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edition 7 (242)
July 2019

Going rental

Institutional investment in the private rental sector finally takes off in Poland

Tomasz Cudowski

Going rental
“We are setting up a platform that will provide the residents of our buildings with a system of discounts, services and other benefits,” says Sławomir Imianowski of Resi4Rent

A glut of projects with hundreds of apartments for rent are now being launched as investors finally come round to seeing the potential of the Polish PRS market

The first few deals on the Polish PRS market, which took place around five years ago, caused something of a sensation at the time, but for a while they were still few and far between. The development of a market back then was not being driven by PRS companies (along Western lines) buying up all the available apartments before the developer had even dug the first hole, but rather by the demand from individual buyers. Furthermore, the capital was generally being invested in more mature, tried-and-tested product, since there were still satisfactory profits to be made from the commercial real estate market and thus expeditions into new, unchartered territory were not necessary. However, the demand from individuals on the residential market has clearly waned in recent months, while the yields for office buildings and shopping centres have increased markedly. And so a new promised land has appeared on the horizon tempting increasing numbers of institutional investors to head towards it: the private rental sector.

Progress and freedom

The latest developer to catch the PRS bug is Golub GetHouse, which in June announced the launch of its Inspirentals brand in Poland. Initially, two Warsaw projects are to be developed under the brand: Postępu Apartments and Liberty Tower. Together these will add a total of almost 900 apartments to the market. “In the United States, our company has been carrying out and managing such projects for many years and we now want to transfer these competences to the Polish market. In Warsaw we have secured land for the development of app. 1,500 apartments for rent,” reveals Czarek Jarząbek, the CEO of Golub GetHouse. The company has also declared that it aims to generate rates of return at the level of office buildings, with the rents to be at the market level and the sale of the rented building to take place after a maximum of two years of it coming into use. The company will also prepare packages of apartments for large companies looking to rent them out or offer them as a non-wage benefit to their employees.

The first of these buildings will be Postępu Apartments at ul. Postępu 1 in Warsaw’s Służewiec district. The complex of four buildings is to be connected by a glass structure with a green patio. It will comprise 371 units ranging from 26 sqm to 71 sqm in six different layouts. These will be fully-furnished and it will also be possible to lease additional furniture. Its amenities will include roof terraces, a gym with a spa, TV rooms and a games room as well as a common kitchen for events, a chill-out zone, a reading room, a conference room with a full complement of office equipment and a parcel collection point. Retail and services are to be situated on the ground floor of the building along ul. Postępu, including restaurants, cafés and grocery stores. The green areas surrounding the buildings will include a playground, boule, beach volleyball and basketball courts, as well as an outdoor cardio zone. Grupa 5 Architekci is responsible for the architectural design of the project, which is to be launched in Q1 2020.

The second Inspirentals project will form part of the Liberty Tower development. This 42-storey tower is to be built at the junction of ul. Żelazna and ul. Grzybowska in Warsaw’s Wola district. It had been rumoured for several months that part of the 140m tower would contain apartments for rent, but it was not until June that the developer officially confirmed that it would have more than 500 finished apartments ranging from ​​32 sqm to 132 sqm in one of its sections. On the 10th and 11th floor there will also be a fitness centre and spa zone, a conference centre, a games room, a relaxation area as well as an open kitchen. An outdoor swimming pool with a jacuzzi and green terraces as well as BBQ zones are to be located on the roof of the nine-storey podium of the tower. Another, separate section of Liberty Tower will be taken up by a 267-room Radisson Red hotel. The architectural design of Liberty Tower is being prepared by American studio Arquitectonica, which has chosen Epstein as its local partner. The start of the construction work has been scheduled for Q2 2020, with the entire project expected to be completed in Q3 2023. “This will be the third residential tower in the centre of Warsaw, but it is the first to be designed for an average resident of the city. It will have a luxurious character due to its large number of additional services and amenities, rather than from high rents,” insists Czarek Jarząbek. “Its unique services will include an entirely on-line rental service, through which it will be possible to sign a contract anywhere in the world, as well as having a community manager and maintenance staff on site in the buildings to look after the convenience and comfort of every tenant – they will even hang a picture in your apartment upon request. A parcel collection point is another novel feature, as well as a move in/move out zone for tenants moving in or out of the building. It will also have the first outdoor swimming pool in central Warsaw,” boasts the CEO of Golub GetHouse. In addition to this, the developer is planning to renovate a historic, seven-storey tenement building next to Liberty Tower, in which another 34 apartments for rent are to be located. The building will be connected to the tower by an underground passageway through which its tenants will have access to all the amenities in Liberty Tower.

