PT Urban Issues No. 017

No. 017 / 16th June 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

Newsletter Editor: Adam Zdrodowski

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tel. +48 504 182 308

CEE MARKETS Foreigners are saying CEE remains attractive compared to Western Europe page 3

OFFICE The first phase of Stegny Business Center in Warsaw has got the go-ahead page 6 Capital Park has delivered the first phase of Eurocentrum Office Complex in the Polish capital page 6

RETAIL Inter IKEA Centre Group Poland is expanding its Park Handlowy Bielany in Wrocław page 7

LOGISTICS Panattoni Europe is building a new logistics park near Poznań page 7

BUILDING LAND Griffin Group has bought two major plots in downtown Warsaw page 7

INTERVIEW Poland Today talks to Jeffrey Lefleur, managing director at global real estate investor W. P. Carey page 8

LATEST LEASE DEALS IN BRIEF Recent lease transactions in the office, retail and warehouse sectors page 9

COMING & GOING Magdalena Sadal, Cushman & Wakefield page 9

FACTS &FIGURES Largest completions, largest lease deals and rents in the commercial property market in 2013 page 10

CONFERENCES Poland Transformed conference report page 11

Participants in the investment session of the conference Photo: Poland Today

Spotlight Hotel Investment Poland Spotlight Hotel Investment Poland Spotlight Hotel Investment Poland Spotlight Hotel Investment Poland conference: there is still ample room for conference: there is still ample room for conference: there is still ample room for conference: there is still ample room for growth in the Polish marketgrowth in the Polish marketgrowth in the Polish marketgrowth in the Polish market Hotel investors continue to see investment opportunities in the Polish market, said participants in the Spotlight Hotel Invest-ment Poland conference which Poland Today organized in War-saw earlier this month page 2

RegisteR now foR

Poland & CEE Real Estate Summit Network Global Capital | Warsaw–London–Frankfurt

25 – 26 June 2014, Bristol Hotel, warsaw

DISCUSSION TOPICS INCLUDE:• How does central & eastern Europe fit into the global

property picture? • Poland: Already overbought and overpriced?• Go East!.. But are the global investors ready?• WARSAW OFFICE: How much can the Polish capital

absorb?• POLAND RETAIL: Is the nation already over-sup-

plied?• POLAND LOGISTICS: Is Europe‘s centre a logical

warehouse hub?• Speed dating: Meet new partners for capital, co-invest-

ment and deals• Central Europe: Where is the value in CE around Poland?• Investors in CE: Who are they and what do they want?

• CE OFFICE: Where’s hot and where’s not?• CE RETAIL: Variable speed consumption• CE LOGISTICS: Does it all depend on roads and rail?• OUTSOURCING: Still big but moving up the value

curve• POLAND RESIDENTIAL: Safe as houses ..

or maybe not?• HOTELS: The rise and rise of CEE hospitality• Financing CEE: Are the banks playing ball?

RegisteR today!

... to get the eaRly biRd Rate!

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weekly newsletter # 017 / 16th June 2014 / page 2

HOSPITALITY

Poland with room for Poland with room for Poland with room for Poland with room for new hotel new hotel new hotel new hotel developmentsdevelopmentsdevelopmentsdevelopments

With the tourism industry picking up in Poland, in-vestors see room for new hotel developments in the country, said participants in the Spotlight Hotel In-vestment Poland conference which Poland Today organized in Warsaw at the beginning of June. More and more people are coming to Poland from abroad and the domestic market has also been ro-bust of late. A number of international hotel chains not yet present in Poland are going to enter the country in the upcoming years, the participants in the conference said. The last few years were a good period for the Polish tourism industry. Approximately 15.8 million for-eign visitors came to Poland last year, said Katarzyna Sobierajska, undersecretary of state at the Ministry of Sport and Tourism of the Republic of Poland. Meanwhile, the demand generated by the domestic market has also been rising in recent years, pointed out Sebastien Denier, vice president, Central and Eastern Europe, at Louvre Hotels. What would help the country boost the demand for hotel space even further is the organization of a bigger number of large-scale cultural and sports events, said Ireneusz Węgłowski, vice president of the management board at Orbis. Significantly, the gap between the weekday hotel occupancy and the weekend hotel occupancy in Poland has been clos-ing, said Katy Miller, business development man-ager at STR Global.

Participants in the investment session Image: Poland Today

Poland remains a country with a relatively low ho-tel space saturation level, according to Sobierajska. There are just approximately 30 hotel rooms per 1,000 inhabitants in Poland, she said. Hotel inves-tors recognize the growth potential of the Polish market, with around 170-200 building permit appli-cations having been filed in Poland last year. “In-vestors perceive Poland as a promising market,” So-bierajska said. Astrid Schafleitner from Motel One said that Poland now offers a lot of opportunities for the conversion of old office buildings, dating to the 1960s or 1970s, into modern hotel facilities. According to Andrzej Chełchowski, partner at Miller Canfield, there is also room in Poland for hotels located near hospi-tals which could be used by both patients and their families. Such facilities already exist in the German market, he said. Admittedly, like in the other property market sec-tors, a number of planning- and property claims-related issues are, sometimes, a problem for hotel investors in Poland, Chełchowski said. The uncer-tainty as to what exactly a hotel investor will be able

