CEE Summit: REITS legislation to transform the Polish market

Legislation to establish REITS in Poland will have a transformational impact on the market and on the country, experts agreed at the 10th CEE Summit in Warsaw, which was organised by Real Asset Media and The Poland Observer.

Dominique Mourenhout, CEO, EPRA, at the CEE Summit

“An appropriate REIT regime can be a game-changer, not just for the real estate market but for society as a whole,” said Dominique Moerenhout, CEO, EPRA. “It can have a tremendous positive impact on tax revenues and on job creation.”

Caution is needed, as REITS legislation has been a topic of discussion in Poland for over 15 years and hopes have been raised and repeatedly dashed. However, there is new momentum now and a more realistic chance of success as the new government, led by Donald Tusk, former president of the EU Council, seems determined to forge ahead.

“REITS are a big opportunity for Poland, especially in regional cities,” said Rafal Mazurczak, chief operating officer, Echo Investment. “They would increase investment flows, provide liquidity and guaranteed exit for investors. Local developers could take more risks and build more offices and residential, as the infrastructure is already there and it keeps improving across Poland.”

The creation of REITS, companies that own, operate and finance income-generating real estate, will not be a magic wand that solves all problems like the housing shortage, experts agreed, but it will provide liquidity, transparency and diversification.

Rafal Mazurczak, Chief Operating Officer, Echo Investment, at the CEE Summit

“The perception of the market would change dramatically,” said Anna Duchnowska, managing director investment management, Invesco Real Estate. “Bigger deals will be possible. Look at a sector like PRS, which is much needed in Poland but no German core capital would invest now. With REITS the volume of transactions would easily double in the Polish market.”

While in other countries in the region 70% of volumes on average are done through local funds, in Poland the percentage was 8% last year. Foreign investors, worried about the liquidity of the market and their exit, have seen the lack of domestic investments as a flashing red light.

“REITS are the crucial last piece of the puzzle in the real estate development jigsaw,” said Malgorzata Kosinska, president, the Polish REITS Association.

Poland has the advantage of being able to learn from other countries’ mistakes and experiences. In Spain, for example, REITS have been an unqualified success, but the initial legislation led to just one company being listed. It was only when the legislation was revamped four years later that the sector took off and market cap increased ten-fold.

“Our suggestion would be not to have a restrictive REIT regime, for example just covering residential, but not excluding residential either as was done in Germany,” said Moerenhout. “The legislation must also be investor-friendly. But my main recommendation would be to make it happen quickly. After so many years of discussions, stop talking about it and go for it.”