A thoroughbred developer

The company first came to Poland, specifically to Wrocław, more than twenty years ago to buy cheaper building materials than in Western Europe. Later it developed the Bema Plaza office complex in the city, and this year is planning to launch another project there: Synergy Business Park. This is only a fraction of what Ghelamco Poland has achieved in Poland so far, and over the years it has grown into one of the largest developers of office space in the country. The company has also entered Ukraine and Russia, where - according to the president of Ghelamco Group, Paul Gheysens - it is about to strengthen its presence in the retail sector. In this exclusive interview, the forever youthful president reveals more about the company's plans and about his passion for Arabian horses

Ewa Andrzejewska, 'Eurobuild Central & Eastern Europe': This year Ghelamco is now celebrating 20 years of activity on the Polish market. What was the reason for expanding beyond Belgium in the first place and entering the Polish market?
Paul Gheysens, president of Ghelamco Group: At the very beginning I didn't plan to set up the company in Poland. In the early 1990s I went to Wrocław three or four times to buy construction materials for Ghelamco's Belgian business, because it was much cheaper there. However, it was not difficult to notice that at that time there was hardly any high quality office space in Poland and the rents were extremely high - even as much as USD 40 per sqm, while it was USD 15 in Belgium. So, it was pretty clear that the local market had great potential. That's how I came up with the idea of our first office project in Poland, the Green House.

What are the major changes that have taken place on the real estate market in Poland over this period?
The major change that affected the Polish real estate market was its quick and dynamic development. Twenty years ago the office market in Poland hardly existed and local investors were too unsure and afraid to begin new investments. Even Warsaw didn't have any modern office buildings and there were no districts that could have been marked as business areas. Now, as the Polish market has expanded, the situation has changed completely. Year after year larger office developments are being constructed, not only in Warsaw but also in regional cities such as Wrocław or Katowice. As a result of its rapid development, the market became much more transparent, but at the same time also more demanding and challenging. The other thing that changed was the awareness of tenants, who now have definitely much higher expectations regarding the buildings' quality than twenty years ago. There has also been one major technical change regarding the currency used in business. At the beginning of 1990s when I set up the company, the main currency used in business was the American dollar and later the Deutschmark, whereas now all transactions are done in euros. I am pretty sure that nowadays we can consider Poland as a mature Central European market that creates a lot of business and investment opportunities for both local as well as international companies. After all, Poland did not slide heavily into recession when the rest of Europe experienced problems during the financial crisis of the past few years.

Which development project are you most proud of?
For me each project is very unique and important, so it is really very hard to select one that I am the most proud of. However, several projects can be identified as landmarks for the operation of our company in Poland. For sure one was our first office development in Poland - Green House, which was completed in 1992 and was soon after fully leased by and then sold to Luxemburg Investment Fund. Another crucial project, in a very difficult market from our point of view, was the development called 'Business Center Bitwy Warszawskiej', which was completed in 2002. And if I had to choose one project from our ongoing investments it would definitely be Senator, because this unique office development combines historic architecture with a modern office space design. This exceptional development is on a historic site that has always been the location of the country's most eminent and important companies and financial institutions, including the National Bank of Poland. I also can't wait to dig the first hole of our next Warsaw project, which will surely become Ghelamco's flagship investment in Poland. Warsaw Spire, a unique complex of a 220m skyscraper and two side buildings, will offer 100,000 sqm of leasable modern office, service and retail space. In addition, inside the Warsaw Spire complex we will also create an extensive municipal space open to all of Warsaw's citizens. Being one of the tallest buildings in Poland, Warsaw Spire will definitely change the city's skyline and become the most recognisable building in the Polish capital. However, I must say here that development is a never-ending story: you create one building and then, while you move onto the next project, you think about how to improve on the previous one - and the key thing is the details. Because, frankly, anybody can do a building, but the details of what it will look like, or how it will function or be arranged, are the most important things.

A year ago at MIPIM you exhibited a rather impressive scale model of the Warsaw Spire skyscraper. At the time you boasted that you had already received a building permit. However, construction work has yet to start and all there is on your website is a note saying that the launch will take place sometime this year. When are you going to dig the first hole?
As I've already said, Warsaw Spire is a unique, world-scale project, which we have been preparing for many years. The project, which will be located on ul. Towarowa, is in close proximity to the future Rondo Daszyńskiego underground station, has a state-of-the-art design and will be built according to the latest construction technologies. After receiving the building permit for this project at the beginning of 2010 we planned to launch it later last year. Due to the difficult market situation, we decided to postpone this until 2011. Meanwhile, a further review is allowing us to optimise the building's complicated engineering process. Last year we were also focusing on finalising the commercialisation of Crown Square, another project located near to our future skyscraper. Right now, some things still have to be improved; however, I can confirm that the construction of Warsaw Spire will finally begin in Q2 this year.