to build in a given location remains a major chal-lenge, said Przemysław Wieczorek, member of the management board at Puro Hotels. Adam Konieczny, country head Poland at Christie + Co, said that a number of international hotel chains including InterCityHotel, Motel One and Leonardo Hotels would like to and are expected to enter Po-land in the near future. At the moment, Ac-cor/Orbis, Best Western, Louvre Hotels and Hilton, which respectively have 64, 20, 16 and 10 hotels in Poland, are the four largest chains in the country, Konieczny said. The representatives of the particular chains claimed that there is still room for new hotels in Po-land. Ralph Steinert, development director, Ger-many and CEE at LHG, said that there are eight to ten cities in Poland with potential for new Louvre Hotels facilities. There is room for growth through both development and take-overs, he said. Mikhail Kolesnik, senior director of development for the Russia, CIS and Eastern Europe area, at Marriott International, said that the company is actively looking at new sites in Poland. Investors argued that Poland continues to offer good investment opportunities. Warsaw and Kraków are now the most attractive cities, with Wrocław being a difficult market, said Rudolf Grossmayer, an asset manager at UBM. Both he and Stephane Obadia, development director at Algon-quin, stressed the attractiveness of branded hotels. It is international brands that bring recognition and value to hotel facilities, they said. Grossmayer pointed out that investment in the Pol-ish hotel market requires patience and long-term commitment. While in Western Europe the com-pany had previously been able to sell hotels right af-ter their completion, this had never happened in


Eastern Europe, he stressed. It is now mostly inter-national investors that are investing in business ho-tels in Poland. Small Polish investors are rather in-terested in leisure locations, said Wojciech Szybkowski, a partner at CMS Cameron McKenna. To some extent, securing bank financing remains a challenge for hotel developers and investors, with not many banks granting loans for new develop-ments. Some investors are now thus resorting to al-ternative sources of financing. Bankers participat-ing in the conference admitted that hotels are seen by their institutions as risky investments whose long-term performance is difficult to evaluate. However, they added that their banks are always ready to finance good hotel projects.

CEE MARKETS

The foreign view: still The foreign view: still The foreign view: still The foreign view: still many investment many investment many investment many investment opportunities in CEEopportunities in CEEopportunities in CEEopportunities in CEE

Ahead of the upcoming Poland & CEE Real Estate Summit which Poland Today and Property Investor Europe are organizing at the Bristol Hotel in War-saw on June 25-26, we talk to a number of key mar-ket figures who will be participating in the event. Based both in Poland and abroad, the representa-tives of major developers, investors, financial insti-tutions and consulting firms have told us that Cen-tral and Eastern Europe remains a highly attractive market and that there still exist many investment opportunities in the region. Robert DobrzyckiRobert DobrzyckiRobert DobrzyckiRobert Dobrzycki, managing partner at Panattoni Panattoni Panattoni Panattoni Europe Europe Europe Europe (based in Warsaw), argued that the Central

and Eastern Europe region is currently very attrac-tive compared with the Western European markets, as well as for those markets. The trend to relocate business from the West to CEE is proof of this, with Poland being the main destination, Dobrzycki said. He added that the assets of the region include an improving infrastructure, a large domestic market and an attractively priced and qualified labour force.

Robert Dobrzycki, Panattoni Europe Image: Panattoni Europe

According to Dobrzycki, investors from Western Europe recognize the growing importance of the Polish warehouse and industrial space market. Lower operational costs and the proximity to Ger-many are the two major magnets currently attract-ing foreign capital to Poland, he said. “When it comes to the industrial market, we are now getting signals from our clients that Poland is the second most attractive country (with Germany being the most attractive one) in terms of moving produc-tion,” Dobrzycki added. Peter BecárPeter BecárPeter BecárPeter Becár, managing director CEE at PoinPoinPoinPointtttPark Park Park Park Properties (P3)Properties (P3)Properties (P3)Properties (P3) (based in Prague), stressed that the Central and Eastern Europe region is very impor-tant in the strategy of rapidly growing the P3 plat-

form across Europe. The company is focusing on building a portfolio in the major hubs of the major-ity of the CEE countries. It believes in the future growth of the CEE markets as the logistic, retail and manufacturing markets in Europe are changing and bringing new opportunities, Becár, said. Poland and the Czech Republic are now recording the most investor and tenant activity in the logistics market in CEE. The Czech Republic is the most saturated market in the region, Becár said. “Even though this shows the further growth potential of the Polish industrial market, I expect the major re-gional hubs to remain in the Czech Republic, Slova-kia and southern Poland area,” he added.

Tomasz Trzósło, JLL

Image: JLL

Tomasz TrzósłoTomasz TrzósłoTomasz TrzósłoTomasz Trzósło, managing director at JLL PJLL PJLL PJLL Poooolandlandlandland (based in Warsaw), stressed that investors do not look at Poland as part of CEE, but rather analyze it separately and make their investment or develop-ment decisions individually for Poland. There is


significant investor interest in the Polish market and the same applies to developers who are very ac-tive across Poland, in all sectors, Trzósło said. He added that the foreign capital is coming from Europe and North America, as well as from the Middle East and Asia. There are many investment opportunities across the region. “Developers need to look at sectors and locations where real tenant demand exists. This could be the case for all sectors and most countries in the CEE region, but for very specific locations,” Trzósło said. For example, according to him, War-saw is now getting hot in terms of the supply of new office space but some of the regional cities in Po-land are now seeing strong demand from BPO/SSC/R&D tenants, justifying the development of new product.