“The unique services of the Inspirentals brand will include an entirely on-line rental service, with which it will be possible to sign a contract from anywhere in the world,” insists Czarek Jarząbek of Golub GetHouse

Ready for Resi

The Resi4Rent platform, which is currently building six projects comprising a total of 1,700 units, is another player with ambitious plans. With around 4,300 of these at an advanced planning stage, by 2023 Resi4Rent is aiming to have between 5,000 and 7,000 apartments in its portfolio. “We started to rent out our first project, Wrocław Rychtalska with 300 apartments, in June. It will be ready in August. Such terms are optimal because the tenants will not be looking for a flat to rent well in advance,” insists Sławomir Imianowski, the CEO of Resi4Rent. “We recently advertised a few offers on an internet portal and received six inquiries in just 24 hours, five of which were related to renting immediately and one from the beginning of next month. It’s a market for quick offers and decisions,” adds Sławomir Imianowski.

At the end of this year, Resi4Rent will put into operation and start renting out a 220-apartment project on ul. Wodna in Łódź. Next year it will start leasing projects on Kępa Mieszczańska in Wrocław (270 apartments) and in Browary Warszawskie in Warsaw (450 apartments). Due to its specific nature and its location, Browary Warszawskie will be the only Resi4Rent project of a superior standard, which – as the developer insists – will be rented at market prices. Each apartment will have air conditioning, while the corridors will be carpeted to minimise the noise. Its amenities will include a special parcel locker for deliveries from couriers during the day – packages can be placed in a locker and the recipient then receives a text message including the code for unlocking it, so they can pick up their delivery at a convenient time. The service will be available to all users of Browary Warszawskie and not only for Rest4Rent tenants. It will also be possible to pick up parcels at the tenant service offices in each building. The other services that these will provide for tenants include problem solving, minor repairs and the coordination of removals. A community manager will also be appointed if it turns out that the tenants are interested in integration and other events. “We will normally offer lease agreements for a minimum of twelve months. Under our annual contracts it will be possible to exchange a flat for a bigger or smaller one or one in another location, which could be of interest to employees working on shorter projects who relocate to different cities every few months. Renting from an institution means that tenants can feel secure – there will be no unexpected terminations of any contracts because, for example, ‘my granddaughter has come back from England’ – as often happens on the individual rental market,” insists Sławomir Imianowski. “Our housing units will be built and finished to a standard we call ‘Echo quality’, because the construction work is the responsibility of our co-owner, Echo Investment, which has an excellent reputation among our tenants,” adds the head of Resi4Rent.

The more affordable apartments offered by Resi4Rent all come with furnished bathrooms and kitchens. With a minimum one-year lease agreement, the flat can be fully furnished to the company’s standard for a small monthly surcharge, but on special request it can be fitted out to the personal tastes of the tenant. “We are negotiating the terms of the contract with the company that will provide the cleaning services for our buildings. Due to the large scale and number of potential tenants, the terms for using such a service will be preferential for our clients. We are also setting up a platform that will provide the residents of our buildings with a discount system for local services in the immediate area, including restaurants, bars, fitness clubs, laundries and other benefits,” reveals Sławomir Imianowski. “Apartments for rent fit into what is known as the ‘sharing economy’. We are expecting a large percentage of our clients to use sharing services when it comes to transport. Each of our buildings will have a good number of parking spaces, because some tenants expect this. We intend to rent out any unused parking spaces on the open market, thus reducing the administration costs, or to use them in other ways. We will certainly be providing a large number of stands and rooms for bikes, also with the expectations of our tenants in mind,” adds the CEO of the platform.

The company’s approach to devising its package of services is certainly off-beat – instead of showering tenants with an array of amenities, it will first provide them with a ‘core’ package of the most popular and most necessary services.

