Top two the target

Eurohypo AG, created from the merger of three large German mortgage banks, Deutsche Hyp, Eurohypo and Rheinhyp earlier this year, is set to make a big splash in the Polish real estate market. Marcus Leininger, Head of the bank's Central European Property Lending Authority, explains in an interview with Eurobuild, what its new unified strength means for this, the biggest pre-EU accession market in his brief.
 

What are your specific plans for Poland?
Poland is one of five target markets in Europe where we are expanding our business. We want to focus on larger projects, which are predominantly located in Warsaw, though we are also looking at other cities, such as in the Silesian region, Poznan and Tri-City. Because the bulk of the office stock is in the capital, most of our business in this sector will take place in Warsaw but with retail it is different and we see the opportunity to finance projects throughout the country. With hotels, we are a little bit cautious because of the number currently arriving onto the market in Warsaw, but I have a good feeling about the provinces and think we can be quite active financing hotels there. However, we will be more focused on business travel than tourist hotels.

What about the residential sector? It is usually considered risky but now that the merger has strengthened your position, do you think you might finance such projects anyway?
Eurohypo does not typically finance residential projects in Europe (with exception of our domestic market Germany), but in 1999, we set up the first Polish mortgage bank called Rheinhyp-Bre Bank Hipoteczny SA, which is going to serve this sector and will deal with the residential business, exclusively in Poland.

How do you view your competition in Poland?
Foreign, particularly German banks are becoming increasingly interested in the Polish market and more are opening offices here. Competition has mushroomed in recent years, especially in the commercial real estate business. It mainly comes from German banks from the public sector, but others have been active in the market for much longer. There are a few more foreign banks as well, who are very aggressive competitors. The fact is that competition is increasing.

But hasn't the merger strengthened your position?
This is correct, because three banks are now operating as one. We have strengthened our position and created more of a balance with our competitors. Due to our new status as a "hybrid mortgage bank", which is a result of the merger and means that we are regulated as a commercial and a mortgage bank, the bank can finance complicated structures such as mezzanine facilities. We get very positive feedback from our clients and we cannot complain about our new business, but we need to maintain the flexibility and  level of service our customers are used to and this is a task I am personally involved in. With a larger and highly-qualified team in Frankfurt, I am convinced we can manage this.

Though many might expect a merger to have created more bureaucracy.
It is true there is some bureaucracy, although the banking business is bureaucratic to a certain extent and the new Eurohypo is now a different company with different rules. We are trying however, to maintain our speed in getting projects approved and the Management Board has allotted a high degree of credit competency to the different levels of management. We don't feel that our bureaucracy is any greater than our competitors.

You operate a representative office in Warsaw. Are there any plans to increase your physical presence here?
We need to consolidate our business first, before we think about any expansion. Of course Poland has business potential, but I would like to say that in short to medium term, we do not see any reason to convert our representative office, which is headed by my colleague Grzegorz Trawinski, into a larger unit.

What about in the longer term? How would you see the impact your operations will have on the Polish market in five to ten years time?
That is a very long period, but our aim is to become one of the top two players in the small sector of financing commercial property. That is part of our overall strategy and it applies to Poland as well.
As we are currently one of the top three foreign property lenders in Poland, we have a very good starting position and with our ability to finance very large projects, we can use this capacity to become number one or two in the Polish commercial property lending market.