Joanna Kowalska-Szymczak, KSP

Image: KSP

Brian BurgessBrian BurgessBrian BurgessBrian Burgess, head of Central Europe at SavillsSavillsSavillsSavills (based in Warsaw), pointed out that, taken as a re-

gion as a whole, the investment volume in commer-cial property in CEE is now heading back to pre-crisis levels. The economies of most of the countries in the region can be expected to improve within the next three years, with Poland and the Czech Repub-lic leading the way. This is well within the invest-ment horizon and offers investors the upside on re-sale, Burgess said. He added that in the medium-term he expects there will be more competition for assets offered for sale in Poland and the Czech Republic and a downward adjustment in yields as a result. He added that he would like to learn more about the attitude of banks to lending into the property market during the up-coming summit. "I have heard as to why banks are not lending into the real estate market but it would be useful to know exactly when and into which sectors," Burgess said. Stratos ChatzigiannisStratos ChatzigiannisStratos ChatzigiannisStratos Chatzigiannis, investment director at NBGI Private Equity LimitedNBGI Private Equity LimitedNBGI Private Equity LimitedNBGI Private Equity Limited (based in London), said that the focus of his company is on the logistics market and the retail market in the secondary cities. “The logistics sector is a robust segment under-pinned by the depth and availability of skilled la-bour at competitive cost, an increasingly efficient highway system and a solid legal system, as well as a big domestic market,” Chatzigiannis said. When asked about the current investment opportu-nities in the region, he pointed to well located logis-tics and secondary city retail centres in Poland, as well as to the logistics sector in the Czech Republic. “The secondary cities retail parks have further scope to develop and offer robust rental yield as the GDP rises and consumption strengthens, Chat-zigiannis said. He added that he hopes to learn more the dynamics of the CEE market during the conference.

Joanna KowalskaJoanna KowalskaJoanna KowalskaJoanna Kowalska----SzymczakSzymczakSzymczakSzymczak, investment director at Kulczyk Silverstein Properties Kulczyk Silverstein Properties Kulczyk Silverstein Properties Kulczyk Silverstein Properties (based in War-saw), said that recent years have been a difficult test for the property markets in Central and Eastern Europe. Poland has stood the test best, Kowalska-Szymczak argued. The country has gained the opin-ion of a stable, sustainable market which can com-pete with Western Europe in terms of the quality of the product, the transparency of the information and the professionalism of the advisors, she added. “Although Poland is technically part of CEE, it is, unlike the other countries in the region, perceived as a market equal to the markets in Western Europe,” Kowalska-Szymczak pointed out. “Un-doubtedly, the leading role in the region is played by Warsaw which has consistently appeared in the rankings of the most popular investment destina-tions in recent years,” she said.

Dieter Knittel, Deutsche Pfandbriefbank Image: Deutsche Pfandbriefbank


According to Dieter KnittelDieter KnittelDieter KnittelDieter Knittel, director, Europe real estate finance, at Deutsche PfandbriefbankDeutsche PfandbriefbankDeutsche PfandbriefbankDeutsche Pfandbriefbank (based in Unterschleissheim near Munich), the core CEE markets, and Poland in particular, remain sought-after investment destinations. The ongoing invest-ment appetite for property in CEE is reflected by the large combined volumes of the transactions closed in the region this year and last. In the first quarter of this year volume stood at approximately €1.4 billion, Knittel pointed out. He added that while the focus in the Central and Eastern Europe region has, to date, very much been on defensive investments in prime locations, inves-tors are now actually starting to move up the risk curve. He added that Deutsche Pfandbriefbank it-self is currently involved in the financing of a num-ber of deals across all sectors in the region. “Last year we closed around €940 million in CEE,” Knit-tel said.

Robert Martin, Europa Capital Image: Europa Capital

Robert MartinRobert MartinRobert MartinRobert Martin, principal, head of Central Europe, at Europa CapitalEuropa CapitalEuropa CapitalEuropa Capital (based in London), pointed out that the CEE countries have greater growth pros-pects than many other European countries as their

GDP forecasts are significantly better. However, he noted that the size of the CEE markets may be a problem. “The markets are small compared to the Western European markets, which makes sourcing suitable product more difficult,” Martin said. CEE is attractive, particularly in an environment which now appears awash with new capital. “Whilst occupational markets are weak, they seem to be stabilizing and bottoming out, which should offer long-term stable growth prospects,” according to Martin. He said that Europa Capital is looking at markets and sectors which are liquid or will be liq-uid within the investment horizon of the Europa Fund IV fund which the company is now investing. “This means the capital cities and the large Polish regional cities,” Martin said. Helmut MühlhoferHelmut MühlhoferHelmut MühlhoferHelmut Mühlhofer, head of debt and capital mar-kets at Allianz Real Estate Allianz Real Estate Allianz Real Estate Allianz Real Estate (based in Munich), said that his company is interested in the expansion of its lending activities in the Polish market, in addi-tion to its core markets of France and Germany. Mühlhofer added that he will be coming to the real estate summit in Warsaw to learn more about the Polish market and, hopefully, also to learn more about new investment opportunities in it. Vincent RobionVincent RobionVincent RobionVincent Robion, head of research for the alliances, international research, at BNP Paribas Real Estate BNP Paribas Real Estate BNP Paribas Real Estate BNP Paribas Real Estate (based in Issy-les-Moulineaux near Paris), said that CEE offers more attractive yields, compared with the established investment markets of Germany, France and the UK. Poland, considering the size of its population, the stability of its economy and its positive outlook, as well as the biggest supply of real estate product in the region, provides a wide range of investment opportunities, Robion said. They range from prime assets through value-added properties to opportunistic ventures. “Other mar-

kets, especially Hungary, are getting on the right track in terms of investor interest but it has not yet translated into a substantial increase in trading,” Robion said. The logistics sector is currently a ma-jor hot spot across the region. “Prime office assets are still in demand but there are not too many assets available,” Robion said. He added that there are also opportunities when it comes to properties that need refurbishment and redevelopment.

Vincent Robion, BNP Paribas Real Estate

Image: BNP Paribas Real Estate

Jonathan TinkerJonathan TinkerJonathan TinkerJonathan Tinker, chief executive and managing di-rector at Helical Poland Helical Poland Helical Poland Helical Poland (based in Warsaw), said that there are pockets within CEE, including War-saw and Prague, which are now highly attractive compared to some of the established West Euro-pean markets. He stressed that some of the Western markets, particularly London, are overpriced. “The prices in London are not underpinned by invest-ment fundamentals, but rather result from the shortage of stock and the fact that everyone wants to be present there,” Tinker said.


