MGPA eyes up the opportunities

This could be a few office buildings, several shopping centres or a stake in a development project. MGPA has now established the MGPA Europe Fund IV opportunistic fund, raising USD 100 mln after the first closing. The second closing is to take place in the next few months and is to be followed by a third one. "Our aim is to build an equity capital of app. EUR 600 mln. The first to join the fund were our current clients, and now we are conducting negotiations with other entities, mainly insurance companies and pension funds from the United States, Europe and Asia," explains Karol Bartos, country manager of MGPA Polska. In addition, MGPA is to invest app. EUR 800 mln (EUR 250 mln is the equity capital while the rest comes from bank loans) of one of the company's clients whose account they are managing. MGPA has been commissioned by the client to look for completed properties on four markets: the UK, France, Germany and Poland. MGPA will also be looking for investment opportunities for its MGPA Europe Fund IV in the same countries.

Properties with potential
The strategy of MGPA Europe Fund IV is described thusly by Karol Bartos: "We would like to spend around EUR 400-500 mln on the Polish market over two years, including the support in the form of bank loans. We are trying to divide the amount equally between office and retail facilities, although everything will ultimately depend on the products that are available on the market. Our priority remains finished properties. However, if we come across a promising development enterprise we could also get involved; but projects of this type can constitute no more than 50 pct of our portfolio," He has three years to invest the funds and another eight to manage the portfolio. And where does he hope to find opportunities? The areas he is looking at include office buildings in Warsaw and shopping centres outside the capital city. "We are interested in an annual rate of return of a dozen or so percent. Historically, we have managed to reach 18 pct," recalls MGPA Polska's country manager. He is now targeting facilities that require changes, such as modernisation, the leasing of empty space, a new tenant mix or an adjustment to rent rates.
"Opportunistic funds' negotiations with property owners in, for example, Warsaw are not easy for one simple reason: there are only a few products here that would provide the rates of return expected by a fund of this type, that is, around 15-20 pct. Especially taking into account the fact that the owner usually has a few other, more lucrative offers on the table. There have been only a few such acquisitions in this market, but recent transactions have included the purchase of Warsaw's Moniuszki Tower office building by Capital Catalyst, as well as the probable sale of Twarda Tower," comments Przemysław Felicki, associate director of CBRE in the capital markets department.

Portfolio changes
The destination of one of Karol Bartos' business trips was Lubin, in the copper mining region in Poland, where the Cuprum Arena shopping centre was opened in 2009. The leasable area of the facility developed by Prestiż MGC Inwest (owned by Dariusz Miłek, one of Poland richest individuals) amounts to 34,000 sqm. Is this mall now going to join Karolinka in Opole (a leasable area of 70,000 sqm) and Pogoria (36,000 sqm) in Dąbrowa Górnicza - the two centres acquired by MGPA Europe Fund III from Mayland Real Estate in 2010? Karol Bartos makes no comment. So far the list of potential properties is long, as is the road to finalising negotiations. Some completely different negotiations are currently being held by MGPA representatives over the leasing of a former police station, which forms part of the Dąbrowa Górnicza complex. The investor has already received a permit for carrying out the construction work and now only needs to secure tenants. The facility is scheduled to open next year. Meanwhile, work on the extension of Karolinka in Opole has now been completed and Smyk Megastore is to move into the extended 2,200 sqm section. The third facility in MGPA's Polish portfolio is Warsaw's Rondo 1 skyscraper, which was acquired by MGPA Europe Fund II. When it was added to its portfolio in 2006 (in a joint purchase with London & Regional) it was 43 pct leased. Now the vacant space amounts to a mere 4 pct of the building, which has a total office area of nearly 60,000 sqm.