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edition 7 (222)
July 2017
Investment & Finance

The market needs institutional quality

Interviewer: TSG

The market needs institutional quality
Xavier Jongen, director, Catella Real Estate

What prompted Catella to invest in Poland – in Złota 44, in particular?

Xavier Jongen, director, Catella Real Estate: Poland is one of the largest countries in the EU. Since its accession it has been doing extremely well and coped very well with the credit crunch. It is a country with a very healthy economy and a great need for investment in the residential market. Basically, the economy is in good condition and so is the residential market. This building was particularly interesting to us because it is the only one of its kind in Warsaw that is so recognisable. Its shape is familiar across Europe and over the Atlantic. It is an iconic building that can potentially interest the clientele that already exists in Poland. These are people who live in many places at the same time, have a cosmopolitan mindset and appreciate high quality. For them there is no other comparable product in Warsaw that offers all the amenities within one building.

However, the work on the building was highly problematic. The developer changed, the contractors were replaced. Its been almost nine years since the foundation stone was laid. Wasnt any of this a problem when making the decision to buy it?

We thought about it and came to the conclusion that the construction of this skyscraper was the crowning of the European ideal. It has a Jewish architect who designed the building, which is opposite a huge monument of the Stalinist period, and we are now investing German money in it. Those people who will be its guests – I think the word ‘guest’ is more appropriate than ‘tenant’, considering the quality of the services that will be available to them – will be representative of all cultures. So the leisure floor should be a unique microcosm of many cultures. We regard the building as a beautiful skyscraper based on a beautiful idea and are not concerned about the bankruptcy of the previous developer or whatever has occurred in the past to tarnish its reputation. The promotion of the concept constitutes a value in itself.

How much has Catella invested in Złota?

I am not authorised to speak on this subject.

What do you think about the current situation on the Polish residential investment market and how it is likely to evolve in the near future?

It is a fascinating investment market. I personally believe that it is the most interesting you can find in Europe and for many reasons. I could talk about it all day long. I will pick out just a few aspects, so as not to bore you. I think that Poland will develop the institutional quality of its market. This is an issue that has been talked about for some time, but in one, two or three years you will dive into the deep end and start swimming. This requires courage but it needs to be done. There is a lot of demand for product to rent. The potential becomes obvious when you look at how many apartments are actually rented out, not by institutions but by individual investors. The market needs the quality provided by institutions. A country such as Poland will certainly evolve in the direction taken by other European markets – towards the institutionalisation of the rental market. It is not there yet. Apart from Złota 44, we offer this quality in two other buildings in Poland, which we purchased with a joint venture partner. One is located on ul. Pereca in Warsaw and the other is near the Kraków University of Economics.

Are you planning further investment in Poland?

Of course. We are still interested in Warsaw and Kraków. I also think that there will be the opportunity to enter two or three other cities when the time arises. Our strategy is very clear. We buy individual buildings, one after another, with clearly defined functions. We are only interested in properties that fit into this strategy. This is the advantage we have over competition that needs to invest a certain amount of money, e.g. EUR 200, 300, 500 mln, and to do it straight away. But there is a problem with the availability of product on the Polish market when it comes to such an approach. We have developed a management system at Catella that allows us to work on small projects and develop them one-by-one while cooperating with local partners. This is the combination of local and international expertise that should be in place when investing in a new country. If you invest somewhere, you should get to know the place and its history and cooperate with partners you can trust. This is a method – a skill – that you can cultivate over time. We have been practising this approach for around a decade now.

How much has the company invested so far in Poland?

Around EUR 80 mln in three buildings. We can double this amount provided we find the right projects.

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