Buying is just the beginning

‘Eurobuild CEE’: After the acquisition of Spektrum Tower in Warsaw, the company’s Polish portfolio totalled 375,000 sqm. What are your plans going into the future?

Małgorzata Turek, CEO, Globalworth Poland: We are moving our offices to Spektrum, hopefully later this year. Our Polish portfolio is currently worth more than EUR 1 bln, but we don’t intend to rest on our laurels. The company has long term investment plans and aims to be the largest owner of office projects in Poland, perhaps also throughout the CEE region. I can’t reveal exactly what we want to buy, but they will be well known and attractive properties in Warsaw and on regional markets.

In which city should we expect the next purchase to take place?

We are currently negotiating the purchase of a new building of more than 50,000 sqm in Warsaw. I think that the transaction should be closed this year, or in Q1 2019 at the latest. And we are also preparing another, slightly smaller deal, thanks to which we will be able to enter 2019 strongly. We expect another 100,000 sqm to be added to our portfolio in the next few months. I believe that another half a million by the end of 2019 is an ambitious but absolutely realistic goal. I know that everyone in the real estate business is saying the same – Poland is an excellent market with many possibilities. But it’s hard not to keep repeating that, since these are the facts. I would add that Poland is also distinguished by the quality of its human resources and talent as well as the very interesting people who are shaping this business.

What is Globalworth’s business approach? Where do you look to find a competitive advantage?

We have a different profile than most investors. Our main goal is to provide stable revenues that will enable us to pay regular dividends to our shareholders [its 2017 dividend pay-out was PLN 48.7 mln – editor’s note]. Globalworth aims to be a long term investor. Our perspective is about 10–15 years. In our opinion, this is an undeveloped niche on the market, which is dominated by a relatively short investment horizon, similar to the average duration of a typical lease agreement. Our model is a combination of the best features of the investment and development business. We buy, manage, build relationships with tenants and add value to our assets. When selecting the assets for the portfolio, we pay attention to the location, the condition of the property and its tenants – existing ones and those that we could attract in the future. We want to create business hubs that will be able to expand so that we can give tenants the opportunity to grow in our locations. We also buy new buildings – such as the portfolio from EPP. They are commercialised and so do not require significant investment expenditure at this time. Furthermore, Globalworth has experience in renovating older buildings and we will also be employing this know-how in Poland. One example is Warta Tower in Warsaw, which has a perfect location and we believe will be counted on the short list of top locations in the city as a result of investment outlays. We already have a concept for it, but I can’t say anything more right now.

However, the competition is growing rapidly nearby...

It is growing, but we are happy about that. It just shows how attractive this location will be in the future. All the projects being developed in the neighbourhood will only add value to Warta Tower. The building itself has a beautiful entrance hall and many other advantages, but due to its age the appropriate funds need to be invested in it so that the tenants can feel like they’re in one of the latest office buildings in that area.

Is the company planning to modernise other office buildings apart from Warta Tower?

We want our buildings to be in a very good technical condition and we are analysing this issue it on a regular basis. I can only say that we are working on restoring some of Spektrum Tower’ splendour at this point.

Is it good to buy real estate at the top of the price cycle?

We are analysing the market on an ongoing basis and at the moment we are not planning to buy buildings at the lowest yields. We acquire real estate that is perhaps not the most expensive but that has the potential to perform well for several decades. We’re not afraid of the challenges that come with the purchase of older buildings and we have the means to restore them to their former glory or to add some new splendour. When entering Poland, Globalworth was looking not for one or several properties, but for a larger platform, which also has an operating part. There were not too many platforms like this on the Polish market and there still aren’t. Hence the decision to buy GPRE, the great value of which is that it came with a structure – with some of the best professionals on the market. It’s not enough just to buy real estate. You have to then manage it with the utmost care. This purchase has enabled us to grow rapidly – with a large number of new projects together with the formation of the entire organisational model of the company. During the last year we have built a new company, employing more than 70 personnel. We carry out many of the operations on our own – with our own investment, financial, accounting, leasing, legal and technical teams – and we are expanding our property and asset management operations.

