CEE Summit: crisis creates opportunities to buy assets

Challenging macro-economic conditions are creating buying opportunities in Poland and neighbouring countries, delegates heard at Real Asset Media’s 9th CEE Summit, organised with The Poland Observer, which took place yesterday in Warsaw.

Anna Duchnowska, Managing Director Investment Management, Invesco

“There are fantastic opportunities everywhere, driven by the availability of equity,” said Anna Duchnowska, managing director investment management, Invesco. “The cost of capital is such that the winners are the ones who have capital to deploy and can buy the best properties on the market, such as offices in the CBD and logistics assets.”

Many big institutional investors are facing re-financing which could become unaffordable at current interest rate levels, so they’re reshuffling their portfolios and selling assets.

“A lot of funds have paid too much for assets and now they have to sell, so as cash buyers we can take advantage of the situation,” said Karolis Adlis, executive director European investments, WPCarey. “High inflation and interest rates are the main challenge for many, but for our company they represent an opportunity.”

High financing costs, as well as uncertainty over valuations and prospects for real estate, are a deterrent for many investors who feel that the party’s over. Others, however, see this lull in the market as a spur to action.  

“There are a lot of opportunities in the Polish market and I believe now it’s the time to deploy equity,” said Michal Stepien, deputy CEO, AFI Europe Poland. “We can make the most of the lack of investors in the market and pick the best assets in the best locations.”

The rise in interest rates has made international investors more cautious and many are re-assessing their strategy and have become more reluctant about committing to real estate in other countries. This has led to a change in the type of investor being active in CEE.

“In Poland we’re seeing less core investors, less German pension funds and less US investors,” said Judyta Sawicka, head of investment and divestment, Echo Investment. “But the gap is being filled by CEE investors, especially from Czech Republic and the Baltics. In Poland we don’t have a domestic market but in CEE there’s a lot of capital that’s been accumulated and now is being deployed in Poland.”

Domestic investors in Poland only account for some 2% of transactions compared to 40%+ in Hungary and the Czech Republic. The lack of a domestic market remains an issue as it means reduced liquidity and a cap on prices as investors don’t see a clear exit.