Peaking at the right time

According to Roger Barris, a founding partner of Peakside Capital: "We can't control the timing of the latter, but we are hoping for it by the end of June. Approval from investors is by no means a foregone conclusion - it can be a real test. However, we believe that the transaction makes a lot of sense for the funds and we are optimistic about securing investor approval. We have already had selective discussions with some of the larger investors and will shortly present [all the details of the transaction] to all of the investors at the annual meeting, although the request to approve the transaction will come after the meeting."
Peakside announced back in April that it was entering the Polish market through the acquisition of the AIB PPM investment fund platform. As a result, Peakside has taken over the management of around EUR 600 mln of gross assets. In Poland these include five office properties in Warsaw: Atrium Plaza, Atrium Centrum and three buildings (?C', ?D' and ?F') of Wiśniowy Business Park, as well as the Poznań Financial Center and the Lubicz Office Center in Kraków. Two Polish logistics properties also form part of the portfolio, Warsaw Distribution Center in Warsaw and Diamond Business Park in Łódź, as well as two office assets in Budapest: Óbuda Gate and East-West Business Center.
Spun out and extending its reach
Peakside was founded in September 2010 as a spin out from the European Real Estate Principal Investments division of Bank of America Merrill Lynch and is owned by its employees. At the end of last year, the company was managing 34 properties in seven European countries. The latest transaction will bring the gross value of assets under management up to more than EUR 2 bln. The question arises, why has Peakside decided to make its move into the Polish market now and in this particular way? "It makes a lot of sense from a geographical perspective," explains Roger Barris. "Entering the Polish market is a very important strategic decision for us. It has a healthy market and economy and is relatively large. And we know that there is institutional investor interest in the country. The assets we are buying are generally fairly stabilised, but some will need more work on them. Poland is a market for which there is investor demand for core and core-plus product, and therefore we think we will be able to raise funds for investing into the country." And why did it opt for the acquisition of this specific platform? "AIB PPM is a good team without any significant legacy issues, which was important for us as we didn't want to walk into a problematic situation," says Mr Barris.
As for how the deals have been structured, with Peakside being the sole purchaser of AIB PPM but the joint buyer of the Polonia funds: "The investment management platform we are buying ourselves, but we are partnering with Partners Group for the stakes in Polonia Property Fund LP and Polonia Property Fund II in a 50:50 joint investment. We have done this to avoid the potential conflict that could arise from us buying both parts of the transaction ourselves; Partners Group provides a third party validation of the price we have paid for the LP stakes."
A Warsaw office is soon to be added to Peakside's network (which includes offices in Switzerland, the UK, Luxembourg and the Cayman Islands) as it prepares to sell AIB PPM's former assets over the next few years. Both funds are closed-ended, so Peakside is now preparing to sell the assets in the next few years, with the first fund at present scheduled to terminate in July 2013 and the other to follow in 2015.
Portfolios, not platforms
For the moment Peakside is not planning any further acquisitions of platforms in the region, but would consider buying portfolios. According to Mr Barris: "These could be office or potentially retail assets; we have a geographical focus, but we are active across different property types. In Central Europe we have owned around 20-30 assets in the past before selling most of them on - and we have owned these in different portfolios. For example, we currently manage the Marriott Hotel in Prague's District 1 on behalf of a separate account."
Roger Barris remains coy about how much Peakside is planning to invest in the CEE region, but he does reveal that the firm will be investing not only with funds raised through Polonia, but through some of the other funds they have under management. "We are most interested in Poland, the Czech Republic, Slovakia and Hungary," he declares, "- but investing in the latter would have to be a special circumstance, as the current situation in the country is much less stable. However, I will say that Poland is core for us and we are definitely planning to be actors on this market in the long term."