According to him, this will never happen in War-saw. When it comes to investment opportunities in Poland, they exist in segments of the market includ-ing retail warehousing, Tinker said. Tinker added that he hopes there will emerge in the future more domestic investors active in the real estate market in Poland. The property market in the country would benefit from that, he said.

James Turner, Balmain Asset Management Image: Balmain Asset Management

Asked about the attractiveness of Central and East-ern Europe, James TurnerJames TurnerJames TurnerJames Turner, managing director at Balmain Asset ManBalmain Asset ManBalmain Asset ManBalmain Asset Managementagementagementagement (based in London), said that occupiers simply want to be in the region. He noted that the demand in CEE is consistent, fi-nance is available and, with some exceptions, the region does not suffer from interest. “Where occu-piers, banks and investors all converge that is where a market is active,” Turner said. He added that many other countries have one or two of those factors, most notably missing the oc-cupier in many cases. The CEE region can genu-inely boast all three albeit in Poland and the Czech Republic mainly, Turner said. According to Turner, Poland and the Czech Republic are clearly the most attractive for the non-speculative investor. “Poland has a wider choice of investment options due to its

size and the number and extent of major conurba-tions outside of Warsaw,” Turner said.

OFFICE

Building permit Building permit Building permit Building permit granted for new office granted for new office granted for new office granted for new office complex in Warsawcomplex in Warsawcomplex in Warsawcomplex in Warsaw

The whole scheme will deliver 27,000 sqm

Image: Pro Value

Special-purpose vehicles BMB Development, APS Real Estate and AWD Investment have obtained a building permit for the first phase of their planned Stegny Business Center office project in Warsaw. The scheme will be located at the intersection of ul. Sobieskiego and Al. Sikorskiego in the Mokotów district of the Polish capital and will comprise a to-tal of approximately 27,000 sqm of office and ser-vice areas. Construction on the first phase of the development, which is called Szmaragd (Emerald) and will com-

prise more than 9,200 sqm of space, is scheduled to commence in October and finish in mid-2016. The whole Stegny Business Center investment will con-sist of three five-floor buildings. The second and the third phase of the project will respectively be called Rubin (Ruby) and Szafir (Sapphire). Talks with potential tenants for the scheme are cur-rently underway, said Piotr Szmilewski, manage-ment board member at Pro Value, the company re-sponsible for the commercialization of the devel-opment. The part of the Mokotów district in which the Stegny Business Center investment will be de-veloped is now gaining in significance and is in-creasingly considered as an office location, Szmilewski said.

OFFICE

First phase of First phase of First phase of First phase of Eurocentrum Office Eurocentrum Office Eurocentrum Office Eurocentrum Office Complex completedComplex completedComplex completedComplex completed

Real estate investor Capital Park has obtained an occupancy permit for the first phase of its Eurocen-trum Office Complex project in Warsaw. The scheme has delivered more than 42,000 sqm of space. The Eurocentrum Office Complex invest-ment is located on Al. Jerozolimskie in the Ochota district of the Polish capital and is expected to comprise a total of 67,000 sqm of office space when it is fully developed. The development was designed by the PRC Ar-chitekci architectural studio and has already been LEED CS Gold-pre-certified. Construction com-pany Erbud was the general contractor of the pro-


ject. Tenants at the Eurocentrum Office Complex scheme include Unilever, Imtech Polska, Tebodin, Qumak, CEPD Management and Randstad Polska. FMCG sector company AB Foods Polska has just leased 500 sqm of office space at the development.

The project is located in the Ochota district Image: Capital Park

RETAIL

Park Park Park Park Handlowy Handlowy Handlowy Handlowy Bielany in Wrocław Bielany in Wrocław Bielany in Wrocław Bielany in Wrocław being expandedbeing expandedbeing expandedbeing expanded

Inter IKEA Centre Group Poland has launched con-struction on a new part of its Park Handlowy Bie-lany shopping centre in Wrocław. After the expan-sion, the mall will become the largest retail facility in Poland. At the moment, the Park Handlowy Bie-lany shopping centre is the largest mall in Lower Silesia. The leasable retail space of the facility is go-ing to increase from the current 80,000 sqm to 145,000 sqm.

The mall will grow to 145,000 sqm Image: Inter IKEA Centre Group Poland

The new part of the development, which is sched-uled to open for business next year, will feature three floors and house over 100 new stores and points of service. An additional 700 parking spaces will be provided in an underground parking lot. In-ter IKEA Centre Group Poland is also going to modernize the existing part of the Park Handlowy Bielany investment. The existing part and the new wing will be connected and will constitute a coher-ent whole.

LOGISTICS

Panattoni Europe Panattoni Europe Panattoni Europe Panattoni Europe building newbuilding newbuilding newbuilding new logistics logistics logistics logistics park near Poznańpark near Poznańpark near Poznańpark near Poznań

Developer Panattoni Europe has launched con-struction on the first phase of its planned Panattoni Park Poznań III warehouse project near Poznań.

The building will deliver more than 12,000 sqm of space. Located twelve kilometres from the down-town of Poznań, the Panattoni Park Poznań III scheme is expected to comprise four buildings with a total of approximately 68,000 sqm of warehouse areas. The first building within the development has al-ready got two tenants – two logistics operators will each take up 5,000 sqm of space at the investment. Panattoni Europe is already planning Panattoni Park Poznań IV. According to Robert Dobrzycki, managing partner at the company, there is devel-opment potential in the Poznań area, with the va-cancy rate at 4.4% and the available space scattered. If a tenant needs over 8,000 sqm of space, new space has to be built, he said.

