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edition 4 (229)
April 2018
Investment & finance

A Metropolitan offensive

Interviewer: Rafał Ostrowski

A Metropolitan offensive
Robert Jaś, vice-president of Metropolitan Investment

You want to create a chain of 20 retail parks under the Metro Park brand. Two have been developed so far and the third one is under construction. What are your plans?

Robert Jaś, vice-president of the management board of Metropolitan Investment: We build retail parks in towns with 20,000 to 100,000 inhabitants. We opened a retail park with a Lidl store in Wisła and a retail park in Biała Podlaska in November 2017. We have now taken over a project in Biłgoraj, which has 26,000 inhabitants, and we are working to develop it further. Over the next two years we intend to create 20 retail parks. We want Metro Park to also be a strong brand for tenants.

How big are the centres and how much capital commitment do they require?

These are projects in the order of 2,000-4,000 sqm of leasable space. You usually have to invest between PLN 15 and PLN 30 mln in this type of centre. We allow individual investors to purchase 5-10 pct stakes in the special purpose vehicles that develop such facilities. We keep a stake in every project. We see the development of our projects through from start to finish and stay with a 5-pct stake while managing the building at the same time. It’s a model that is already used around the world and Metropolitan Investment is the first company to implement it in Poland.

How many projects have you developed with this model?

About ten projects last year, including several centres for discount stores. These are the kind of projects that we are planning to develop because they include attractive lease agreements with chains such as Biedronka.

How many investors have you managed to attract?

Last year our investors, including bondholders and shareholders, increased in number to 500 with each investing on average PLN 430,000. So we are talking about a total investment of around PLN 200 mln. Our investors have access to the company's reports and balance sheet, so they have full control over what is happening to their money. We also receive feedback from them, so we know that they are happy. All that is needed is that each of them increases their engagement and recommends us to their friends and straight away we have growth.

You could also say you are putting Polish capital into the Polish retail sector...

Yes, that is true. This is happening a little bit via the back door because there are no REITs in the retail sector. Small players therefore need to be provided with opportunities to invest that are based on existing forms laid out by the commercial companies code (KSH). Today 97 pct of transactions on the retail real estate market involve foreign capital. As for Polish investors, there are very few people like Rafał Sonik, that can afford large projects. A really small first-time investor will be able to buy 2 pct of a shopping centre. It is only a matter of reaching such people, which is why we are working hard to develop relationships – we already have four branches: in Gdańsk, Kraków, Warsaw and Poznań. In the near future we intend to open more centres in five locations, namely in Wrocław, Katowice, Szczecin, Lublin and Bydgoszcz.

Discount stores, retail parks ... but are there also some bigger projects?

Yes, we are now developing three shopping centres with areas between 13,000 sqm and 17,000 sqm. For now, these projects are on the books of our mother company but when construction work is more advanced and the leasing level reaches about 70 pct, we will offer these centres to investors as special purpose vehicles. The projects I’m talking about are: Galeria Metro Kwidzyn, Galeria Chrzanów and Metropolitan Outlet which we bought from Carrefour in Bydgoszcz. We are organising the business in line with the latest trends on the retail real estate market, so that it’s not just based on fashion but also on large recreation and entertainment zones. All our facilities will include children's playrooms and restaurants. We are appearing in places where there is still a gap on the market.

And even bigger projects in even larger cities?

In the near future we are not planning any further investments in large malls because there is a high level of saturation with this kind of format.

Is this in any way a safe business?

Yes, it is. We are looking at real estate sectors that offer reliable and safe returns for investors, such as retail parks and shopping centres. This is the exact reason why pension funds and large companies, such as ECE, have been active on this market. No leases are signed for periods of two or three years – they are all much longer. Anyway, take a look at who keeps on investing in this market, who it is who takes over malls and does them up. It is for example South African capital such as Rockcastle. It is for good reason that this company’s shareholders are selling their shares in American companies and buying malls in Central and Eastern Europe. These are business areas that produce reliable returns.

What kind of profits can individual investors expect?

You have to bear in mind that our model involves the partial leveraging of our projects. Many institutions, such as BGŻ BNP Paribas, ING and Pekao, finance our investments. Our projects produce a 10-11 pct return on equity with outside financing. Of course, part of this is used to pay off the bank debt, which leaves us able to pay out about 5 pct but the equity grows every year. .

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