Octava aiming higher

Henryk Rytwiński, COO, Octava Property Trust: Since 2013 the entire 11,000 sqm building of the former Praktiker DIY store has been waiting for redevelopment and re-leasing. We plan to convert it into premises for retail tenants. What tenants? Well, the selection has not finished yet. The building is structurally in a good technical condition, and its modification and adaptation for many tenants occupying smaller modules will entail a certain amount of investment. Furthermore, we have to make changes to the façade.

Who has designed these changes?

Pejot Studio, which is a small but reliable studio. We already have a building permit and the building should be completed next year.

This means that the construction work will start soon...

Yes, we hope that the work will start later this year or at the beginning of the next. This is a renovation project, so the construction work should take us about 5– 6 months.

Are you waiting to launch the advanced stage of the leasing?

Not necessarily. We are verifying how big the demand for this space is at the moment. Our advisors in this field are experts from Savills. We have already concluded the first lease agreements, with a franchisee of trampoline park brand Jump World, which has leased around 2,500 sqm in our building. We will be able to say more about this in the next few weeks.

You mentioned changes to the façade.

Our project on al. Krakowska consists of several buildings, including the building occupied by Auchan, the more than 20,000 sqm Metro office building and the section comprising such tenants as Agata, Komfort and Media Markt. The façades will also be changed on these buildings.

Your project is a typical destination for weekend shopping trips. Has the new law restricting the Sunday shopping affected the activities of your tenants, and hence yours?

We have been hearing people saying that March was a good month, April was bad, May was good again, and June... well, we can see that we have a kind of see-saw effect for now. It’s difficult to discern a pattern. I think we need more time to adapt to the situation. In my opinion, the final negative effect will be offset by increased turnover on the other days of the week. We have no influence on the legal changes and if we want to continue trading in Poland – and we do want to – we must adapt to the changes in the law.

And have tenants been knocking on your door asking for a reduction in their rent?

No, they have not. That’s why I believe that if there has been any negative effect, it’s small.

The Octava Property Trust was set up in 2014. Will it soon be time to sell your assets?

On the contrary, we are looking for more acquisition opportunities. Of course, if an attractive offer comes along, we will consider it; but we are a long term investor and our goal is to keep our properties in the portfolio and to expand it further.

What kind of product are you looking for?

We invest mainly in office and retail real estate, and less often in warehousing or other types of properties. These are not new buildings, but they must always be in good locations. The properties we take over often require our commitment, in terms of financial restructuring, modernisation and management optimisation. We know that such real estate requires investment and we are prepared to do it. We take into account these financial risks when negotiating the price. Our strategy is based on the subsequent active portfolio management. We know our tenants and their needs well. And we can satisfy their needs when it comes to savings in operating costs and increasing their revenues.

How easy is it to find tenants in such a competitive market for your portfolio?

We have shown with the real estate we have that you can have modern space with good transport links – and not necessarily for the money you would have to pay in the most expensive office towers, such as Warsaw Spire.

What will the investment outlays on repairs and the refurbishment of the real estate in your retail and office portfolio be like this year and the next?

Each quarter we update the needs and budget for such investment. We have set an amount of about PLN 25 mln for this year.

And what funds do you have for future projects?

Our main investor is American fund Elliott, which manages a portfolio worth several dozen billion dollars. If we consider that a project is worth our attention, we turn to the fund first. The locations that most interest us are Warsaw and the seven largest regional cities. We do not say ‘no’ to smaller cities, but only if what is on offer is a unique property in an excellent location.