Have you managed to secure the financing for such a large project? I have heard that it was not only a bank loan that you were considering?
We are now in talks with banks regarding the financing of our projects. I can assure you that, since we are among the most experienced and reliable developers operating on the Polish office market, these talks are progressing smoothly and I cannot see much problem with obtaining the financing for our future projects, including Warsaw Spire. We have always succeeded in securing equity for our projects and gaining proper financing during their construction. Naturally, without any finance we are not able to launch such a huge project, so we need to have signed the pre-lease agreements with serious business partners. I can assure you that we don't have any problems with gaining potential tenants.

Senator is another office project that you announced last year. The construction work has been launched but what about the number of tenants? Ghelamco has usually been rather effective when it comes to securing tenants for its projects.
That is true. This is particularly the case for such projects as Senator, which since the very beginning has attracted a great deal of attention from prospective tenants. After all, unique interiors in historic buildings seem to be a natural location, for instance, for banks, consulting companies and law firms. Right now we have already secured a large part of Senator's office space and I am pretty sure that by the end of this year it will be almost fully leased to the most prestigious tenants operating on the Polish and indeed international market.

Just like other developers, such as Skanska, GTC and Echo Investment, you have been building land banks in regional cities in Poland. Now these plots and the projects that were supposed to be built on them are waiting for better times. What is the future of these sites? How do you assess the potential of Katowice or Wrocław?
As I've already mentioned, at the very beginning of the 1990s I used to visit Wrocław in order to buy construction materials. However, to be honest, since the office space market in Poland hardly existed at that time, it didn't even cross my mind that I would be constructing any project there any time soon. We finally decided to enter the Polish market and although we began with the development of projects in Warsaw, I have always carefully and continuously assessed the regional opportunities on the Polish market and borne in mind that it would be great to build something outside the Polish capital. This is why, as soon as we noticed that Poland's regional markets were picking up, we decided to start projects in such cities as Wrocław and Katowice. Our first regional project developed in Poland was the 23,000 sqm Bema Plaza office complex in Wrocław. This was the biggest project delivered to the market in 2008 outside the Warsaw region. Soon after its delivery it was purchased by Deka Immobilien Investment for app. EUR 106 mln. In 2011, three years after the completion of Bema Plaza, we are about to start our second project in Wrocław: Synergy Business Park, which will provide over 60,000 sqm of office space. Last April we also completed the Katowice Business Point project, which offers 17,000 sqm of class A' office space. And later this year we will start marketing Katowice Business Point.

The latest news from your company concerns the sale of the Crown Square office building in Warsaw to the Invesco Real Estate fund for EUR 63.7 mln. What yield on the investment did you manage to achieve?
The total yield achieved on investments in 2010 is something that we can't reveal, but what I can say is that the last year was really a very good one for Ghelamco. Regarding Crown Square we received various offers from different investors that were interested in purchasing the project.

Is it easy at the moment to hold negotiations with investors? If so, does this mean that the investment market in Poland is reviving?
It's worth mentioning that although the investment market in Poland turned something of a corner in the second part of last year, there are still no easy deals on the real estate market. But the interest of several big, potential buyers gave us the comfort of negotiating a profitable result. And how will we spend the funds raised from the Crown Square sale? Well, every time we re-invest a big part of our profits, we will for sure re-invest the obtained funds in the further development of the local market.

A lot of your investments in Poland are office projects. Does this mean that you are not planning any new projects in the field that is currently led by ProLogis and Panattoni Europe, i.e. in the warehouse sector?
In the past we have built a lot of warehouse projects both in Belgium and Poland, but years ago we decided to focus instead on office, retail and residential projects, because they give us much better opportunities to invest our money. In Belgium we are now focusing on the residential, office, retail and leisure markets and in Poland we are operating in the office and residential markets. However, we are also planning to start here with retail and street malls soon. Regarding the logistics sector, we are still very active in Eastern European countries. In 2009 in Ukraine we developed 26,000 sqm of warehousing, which was leased to Oriflame, and in Russia we have two plots in Moscow, where we plan to develop large warehouse projects. The logistics market in Russia has started to improve recently and therefore we expect a healthy market for 2011.

Outside Poland, e.g. in Russia, your activities are focused on warehouse projects, even though they have been limited to one enterprise so far: Dmitrov Logistics Park, near Moscow. Another Polish developer said recently that a foreign investor enters Russia with a lot of capital and little experience but leaves the country with a lot of experience and little capital. This may be only be a jokey remark and something of an exaggeration. But the Russian market is clearly reviving. Are you planning to intensify your activities over there?
We have two projects near Moscow, both logistics parks. We also have a site ready for development with all the necessary facilities, utilities and road access in place. Currently we are talking to some potential clients. We planned to start the first phase of the investment in 2010, but after careful consideration we decided not to, due to the problematic market situation. Right now there are a lot of enquiries about the Russian market. For the moment we are focusing on signing pre-lease deals. For sure the Russian market is a unique and rather tough one. To invest there a developer needs to have some experience, but the important thing is that he needs to have a good attitude and to know what to expect. The developer you spoke about probably met with some difficulties and was generalising this situation to the whole Russian market. From our side, I must say that we have had a good experience in Russia. We can't say anything bad about working in Russia; you must do it patiently and with a long term vision. Moreover, how you perceive the Russian market depends greatly on where and what you are building. Probably a shopping centre in Moscow is much more difficult to develop than a warehouse outside the Moscow area.