“We are aware that institutional apartment rental in Poland is still in its infancy, so at the moment we are getting to know our clients and their preferences. The fragmentation of the market taking place in our country has so far prevented us from drawing general conclusions about tenants’ tastes based on who they are, their lifestyles and their expectations. So we are preparing to add those services that prove to be important within a very short time,” adds Sławomir Imianowski of Resi4Rent.

The first ones

Any summary of the current PRS market in Poland would be incomplete without mentioning the Apartments for Rent Fund [Fundusz Mieszkań na Wynajem], which is not actually a private sector operation, but which due to its scale is certainly having an impact on how the market is shaping up. The fund was set up to provide rental housing for those on low incomes and is managed by TFI BGK, which was established by the state-owned Bank Gospodarstwa Krajowego. It completed and handed over its first few residential units in H2 2014. The fund acquires apartments by buying entire buildings from developers or by carrying out its own developments. “Our portfolio currently comprises 1,820 apartments in six Polish cities: Warsaw, Gdańsk, Poznań, Wrocław, Katowice and Kraków. The average rental level for the entire portfolio amounts to around 94 pct. We plan to expand our portfolio with projects on ul. Bóżnicza in Poznań and on ul. Wspólna in Łódź later this year. Now we are thinking about further investments in Warsaw, Poznań and Łódź over the next five years,” reveals Rafał Malik, the director of Fundusz Mieszkań na Wynajem.

The most popular flats offered by the fund are two-room apartments and studios, as its tenants are usually single and aged between 25 and 40, but the tenants can also be couples and couples with children. “Our projects are notable for their modern construction – the buildings we buy must have outdoor parking, as well as underground car parks, lifts and preferably retail and services on the ground floors. We also pay close attention to their locations – they must be both interesting and convenient, but not necessarily in city centres,” says Rafał Malik.

The apartments are provided fully furnished, while the fund also provides a 24-hour service and a fixed rental price that only increases (or decreases) according to the annual inflation rate. Contracts (based on occasional rental terms) are signed for periods of six to 48 months.

Finally, we cannot neglect to mention the company that first set the ball running for PRS in Poland and has been building up steam ever since. German investor Catella created a huge stir around five years ago by buying several floors (around 70 units) of the exclusive Złota 44 apartment building in Warsaw. Its purchase of a large low-range apartment package – almost 200 apartments in the Pereca 11 building in Warsaw’s Wola district, which Belgian developer Matexi had originally sold to the Bouwfonds European Residential Fund – generated just as much excitement. A consortium of Hines and Heitman is now developing a complex of three buildings with 150 apartments on ul. Rakowicka in the city for Catella. This project is mostly made up of smaller, app. 40 sqm apartments, some of which are furnished. The contracts signed by Catella’s tenants are for at least six months. ν

Maximilian Mendel

the head of residential investment at JLL

Living at the top

We have been seeing a growth in investor interest in assets in we could call the Living sector, which also includes rental apartments. In a survey conducted by JLL in 2018 of the world’s largest players, as many as 16 pct declared a willingness to invest in the markets of Poland and Central Europe. The Polish market is one of the most attractive in Europe in terms of investment returns. More than PLN 2.3 bln was invested in this sector over the last four years, although five years ago the segment didn’t even exist here at all. The cautious investment activity we’ve seen in this sector in this part of Europe is partly the result of the lack of ready-made product of a certain size. The main strategies for investors entering the Polish market currently are forward-purchase and forward-funding, unless the investor wants to take on the development risk directly. If we had stable rental apartment portfolios of an appropriate scale in Poland and other Central European countries, we would also attract investors whose investment strategies currently do not include such purchases. Paradoxically, the slowdown in ‘retail sales’ may represent an opportunity for the growth of this segment to accelerate. The interest in renting apartments has been increasing. This is being driven by demographic and social changes. At the same time, the interest in purchases from individual buyers has fallen as prices increase. If a high transaction level is maintained, developers will be induced to look more favourably at selling entire projects to investors. As for the product, the most interesting are one- and two-room apartments, with the main target group being young professionals. Apartments for more affluent tenants make up only a small part of the market.

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