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edition 12 (246)
December 2019
Trends

Exit as important as the entry

Tomasz Szpyt-Grzegórski

Exit as important as the entry
Rikke Lykke, the European head of asset management, the head of corporate integration and the regional head for the DACH and CEE regions at Patrizia

What factor is the most important in attracting investors to Poland?

Rikke Lykke, the European head of asset management, the head of corporate integration and the DACH and CEE regional head of Patrizia: You can definitely say that Poland is an interesting location, there’s no doubt about that. However, in many ways Poland’s market does not differ from other European countries, where we can see areas that are highly interesting to investors and those that are of little interest. Poland seems no different from countries such as France, Germany or the Netherlands. There are cities in Poland that are of interest to investors like us and there are places that we don’t find attractive. What’s most important is how easy it is to exit an investment. If we compare Poland to a country like Finland – which is also a very attractive market for us – there are cities that give us cause for concern and that’s not because of their potential for investment but because they are dominated by a small number of local players and there are few international firms. If we were to invest there now only to find that we wanted to exit the asset in ten years time, we might be forced to sell to players who know each other well enough to agree on the price in advance. We cannot think about assets only in terms of what they look like today. We have to consider what we’ll be doing with them in a decade or so and what it’s going to be like to sell them later on. What is very important for us to be able to exit easily because we manage money on behalf of European pension funds. This money doesn’t actually even belong to these funds but to ordinary people. If we promise to provide a return of 4-4.5 pct every year, we need to be sure that we can do it. We also need to be sure that if we buy a building today for let’s say EUR 100 mln, then in ten years we’ll be able to sell it for more than EUR 100 mln. If we don’t, our investors will lose out. That is why the exit is as important to us as the entry.

What kind of cities are attractive to an investor like Patrizia?

Take the top ten cities in a given country and then you have to start asking the following questions: Are there universities as well as technical and economics colleges? Are there large medical centres with research departments and are there airports? Have large infrastructure projects been built or are they being planned by the local authorities? Those cities where you can most often answer ‘yes’ to such questions are the ones that are most interesting.

Are there many such cities in Poland?

Yes, there are. We’re mainly interested in residential projects. After all, we can see very high demand in the residential sector. We’re considering a number of projects but I can’t reveal any details at present.

You mean residential projects?

Yes, but not only. We’re also keeping an eye out for office, retail and logistics projects.

Are investors worried about anything happening now in Poland?

It’s a good thing that you’re building so much in Poland but you also have to ask yourself if there is sufficient demand for it – especially when it comes to offices.

Yields in Poland are at historic lows. Is there any chance of them falling further?

The basic questions that need asking are: why should they fall? Why should we expect yields in Kraków or Warsaw to be lower than in Amsterdam or Hamburg? What makes Polish cities so special? I don’t understand why a given city that is an important centre in its country should have lower yields than any other city that is also an important centre in a different country. It’s a very parochial way of thinking. One of our bigger funds, which we are launching right now, is not going to focus on individual countries but on cities – those that are vibrant and have potential for growth with a young labour force and universities. And it won’t matter if it’s a Dutch or a Polish city.

How many such centres are there in Europe?

We’ve identified around a hundred such cities.

So are there other countries and cities in Central and Eastern Europe that are interesting to Patrizia?

We’re interested in the Czech Republic – we are looking to invest there and over time want to build up a local team just like we’ve done in Poland. We’re interested in the three largest cities there.

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