BUILDING LAND

Griffin acquiring more Griffin acquiring more Griffin acquiring more Griffin acquiring more land in downtown land in downtown land in downtown land in downtown WarsawWarsawWarsawWarsaw

Real estate investor Griffin Group has recently an-nounced the acquisition of a total of over 16,000 sqm of developed land in downtown Warsaw from Zakłady Graficzne “Dom Słowa Polskiego.” The two plots are located on ul. Pańska and ul. Miedziana in the Wola district of the Polish capital and neighbour the Jupiter shopping centre site which Griffin Group bought from the Spanish Cata-lunya Banc in December last year. Due to the transaction, which is expected to be closed later this month and whose value has not been disclosed, Griffin Group will own a total of more than four hectares of land in that part of War-


saw. “At the moment, we are the owner of one of the largest sites in the downtown of the city which can be used for commercial purposes,” Piotr Fi-jołek, partner at Griffin Real Estate, said in a state-ment. Griffin Group has not yet revealed what it is going to develop on the recently acquired land. After the acquisition of the Jupiter mall, the company said that it is considering a number of possible options with regard to the future redevelopment of the site. The Jupiter shopping centre will continue to oper-ate till mid-2017. Property market experts expect that a new large-scale shopping centre or a mixed-use complex with a number of mid-rise buildings featuring office and residential space could be de-veloped in the location. Established in 2006, Griffin Group has a number of retail properties across Poland, including Hala Koszyki in Warsaw, Dom Handlowy Renoma in Wrocław and Supersam in Katowice, in its portfo-lio. The company also owns building land and office assets. Earlier this year, Griffin Group acquired the Nordic Park, Bliski Office Center and Company House II office buildings in Warsaw, as well as the Centrum Biurowe Lubicz office complex in Kraków.

INTERVIEW

Poland continuing to Poland continuing to Poland continuing to Poland continuing to move farther away move farther away move farther away move farther away from the rest of CEEfrom the rest of CEEfrom the rest of CEEfrom the rest of CEE

Poland Today talks to Jeffrey Lefleur, managing di-rector of global net-lease real estate investment

trust W. P. Carey, about the current investment op-portunities in Poland and the CEE region. Jeffrey Lefleur will be a speaker at the CEE Real Estate Summit on 25-26 June in Warsaw.

Poland Today talks to: Jeffrey Lefleur, managing director at W. P. Carey Poland Today: Poland Today: Poland Today: Poland Today: HHHHow attractive arow attractive arow attractive arow attractive areeee Poland and Poland and Poland and Poland and CEE in general from your perspective as a global CEE in general from your perspective as a global CEE in general from your perspective as a global CEE in general from your perspective as a global real estate invesreal estate invesreal estate invesreal estate investor?tor?tor?tor? Jeffrey Lefleur: Jeffrey Lefleur: Jeffrey Lefleur: Jeffrey Lefleur: The first point I would raise is that Poland and the CEE are two different markets. There is no other market in Eastern Europe like Po-land, and it continues to move farther away from

the rest of the region. Poland continues to be the most attractive market in CEE because it has great liquidity (both on the debt and equity side) and lots of new product to invest in, all in a stable, safe eco-nomic environment. The same simply cannot be said for any other market in Eastern Europe. While we have seen an enormous compression in yields in Poland, it still has enough premium to the Western European markets to make it interesting. Where in the region do you now seeWhere in the region do you now seeWhere in the region do you now seeWhere in the region do you now see the best ithe best ithe best ithe best in-n-n-n-vestment opportunities?vestment opportunities?vestment opportunities?vestment opportunities? I think all of CEE looks interesting compared to Western Europe, it just depends on your appetite for risk and ability to use equity. But in terms of see-ing real opportunities for institutional investors, it is all coming from Poland at the moment. There simply are no new investment ideas coming out of the other CEE markets. Which kinds of properties offer the biggest rWhich kinds of properties offer the biggest rWhich kinds of properties offer the biggest rWhich kinds of properties offer the biggest re-e-e-e-turns?turns?turns?turns? I would normally say logistics offers the best pre-mium, but people have learned that core logistics on long-term leases are a safer and more secure bet than class-A offices or high-street retail, so what we have seen (at least in Poland) is cap rates compress and coverage almost to all the same yield range. Lo-gistics still has a slight premium, but not all that much. Do you see any potential threats/challenges in Do you see any potential threats/challenges in Do you see any potential threats/challenges in Do you see any potential threats/challenges in the CEE real estate markets in the shortthe CEE real estate markets in the shortthe CEE real estate markets in the shortthe CEE real estate markets in the short----term term term term and longand longand longand long----term perspeterm perspeterm perspeterm perspecccctives?tives?tives?tives? I think one threat for Poland is the potential for a bubble in real estate values. There is so much new class-A office and logistics being put up, and if the Polish economy hits a bump and declines, then the


real estate market could find itself with a lot of un-needed buildings. In general, Russia is an obvious short-term challenge, but only in terms of giving the region a sense of instability (which is never good for investment). Much of the CEE (ex. Poland) is still not in great economic condition, and it remains a challenge for the CEE as a whole to show some growth and an ability, from a political perspective, to manage their individual economic issues. How available is now financing for real estate How available is now financing for real estate How available is now financing for real estate How available is now financing for real estate investments in CEE?investments in CEE?investments in CEE?investments in CEE? Liquidity from lenders has certainly improved from the bottom of 2010, but you still have the "winners" and "losers" where the lending markets remain vastly different. Poland, Czech Republic, and Slo-vakia all benefit from aggressive German lenders that can provide low-cost financing. However, starting in Hungary and heading south it becomes increasingly difficult and expensive to find good debt financing. What are your investment plans in the region for What are your investment plans in the region for What are your investment plans in the region for What are your investment plans in the region for the near future?the near future?the near future?the near future? We continue to seek out long-term, single-tenant, net-lease investments at attractive yields through-out Europe.