Are the services available on the market inadequate for this?

Absolutely not. We use external consultants and we will continue to cooperate with them. There is a whole mine of knowledge and experience coming from the outside. In Poland the level of professionalism is very high. The distinguishing feature of our company, however, is that the property and asset management take place within it. We have our own people who look after and manage the real estate. The point is that the policy regarding our tenants and taking care of them should be consistent.

Globalworth has recently invested USD 10 mln in Mindspace. Should we expect further investment in this company?

Co-working is the future. The intense activity of companies in this segment confirms this. We already have several large players in Poland and it’s a very promising segment of the market, hence the decision to cooperate with Mindspace in the opening of new locations...

...in Poland and Romania or other countries? What exactly does this cooperation entail?

We already have a well- established partnership with Mindspace, which started in Poland, as they are our tenant in the renowned Hala Koszyki development. This year they decided to enter the Romanian market by opening their first three locations in Globalworth buildings in Bucharest: Globalworth Campus, City Offices and Bucharest Tower Center. Thanks to this cooperation, we have a richer offer for our tenants and Mindspace has access to the best locations on the two largest CEE markets.n.

Is it not the case that every major office developer now has a co-working company it is working with?

We are not a developer, but it does seem to be that way. If we can offer this kind of space, why shouldn’t we do it? Particularly considering that Mindspace was already our tenant. With the deepening of our cooperation, it will occupy an additional 1,500 sqm in Hala Koszyki.

The real estate market in Poland has been going through a prosperous time in recent years. Is it really as good as the summaries lead us to believe?

From our investment perspective, it is a very interesting, absorbent and liquid market. An investor can now choose from six markets outside Warsaw when looking for new opportunities. Globalworth operates in a niche that is, in our opinion, resistant to change. I don’t want to start agonising over how long the period of prosperity will last, but I can tell you what we are doing. We are trying to be as immune as possible to corrections – to have good buildings, in good places, with tenants who want to stay and possibly expand. We are interested in the long term effect. If you buy with a 15-year perspective, the business cycles flatten out and don’t have as big an impact on the investment. We want to have long lease agreements and keep tenants with us. We hope that we will prove effective in this respect. Our investment strategy, which is based on a low proportion of external financing, will certainly help us.

What percentage of offices in the company’s portfolio are leased and what is the average duration of the lease?

Our office buildings are 95 pct leased with an average weighted lease term of more than four years.

What will be the eventual size of Globalworth’s portfolio in Poland?

It’s difficult to determine this definitively. We are looking at any available properties that can fit into our investment policy. We have great opportunities, resources and access to financing. We already have EUR 1 bln of properties in Poland and we are still buying – the Polish market certainly has much to offer. ν

Target: offices

Globalworth Real Estate Investments Ltd is an investment company listed on the AIM market of the London Stock Exchange and that operates on the CEE real estate market. The company holds a majority stake in Polish office real estate platform Globalworth Poland, which is listed on the Warsaw Stock Exchange. Globalworth buys, builds and manages real estate directly, mainly office buildings. It employs app. 170 specialists in Poland and Romania who manage a portfolio of real estate worth app. EUR 2 bln, 90 pct of which are income-generating assets, mainly office buildings, leased to around 440 local and international enterprises in 37 sectors and 28 countries. In Romania the company is present in Bucharest, Timişoara and Piteşti. Its Polish assets are located in Warsaw, Wrocław, Łódź, Kraków, Gdańsk and Katowice. Globalworth Poland’s portfolio comprises 16 office and office and retail real estate properties.

Looking good at the helm

As the CEO of Globalworth Poland, Małgorzata Turek is responsible for the introduction of Globalworth’s strategy in Poland. She has many years of experience in the real estate sector, which she gained while working for developers and international law firms. Prior to joining the Globalworth Poland team, she was employed by Skanska Property Poland, where she was the operations director (COO) and board member responsible for the company’s transactions and operations in Poland. In 2017 she became the CEO of Griffin Premium RE, after the acquisition of a majority stake by Globalworth, after which the company was transformed into Globalworth Poland.