The courage to find new roads

Tomasz Cudowski, Eurobuild CEE: What’s your view of the state of the office market in Poland and how does your company fit into it?

Sławomir Gajewski, chairman of the management board, Torus: Well, we can’t pretend that it hasn’t been a very difficult time for the entire sector for some time. We got through Covid and the post-Covid period, but now we have to contend with the economic slowdown. All of this means that investors have lost their enthusiasm for the office market and are looking for other ways to invest their capital. In the US, the sector is still struggling with the reluctance of workers to return to the office, which has tarnished the entire image of the real estate sector. Luckily, we can now see the first signs of an end to this crisis, with employers now campaigning intensively for their staff to return. This problem was probably never quite that serious here in Poland, where we could say that the sector has completely dealt with it. As a developer, Torus has not been especially hurt by such trends. The demand for our space has held up more or less at the same level for the last few years, including during the pandemic. For example, we started the construction of our Format office building in the summer of 2019 and it was commercialised during the pandemic, but despite this, we found tenants for 90 pct of the space.

Since we are on the topic of Format, I hear you are looking for a buyer. Have you had many enquiries?

Quite a few. We’re already negotiating with potential buyers, but many investors are looking for cheap bargains and, to be quite honest, Format is not going to be one. It is a prestigious office building that’s almost fully leased with good contracts and we feel no pressure to exit our investment quickly. I believe we’re soon going to find the right buyer and will be able to negotiate terms that are beneficial to both parties. Torus has already made seven real estate sale transactions with six investment funds for a combined total of EUR 370 mln. We like to joke that we have an unusual modus operandi, which is to buy up land in the good times to sell our completed properties during a crisis. But our method clearly works, because the biggest problem Torus has is finding buyers for our office buildings willing to pay a reasonable price.

Since you’re not having any problems with the leasing or sale of prime properties, what’s the biggest current challenge you’re facing as a developer?

I’m not saying anything original here, but the greatest inconvenience is how expensive money is and the extremely stringent approach banks are taking to financing projects. However, at Torus we mainly finance our projects through the sale of our buildings and our bank assets, so we have managed to cope with the construction and fit-out costs that many developers are struggling with.

What are investors paying the most attention to when looking to buy office assets in such difficult times?

The usual suspects. Mainly, the quality of the construction, the tenant mix, the strength of the contracts and the technical and tenant service. There are many opportunistic investors in the market looking for older buildings that could have their standard or even their usage improved, but they rarely come to us.

Torus’ projects are mainly built in central locations, which often generates some social friction. Who is it easier to consult with when it comes to such projects – local residents or the local authorities?

Both groups are important parties in the dialogue that you have to start. Holding such a dialogue isn’t a problem for a company that has been operating in a specific market for over 20 years and is widely recognised as a local developer. Everything we do at Torus can be characterised as clearly showing that we are not just motivated by profit and that we feel a responsibility towards the city. The examples are endless. Some of our developments, such as Alchemia and Format, were built on former industrial sites and we have breathed new life into them while changing the entire face of their districts. For Format, we have created playing fields, which were originally just for the tenants but in the end, we also opened them up to local residents. In 2018, we also became the main sponsor of Wybrzeże Gdańsk – a local handball team that plays in the premier league, even though just a few years ago we would never have imagined entering such a partnership and that it would be beneficial to us. Our sector is, unfortunately, still often perceived as a den of bloodsuckers, but we are slowly trying to change this.

You also sometimes have to work with the building conservation office, with a prime example being your Rycerska project. Could you tell us something more about this?

This is a project in the centre of Gdańsk on the site of a mediaeval settlement. Archaeological work is currently underway. Its history goes back over 1,000 years, so we are approaching it with the due care and sensitivity it requires. We will probably announce the details of the project in the spring, when the concept is drawn up. Of course, it will need the blessing of the monument conservation office. We are also developing on land of historical value when it comes to our Doki Office project. This lies within the Gdańsk Shipyard, which is listed on the historic buildings register. And we also have to consult with the conservation office in Warsaw, where we are developing a 111-room hotel with a partner in a historic townhouse on ul. Pankiewicza.

That’s quite a broad range considering that you have just made your debut on the logistics market as Torus Logistics and you’re also exploring entering the PRS market. Is this your plan for the next few years – to diversify, in terms of both your activities and geography?

You could say so. It’s true that up until now we have been seen as a local developer, but we’re also branching out into a few other large cities. As well as Warsaw, with the same partner we have also developed Altus Palace – a five-star hotel in Wrocław. When it comes to our logistics project in Gdynia, this is more a return to this particular market, because several years ago we built a small warehouse park in Kowale over a number of stages. Gdynia City Logistics is to be a modern centre that offers around 23,500 sqm of logistics and office space with a BREEAM rating of ‘Excellent’. Furthermore, we are working on our first PRS project. We are building an estate in Przymorze Małe in Gdańsk and more details are soon to follow. Just next door, we are working on the concept for another mixed-use project on a site purchased from the Bałtyk candy factory. A total of 20,000 sqm is to be built in a number of stages with a number of different uses, one of the more original of which is a theatre stage – an idea we are currently working on. However, we are not planning anything revolutionary in terms of the profile of the company. We still intend to remain the number one developer in the TriCity.

But you are planning a revolution for the management team of Torus. Recently you brought in Przemysław Ryś, who I hear is to take over your responsibilities gradually. Can you confirm this? If so, surely this is quite unusual?

The scale of the current challenges in the market as well as of our investment and development plans required us to strengthen our management team, so I wouldn’t call it a revolution. Przemek Ryś’s appearance is no accident. It was planned for quite some time and is being done as part of an agreement with the company’s owners for the long-term success of the business. The plan is that in a few years’ time I will hand over the CEO helm to Przemek, who has already joined the management team in the position of director of operations. We have decided that the handover will take 2–3 years. As one of the owners, I will, however, remain as part of the management to concentrate on business development, but I will take a break from actively managing the firm.

I can’t imagine you ever retiring.

I can’t either, so for the time being I won’t be (laughs). I’m not a cyborg and my hobbies – skiing, cycling, mountain hiking and sailing – should help to keep me fit. Nevertheless, my biggest passion is creating new, interesting space. So, even after I retire, I will be wandering around the TriCity, wondering what could be built here to make people’s lives better.

Last year, Torus celebrated 20 years of operations, during which time you have been managing the company. What do you think has been your biggest success over these last two decades?

Probably that we survived and all the disruption has only strengthened us. I’m quite ambivalent when it comes to real estate crises. Of course, they make running a business more difficult and are usually very costly; but on the other hand, they force you to improve your strategy and change the way you think. They open up new roads in front of you. All you need is the courage to take them.

The roaring twenties

Sławomir Gajewski graduated in law at the University of Gdańsk and completed his judge’s application. He gained his business experience at the Pomeranian Development Agency and the Gdańskie Wydawnictwo Oświatowe publishing house. In 2002, with the founding of developer Torus, he took on the position of CEO. He has held this same position for over two decades. Under his leadership, the company has completed projects in various market sectors while specialising in modern office buildings. The company is now developing Collab, its own flexible office space concept. It also develops hotels and mixed-use projects. In his spare time, Sławomir enjoys sailing, mountain hiking, skiing and also plays squash.