JEFFREY LEFLEUR Jeffrey Lefleur joined W. P. Carey as an analyst in its Treasury department in 2000. Prior to W. P. Carey, he worked at P. Schoenfeld Asset Management perform-ing various risk-arbitrage analyses, as well as for the Internal Audit Department of the New York Mercantile Exchange. Lefleur graduated from New York Universi-ty's Stern School of Business with a double major in Finance and Accounting.

W. P. Carey is one of the partners of the Poland & CEE Real Estate

Summit which Poland Today and Property Investor Europe are or-

ganizing at the Bristol Hotel in Warsaw on June 25-26.

LATEST LEASE DEALS IN BRIEF

Ursus Logistic Center Image: JLL

Empark Mokotów Business Park has announced it has signed lease renewals for a total of 7,000 sqm of office space since the beginning of this year. Among the companies that have stayed at the complex are HenkelHenkelHenkelHenkel, LUX MEDLUX MEDLUX MEDLUX MED, mBank mBank mBank mBank and PPPPaaaapyruspyruspyruspyrus. Empark Mokotów Business Park is located in the Mokotów district of Warsaw and is owned by Heitman Euro-pean Property Partners III and Immofinanz. It comprises a total of over 115,000 sqm of office space in nine buildings, with JLL acting as the exclusive leasing agent. Food distributor MAROL MAROL MAROL MAROL has leased 3,000 sqm of warehouse space at the Ursus Logistic Center lo-cated in the Ursus district of Warsaw. The lease transaction was brokered by JLL consultants.

COMING & GOING

Magdalena SadalMagdalena SadalMagdalena SadalMagdalena Sadal

Magdalena Sadal has recently joined the valuation and advisory department of Cushman & Wakefield in Poland as a senior research consultant. She will be involved in retail real estate projects. Sadal has more than eleven years of experience in the shop-ping centre and retail chains industries. Prior to joining Cushman & Wakefield, she worked at Tesco Polska as a regional site research manager.

Thank you to all partners, patrons, speakers and participants who took part in the conference.

Participants included senior figures from the following companies:

Conference: Spotlight Hotel Investment Poland2 June 2014, Golden Tulip Warsaw

Aareal Bank Accor Ibis Centrum Algonquin Alior Bank Bank Pekao SA Biznes Hotel BZ WBK Carlson Rezidor Hotel Group Christie+Co CMS DeSilva Dako Services Diversey DTZ Erste

Group Bank Europejskie Centrum Inwestycyjne (ECI) Five Stars Galt Cushman & Wakefield Hilton HG Consultants Hochtief Development Horwath HTL Hospitality Inside Host Hotels Hotel Asset

Management – HG Consultants Hotel Gateway Hotelarz Hotel Solutions Partnership Hotele Syrena Invesco Real Estate Hotels Institute of Tourism IBB Polska Interhospitality LHI Marriott Metro

Properties Miller Canfield Ministry of Sport and Tourism Louvre Hotels MRP Hotels Micros-Fidelio Polska mLeasing Motel One Nowa Warszawa Orbis PCCC PKO BP Poland Convention Bureau Polish Properties Polish Hotel Company Polmaster Contract Puls Biznesu Puro Hotels Satoria Schoenherr Stadion Narodowy Starwood Hotels & Resorts Worldwide Steigenberger Hotels Worldwide STR Global Świat Hoteli Tesco Polska TriGranit Urząd Miasta Warszawy Vision Hotel Management Warimpex Worldhotels

www.poland-today.pl

Content Partners Partners Media PatronsFounder Patrons

www.fivestars.pl

weekly newsletter # 017/ 16th June 2014 / page 10

FACTS & FIGURES

LaLaLaLargest industrialrgest industrialrgest industrialrgest industrial projects delivered in 2013projects delivered in 2013projects delivered in 2013projects delivered in 2013

Location Project Developer Area

(sqm)

Wrocław Panattoni BTS Lear Panattoni 32,300

Silesia SEGRO Business Park Gli-

wice Building B SEGRO 31,700

Warsaw Tulipan Park Warszawa

Bulding B SEGRO 24,000

Silesia SEGRO Industrial Park

Tychy B SEGRO 18,300

Wrocław Prologs Park Wrocław V Prologis 18,282

Source: Colliers International

Largest office projects delivered in 2013Largest office projects delivered in 2013Largest office projects delivered in 2013Largest office projects delivered in 2013


(sqm)

Warsaw Konstruktorska

Business Center HB Reavis 48,300

Warsaw Miasteczko Orange Bouygues Immobilier 43,700

Warsaw Plac Unii BBI Development

/Liebrecht & wooD 41,300

Warsaw Marynarska 12 Ghelamco 40,000

Wrocław Sky Tower LC Corp 28,100


LaLaLaLargest retailrgest retailrgest retailrgest retail projects delivered in 2013projects delivered in 2013projects delivered in 2013projects delivered in 2013


(sqm)

Gliwice Europa Centralna Helical Poland 67,000

Kraków Galeria Bronowice Immochan 60,000

Poznań Poznań City Center TriGranit 58,000

Gdynia

Centrum Riviera

(Wzgórze

– extension)

Mayland Real Estate 70,500

Katowice Galeria Katowice

Meyer Bergman

European Retail

Partners/ Neinver

42,000


Selected Selected Selected Selected large investment transactions large investment transactions large investment transactions large investment transactions in 2013in 2013in 2013in 2013

Sector

Project

Value

(EUR mil-

lion)