The situation is similar for Ghelamco in Ukraine, where one warehouse complex has been built (near Kyiv) and you are now planning another similar project, as well as a mixed residential and retail development. How advanced are these projects? How do you assess the development possibilities on this market?
At the moment we are scanning the Ukrainian market carefully. We would like to see more political stability before we enter the market with major projects. Ukraine is a country with growing potential. When the political situation stabilises, it will provide huge opportunities for developers, especially regarding high quality warehouse, office and retail projects. Residential developments are too locally-oriented, where you deal with individual people and their needs. In markets such as Ukraine we think that it is better to focus on business-to-business (B2B) investments and to leave residential projects to local developers. But Asia and Latin America represent huge possibilities that also need to be looked into!

Do your plans include expansion into these other markets? Which in your opinion are the promising - Romania, Bulgaria, Turkey or Asia and Latin America, as you've just mentioned?
We are constantly scanning markets in other locations, looking for promising possibilities, but so far no binding decisions have been made. Currently we are focusing on our existing markets, where there is still much to do. We are expanding our activities outside the countries' capitals to major regional cities. In addition, we are increasingly committing ourselves to residential and retail projects.

How big is the land bank in each of the countries Ghelamco operates in? How many sqm of space can be developed on this land?
Concerning our entire land bank in each of the countries Ghelamco operates in, we can develop nearly one mln sqm of modern office, retail, residential and warehouse space.

Ghelamco is involved in the Qbik Woronicza project and is still planning to renovate two historic buildings on ul. Foksal in Warsaw. When is this renovation project going to be completed and are you planning other residential investments in Poland?
Without any doubt, the renovation of the historic buildings on ul. Foksal is our most time-consuming investment. We have found enough documents that show the original façade of the tenement house at Foksal 13 to allow us to restore the former glory of both of these marvellous historic buildings. Right now we are still waiting for a decision to allow us to start the renovation work on the late 19th century façade. We hope that in the near future we will be able to start the reconstruction, as we have obtained all the other necessary documents and permits. This project is very close to my heart. Every time I am on ul. Nowy Świat and I see the dilapidated condition of those beautiful buildings, it breaks my heart. When the Foksal project can eventually move onto the construction stage and be completed I will most certainly keep one of the apartments for myself. We are also currently developing a soft-loft type project in Warsaw - Woronicza Qbik. And we also plan to start the Matejki House residential project in Wrocław, as well as estate homes in Konstancin - Konstancin Gardenville. We want to expand our activities in the residential sector. Later this year we are planning to announce another residential project.

Don't you feel exhausted sometimes? We now have two years of turbulence on the financial markets behind us. Are you planning to retire?
I am still very young [he smiles] and I'm not thinking of retiring at all. We have changed a part of the skyline of Warsaw and there is still a way to go. I have been on the real?estate market for 25 years and every day and every new project is a new challenge. I still find my work exciting. I am a creator. Moreover, I am working with amazing people whose energy makes me even stronger. It is also very satisfying to observe how our projects are progressing, how they are appreciated by their tenants, investment funds and market experts. The awards that we receive for our buildings, the numerous quality and ecological certificates as well as the trust we have earned from prestigious clients is what makes this job interesting, rewarding and most certainly not tiring.

Are your sons - who are already involved with the firm - being groomed to be your successors?
I have two sons and a daughter. My sons are extremely interested in the real estate market. They are involved in the company's Belgian department. It is very satisfying to watch them build teams. That they started from the bottom also helps them to gain respect from the team. Hopefully soon they will have acquired the necessary knowledge and experience.

Have you been considering selling some of the shares in your company?
So far I have never considered launching an IPO. Of course I have considered different options, but never seriously. But I am not ruling anything out. We will see what the future brings.

What business would you have entered if it had not been real estate development?
For sure it would have involved some kind of 'creation': creating a product, a plan, a building... To want to bring things to perfection is an attitude, but so is the impatience and the urge to realise projects.

It is commonly known that your great passion is horses. What does that hobby mean to you? Is this a way of relaxing and getting closer to nature after working hard on the real estate market?
Horse riding was my favourite pastime when I was young, and I used to enter a lot of contests. Unfortunately, day one of my professional career meant the end of this hobby - until five years ago, that is. That was when I started breeding Arabian horses at the Knocke Arabian stud farm. Some of the broodmares are of Polish origin, and of course there is our pride and joy - the beautiful stallion QR Marc.

From gardens to office parks
Paul Gheysens is the founder and president of Ghelamco Group, a real estate investor and developer active in the office, residential, retail, logistics and leisure markets in Belgium, France, Poland, Ukraine and Russia. The 57-year-old Mr Gheysens started his business career in the late 1970s designing winter gardens. In 1983 he moved into building for agriculture, from where he moved on to industrial development and then into office and residential projects developed under the Ghelamco brand. He established Ghelamco in Belgium in 1985. In 2010 the group closed its financial accounts with a net profit of EUR 60.147 mln and now employs more than 250 people. He lives in Ypres, Belgium. Apart from building and creative work, Arabian horses are his great hobby and passion.