CEE Summus Capital: Boldness from the Baltics

Why did you decide to enter the Polish market at this time?

We began actively investing with Summus Capital about a decade ago in the Baltics. It was a time when the commercial real estate investment market was recovering from the last global financial crisis, yields were attractive, and there was a wide selection of properties available for acquisition. We grew until we reached a point where the value of Summus’ portfolio approached half of the total annual commercial real estate transaction volume in the Baltics. Simultaneously, overall investment volumes into commercial real estate slowed significantly again, driven primarily by a period of successive crises, which we are all still navigating. Several international investors exited the Baltic market, transactions came to a standstill, and sellers had little pressure to sell despite rising interest costs.

Faced with a liquidity shortage in the market due to external factors and the size of our portfolio, while maintaining a strong desire to grow, we strategically decided to expand out of Summus’ home market and change the current country-based allocation. Poland's commercial real estate market, its scale, and its level of professionalism have been of interest to us for some time. We admired Poland's consistent economic growth over the past decades, the sustained demand from international companies for modern office spaces, and its strong domestic demand. This combination made Poland a logical choice for us, alongside its geographical advantage.

At Summus, we follow a principle that reflects our core strategy: invest like an institutional investor and lead like a local. This approach requires more time when entering a new market to gain market insight and build a solid network of contacts and local partnerships. Most importantly, we prioritise spending enough time on the ground to understand the nuances of various investment opportunities, something that spreadsheets and market analyses alone cannot reveal. As a result, it took us a bit longer to close our first deals, but we are delighted with the outcome. The timing for entering the Polish market, where the impact of successive crises is fading and capital costs are trending downward, feels as ideal now as it did in the aftermath of the last financial crisis when we started investing in the Baltics.

Why did you decide to acquire these particular properties?

Choosing the office sector for our first acquisitions was a deliberate decision. Poland's continued appeal to international companies as a location for their service centres and back offices, even during the most recent crises, supports this. We also see growing domestic demand from existing companies looking to expand or relocate.

For us, selecting office buildings involves strict criteria. They must have been developed in recent years to meet the latest architectural and construction standards, align with current trends, and comply with the latest ESG requirements. Such buildings experience slower physical and functional depreciation, helping to preserve their asset value. It is equally important that tenants have made leasing decisions and moved into this modern space designed for new functional requirements, including hybrid and remote work.

Both React and Lakeside meet these criteria. They have a strong tenant base, including such resilient sectors as healthcare, banking and IT. The average lease term of 6–7 years is particularly valuable for a new entrant to the market in the context of asset management. We have certain minimum yield expectations for assets, so we generally don't look at prime assets in prime locations. Instead, we rather focus on prime tenants in prime assets.

Will React and Lakeside become the first of several acquisitions in Poland and the wider CEE region? What is your strategy going forward?

We are certainly open to new opportunities and are actively exploring the market. Currently, we see significant opportunities in Poland, and our goal is to grow our portfolio here while building a strong asset and investment management team. At Summus, we follow a diversified portfolio strategy, ensuring no single commercial real estate segment dominates our holdings. As we do not have a defined exit strategy, our portfolio must generate stable cash flows to withstand turbulent periods while remaining sustainable. This diversified approach has already proven its value – in addition to a relatively large share of office and healthcare-focused properties, retail holds the most significant share in our portfolio, while office assets provide long-term stability and the importance of healthcare continues to grow, offering a secure choice for landlords, retail presents opportunities to enhance asset value through a hands-on approach.

Having already entered the Polish market, we now see promising opportunities in retail as well. We own several shopping centres in the Baltics, with many tenants overlapping with those operating in Poland. This alignment should simplify the decision-making for potential acquisitions. The retail park sector also interests us. We are closely monitoring all significant developments and would gladly participate in a forward-purchase transaction if the opportunity arises. While our office selection criteria focused on securing prime tenants in prime assets and prime locations will undoubtedly be a key factor in retail as well.

Hannes Pihl is a board member of Summus Capital and the managing partner of Zenith Family Office, the strategic asset and investment management partner of Summus Capital.