Seller

Buyer

Retail Silesia City

Center

412 Immofinanz Allianz, ECE

Retail Galeria

Kazimierz 180

Globe Trade

Center,

Aventus

Invesco RE

Retail Galeria Domini-

kańska 151.7 ECE

Atrium

European Real

Estate

Office New City

127 ECI

Hines Global

REIT

Office Mokotów Nova

121 Ghelamco

Tristan Capital

Partners

Office Senator

120 Ghelamco

Union

Investment

In-

dustrial

H&M ware-

house

64 Invesco RE W.P. Carey

Indus-

trial Żerań Park II 43.2

Area Property

Parners,

Apollo Rida

Poland

SEGRO


LLLLargest office lease dealsargest office lease dealsargest office lease dealsargest office lease deals in 2013in 2013in 2013in 2013

Location Tenant Area(sqm) Project

Warsaw Polkomtel 22,680 Konstruktorska 4

Warsaw Getin Holding 18,850 Wola Center

Warsaw Urząd Rejestracji Leków 13,000 Adgar Park West

Warsaw Bank Zachodni

WBK 11,800 Atrium 1

Wrocław Getin Holding 11,700 Sky Tower


Retail rents (EUR/sqm/month), Q3 2013Retail rents (EUR/sqm/month), Q3 2013Retail rents (EUR/sqm/month), Q3 2013Retail rents (EUR/sqm/month), Q3 2013

20

30

40

50

60

70

80

90

ŁódźWrocław

Tri-citySzczecin

PoznańKraków

Warsaw (out of town)Silesia

Warsaw (city centre)

Source: Cushman & Wakefield

Office rents (EUR/sqm/month), Q3 2013Office rents (EUR/sqm/month), Q3 2013Office rents (EUR/sqm/month), Q3 2013Office rents (EUR/sqm/month), Q3 2013

Source: Cushman & Wakefield

10 15 20

25

Gdańsk

Szczecin

Katowice

Poznań

Kraków

Wrocław

Warsaw (non-central)

Warsaw (CBD)

Largest industrial lease deals in 2013Largest industrial lease deals in 2013Largest industrial lease deals in 2013Largest industrial lease deals in 2013

Location Tenant Area(sqm) Project

Wrocław Amazon 123,500 Goodman Wrocław South

Logistic Center

Poznań Amazon 100,653 Panattoni Poznań

Wrocław Amazon 100,653 Panattoni Wrocław

Poznań supermarket

chain 82,385 -

Central Po-

land Castorama 49,961 Panattoni Park Stryków


Poland TransformedHow unleashing business helped write Europe’s biggest success story

Conference & Cocktail Party | 28 May 2014 | Endorfina Foksal | ul. Foksal 2, WarsawUnder the Patronage of the President of the Republic of Poland, Bronisław Komorowski

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HONORARY PATRONAGE

S t r at f orGlobal Intelligence


POLAND TRANSFORMED

No pain, no gainNo pain, no gainNo pain, no gainNo pain, no gain

Poland made the tough decisions – but the right ones – and that's why its transformation has been success-ful

There is a line of thinking which says countries that want to implement tough economic reforms need tough leaders: efficient decision makers who can hold on to power as the population reels from the initial dif-ficulties they bring. Democracy is too messy, the rea-soning goes, to be an effective system when such diffi-cult decisions are being made at the highest levels. People will reject the pain, and change their leaders, never allowing for the reforms to be fully implement-ed. If harsh economic reforms must be made, it is bet-ter that a strong leader – an authoritarian – is the one who sets them in motion. Political reform can come af-ter economic reform.

Such thinking has become increasingly popular as the world watches China, which has continued to trans-form from a centrally planned economy to one more based on a free market. The theory goes that only the country’s authoritarian leaders – guaranteed to remain in power – could implement such changes, which have undoubtedly had a negative effect on swathes of Chi-nese society.

But Poland’s case belies that view. At the Poland Transformed conference held by Poland Today in Warsaw at the end of May, former Prime Minister Jan Krzysztof Bielecki pointed out that in Poland 25 years ago, the political reforms and economic reforms went hand in hand. Instead of making the economic reforms

harder to implement, the political reforms actually al-lowed for their more effective implementation.

Jan Krzysztof Bielecki, former Prime Minister and top economic advisor to current Prime Minister Donald Tusk. Photo: Poland Today

"The political reforms that were implemented were the strongest support for the economic reforms," said Bielecki, who is currently the top economic advisor to Prime Minister Donald Tusk. "In the early days, we had more prime ministers than a football team has players," he quipped, adding that because leadership changed so frequently, it was difficult for any vested interest to establish itself as a dominant force. This helped to prevent the consolidation of power in the hands of the few, as was the case in some of Poland’s neighbours after the fall of the Soviet Union. "Unfor-tunately there are plenty examples: oligarchs, corrupt politicians, who managed to benefit themselves, but effectively stopped the process of building up a com-petitive economy," he said. Painful process Nevertheless, Poland's ability to keep vested interests from holding back competitiveness didn’t mean change was easy. The economic reforms that were im-plemented became known as 'shock therapy' for their

harsh initial effects. Almost overnight, 1.1 million Poles were out of work, unemployment hit 20%. Inflation reached 250%. The reforms were highly unpopular. But Poland stuck to its path, and by 1995 its gross do-mestic product outgrowing those of all of its neigh-bours, at a brisk 7% pace no less. "Transformation was an extremely painful process," said professor Witold Orłowski, chief economist at PwC in Poland and the director of the Warsaw Uni-versity of Technology's business school. "If you ask me what errors Poland made, I would say hundreds." However, he said, "if you are talking about the general route Poland took ... we would have chosen the same path." That path included immediately allowing just about any type of economic activity. All at once, an explosion of entrepreneurship gripped Poland, with people sell-ing goods on the pavements and out of the boots of cars. As many as 600,000 business sprang up within two years of the shock therapy reforms. "The driving force in Poland's economy has been its people – not just the people, but their activity," said Orłowski. "If you ask me what could be seen as the biggest factor, or one of the biggest ones, it was the en-trepreneurship." Orłowski said that over the past 25 years Poland had taken "full advantage" of its human capital, pointing out that average GDP per capita had risen from about 30% of the European average to about 62%. The foreign factor The shock therapy reforms immediately opened up Poland's economy to the world, which set domestic firms scrambling to compete with more experienced companies from Western Europe. Poland incurred a hefty trade deficit. But opening up to new markets al-lowed the country to increase exports by a factor of 25 – from about $10bn in 1990 to a quarter of a trillion


