Turning into a swan

Small talk
Real estate investment management company MNK Partners recently made its first Polish acquisition. We spoke to investment director Małgorzata Cieślak-Belgy about what and where its next moves are likely to be.

You’ve now completed your first transaction in this country. Is the purchase of a boutique office with a single tenant a sign of how MNK Partners plans to expand in Poland? What kind of assets is your company particularly interested in?

Małgorzata Cieślak-Belgy, investment director, MNK Partners: The office building on ul. Połczyńska in Warsaw was indeed our first purchase, but I wouldn’t say that its format tells you anything about how MNK partners is to expand into Poland. All the time, we’re looking for attractive assets and have such a diversified strategy that in principle we can invest in any segment of the market. If it’s to be a single tenant building that tenant has to be very strong with a good financial standing and a lease term of many years, which was exactly the case with the Warsaw building. MNK Partners manages two dividend funds, one of which, Polska by MNK, will focus on Poland but can also invest in other CEE countries.

Well, I’ve heard the office building acquisition in Poland is intended as a bridgehead for MNK partners to expand into other countries. What other markets are you looking at?

Poland has a very strong and attractive market, so Warsaw was a natural choice for us when we were considering the location of our regional office. I’m involved in raising capital throughout Europe, so being located in Poland is also ideal for being close to other CEE countries and the Baltic and Nordic states, which we are also interested in. Our operations are only limited geographically by the condition of particular markets. There’s no country in the CEE region we have ruled out. Currently, we have investment portfolios in Ireland, Portugal and Poland and we are in the final stages of closing a transaction in Budapest.

So what more can we expect in Poland?

This year we are definitely going to close a few transactions here. Right now we are doing due diligence on three deals and two are at a very advanced stage. But we’ve got an appetite for much more, even though we make our choices carefully and we are not in any rush.

What’s the main difference between investing in Poland and in Western European countries?

Generally speaking, it’s pretty much the same wherever you are, when it comes to how individual transactions go. Of course, there are differences in yields. They are much lower in Western Europe, which is why CEE countries are attractive to us. Moreover, what each market offers is specific to the country; the age of the properties is different as well as the demand structure and the legal and economic environment. Not long ago I was analysing a transaction in Brussels. There transfer taxes on so-called asset deals are above 12 pct and this has a huge impact on how acquisitions are structured. In this respect Poland is a relatively easy market. I’ve been working here for 25 years so there’s not much that can surprise me. It is also much easier for us when our transactions are limited to EUR 15–20 mln, because we are not competing with the big players.

What impact has the pandemic had on the operations of MNK Partners? Has the way you do your business been permanently changed?

At an organisational level we didn’t really feel any effects from the pandemic. We are expanding intensively all the time. We even enlarged our team by a few people during the lockdown. However, over the last six months we have closed three transactions, each in a different country. We have also been looking at a lot of other buildings and you have to visit each property. It was these trips that were disrupted by the lockdowns. Added to this there were the differences in the regulations introduced in individual countries. When it comes to how attractive specific asset classes are, the pandemic has changed a lot of things. It’s harder to get financing for some buildings, such as retail centres and hotels, but there’s no problem for logistics centres, which have become a really hot product due to e-commerce. Interestingly enough, during the pandemic retail parks passed the test with flying colours, whereas just three years ago they were somewhat overlooked on the investment market, and people would even speak of them in a derogatory manner as an ugly duckling. In a sense, that turned out to be quite prophetic. From being rather charmless buildings, a rather attractive and virus-resistant asset class has emerged. The pandemic has sped up so many trends that we noted a long time ago but had been developing rather hesitantly. I’m talking about trends like the hybrid work model and the work-life balance ideal. Just a year ago these were rather exotic notions, but nowadays they are ubiquitous. Besides this we’ve changed the way we think a little. We have different priorities. We have become harder, more solid and stronger. As a result we are returning to our offices and trade is returning to shopping centres.

And what about your holiday plans this year? I hear that last year they didn’t work out for you…

But is it going to this year! That at least is the plan. Last year it was with real regret that I had to call off a trip I’d been planning for ages – I was going to go travelling around France. We wanted to show our children those places that we love, even though they also had a hand in planning our itinerary. But the hotels have re-opened, the planes are flying again and we’ve all had our jabs, so now all we are thinking about are our holidays.

Interview: Tomasz Cudowski