Transaction volumes have picked up significantly since the lows of the first lockdown, delegates heard during last week’s ‘Investment Capital & Sectors: what are the new risks?’ briefing, part of the online CEE Summit organised by Real Asset Media and Poland Today.
“We were expecting a real slowdown like in April and May, but the second wave of the virus hasn’t affected the market at all,” said Jean-Bernard Wurm, head of business development Europe, secure legal title, AXA. “We’ve seen a 20% increase in the number of transactions we insure and the volume of deals we underwrite. It has been a very pleasant surprise.”
Activity has not been limited to Poland, he said: “Even in Romania, which was a distressed market earlier in the year, we’re now doing the biggest transaction ever. I believe we haven’t seen the end of it.”
What has changed in the market is the type of investor. International investors have been kept away by a combination of travel restrictions, caution, their own problems or simply a wait-and-see attitude, while local capital has come to the fore looking for opportunities.
Local investors come to the fore
“There has been a real shift in the market with a lot more local deals,” Wurm said. “It’s Polish investors buying Polish assets now.”
Even South African capital, which has been so active in CEE in the last few years, is currently largely absent.
“South Africa has had a tough time with the pandemic and this has put pressure on the balance sheets of REIT-like listed property companies, so there is little appetite for expansion,” said Craig Smith, head of research and property, Anchor Stock Brokers. “Capital is scarce and raising fresh equity for new ventures is unlikely, but South African companies will not dispose of the assets they own in CEE.”
In fact there are new players exploring opportunities in the region, he said, but not in the retail sector where South Africans have invested the most in the past and which is now facing macro headwinds.
“SA capital has been investing in the logistics sector in the last twelve months,” said Smith. Other long-standing investors have made the same choice.
Making the retail to last mile switch
“We have a new name but a very long history in CEE,” said Herman Kok, head of research, Mark, which used to be called Meyer Bergman. “Our retail investment component has been drastically reduced in favour of last-mile logistics.”
Interest in the region seems undimmed, but there’s a shift to logistics and alternative sectors that are seen as more promising.
“There’s a South African family office putting together a big pool of capital with a pension fund to invest in PBSA in Poland,” said Douglas Edwards, head of group equity raising and client services, Corestate Capital Investors. “Investors are increasingly differentiating between asset classes.”