is applying for the planning permission to build a new car park, a new volleyball pitch, a new park area with outside seating arrangements and we also intend to improve the catering facilities in the park. It has two canteens already but we want to improve the range they offer. We will be opening a kindergarten, so that it is easy for young mothers with children to leave their children there during the day and to pick them up at the end of it. So we are aiming to make it a really comfortable place for people to come and work.

You own Blue Tower in Warsaw, which is quite an old building. Are you planning to renovate it?

We’ve done a lot already to improve the tower but we have other plans. It’s a fantastic location, but as you walk through the foyer you will notice a lot of empty space. Our aim is to open up the façade, so people walking along the front of the property can see it more clearly, and to add more retail space to the ground level. I think we can create some really good quality retail space, another 400–500 sqm, and improve the existing range. We are also planning to add a really sexy new restaurant above the atrium. This will be built onto the glass atrium roof with an external lift going up to it. We already have the site development conditions and permission from the heritage authorities, but we still need more permits. Hopefully, later this year we will have the building permit and can start constructing it with a view to completing it in 2019.

You also own Oxford Tower in central Warsaw. What plans do you have for this building?

Again, we’ve done a lot already to improve the building. We’ve owned it since 2007, since when we’ve introduced a new sprinkler system, an air conditioning system, handling units, lifts, while we have also improved the reception area. We aim to continue to upgrade the entrance and reception area.

What’s the situation like on the investment market in Poland from an investor’s point of view?

At the moment there is a huge price expectation mismatch. I’ve become quite nervous of the potential economic impact of what’s going on on the political scene in Poland, with the EU threatening sanctions against Poland over market interference by the government and its policy towards the judiciary. Some investors are becoming genuinely nervous about investing in Poland. I’m hearing some pretty negative things about the country from the international investment community that I’ve never heard in the past. Poland has always been regarded as a great economy in which to invest with a stable, democratic, liberally-oriented government. But that can’t be taken for granted at the moment and we are also encountering problems with the tax authorities. I completely sympathise with the tax authorities’ desire to collect taxes, but the problem with the way they’re behaving at the moment is that there is no certainty about what the tax should be. This is making transactions very difficult.