dollars today. "If you run the right policies your econ-omy will adjust and you can benefit from that," said Orłowski. Money from around the globe flooded into Poland – but primarily after EU accession. In 1990, Poland had almost no foreign direct investment, Orłowski said. It had only reached almost $50bn in 2003 – but by 2012 it had rocketed to $250bn. Poland’s pain had paid off in the form of attractiveness for investment. "Broadly speaking, Poland was following a reasonable economic policy – both structural and macroeconomic," said Orłowski.

'Transformation was an extremely painful process' It paid off in other ways as well. Between 1990 and 2013, GDP rose at an average of 4.1% per year. Exports grew at an average rate of 9.8%. In terms of scale, Po-land's economy has risen from 35th largest to 22nd. During the global economic crisis that began in 2008, Poland never once saw a quarter of negative growth and was the only member of the European Union not to go into recession. There are still plenty of challenges for Poland to over-come however. Orłowski pointed out that it is only a "moderate innovator" – ranked 25th in the EU. It is in the middle of the value chain, with 76% of its exports going to the EU. Business environment, public services and infrastructure still all need an upgrade, he said. But in the end, the balance of transformation is very positive. “Any change has winners and losers in relative terms. I would say the number of winners is much bigger than the number of losers.”

by Andrew Kureth

POLAND TRANSFORMED

MoreMoreMoreMore trust, less red trust, less red trust, less red trust, less red tapetapetapetape

As it looks to the future, Poland will have to overcome cultural and ad-ministrative barriers to progress

Following 25 years of economic and political trans-formation, Poland must now overcome new cultural and political challenges on its way to becoming a truly prosperous European country, according to some of Poland's most prominent business and economic lead-ers in a discussion panel at Poland Today’s Poland Transformed conference at the end of May. "The main challenge for the Poles is being able to cooperate and trust each other," said Jan Krzysztof Bielecki, a former prime minister and current head of Prime Minister Donald Tusk’s Economic Council. "We love to blame others without recognizing our own mistakes. There is a fantastic excuse culture in Poland, whereas the trust culture is very low. This explains why there are so many business organizations in Poland – they simply don’t trust each other," Bielecki said.

Moderator Edward Lucas, senior editor at The Econ-omist, asked Henryka Bochniarz, head of the Polish Confederation Lewiatan employers association, to share her thoughts on the past 25 years. She focused on the poor quality of administration, which she said could become a significant barrier for future growth. "Back in 1990 it took me 20 minutes to register my business because the bureaucrats had no idea what to do with us. Now all the procedures are so much more troublesome, making life for entrepreneurs quite hard," she said, adding that many officials are simply afraid to be seen as overtly business friendly. "We need

a transfer of people from business to administration and better education for public officials, a much more ‘project management’ way of thinking."

From the right: Senior Editor at The Economist Ed-ward Lucas, CEO of the Warsaw Stock Exchange Adam Maciejewski, World Bank Country Manager for Poland and the Baltics Xavier Devictor, V-ce Chair-man of PwC Jacek Socha, President of Confederation Lewiatan Henryka Bochniarz and former Prime Minis-ter Jan Krzysztof Bielecki. Photo: Poland Today

Lucas pointed to the numerous failed attempts by the Polish government to make the administration more efficient, asking Bielecki about the current state of af-fairs. "The government is a friend of entrepreneurs – otherwise they wouldn't have benefited as they did over the past 25 years. The question is to what extent the problem lies in bad regulation and to what extent it is a cultural challenge," he answered. Bielecki admit-ted that despite a concerted effort to address the prob-lems listed by the World Bank in its annual Doing Business report, a lot remains to be done. This is espe-cially true in sectors such as construction, where the deeper you dig into the details, said Bielecki, the clear-er it becomes that the entire legislative framework needs to be completely overhauled.


However, Poland has recently made some huge strides when it comes to the ease of doing business, said Xavi-er Devictor, country manager for Poland and the Baltic states at the World Bank. "Poland has been a true global champion of the Doing Business ranking in the past couple of years. We have seen a deep and genuine commitment on the part of the government to address problems in a systematic and pragmatic way. I wish I saw the same amount of eagerness, curiosity and pragmatism on the part of public administration in other countries where we operate," Devictor said. "Po-land’s growth over the past quarter of a century has been driven by increasing productivity backed by rap-id absorption of foreign technology, with very little capital. Importantly, the growth has been shared by all with inequality remaining at an average EU level. The next challenge will be to stimulate innovation in order to maintain the growth."

"Perhaps the crucial part was that we un-derstood that we ba-sically have to count on ourselves. We knew that no-one was going to help us," said Adam Maciejewski, CEO of the Warsaw Stock Exchange. Photo: Poland Today

Fortunate mix According to Adam Maciejewski, CEO of the Warsaw Stock Exchange, Poland benefited from a fortunate mixture of several factors, including large FDI vol-umes, strong domestic demand, lower labour costs, fa-vourable demographics and dynamic capital markets.

"Perhaps the crucial part was that we understood that we basically have to count on ourselves. We knew that no-one was going to help us," he said. As for future growth, “We need to focus on three key issues: pro-moting innovation and making sure the money we in-vest in it is spent efficiently, securing talent supply, and helping Polish champions expand globally through economic diplomacy," he said.

'We need a transfer of people from business to administration'

Jacek Socha, a partner in the advisory department and deputy chairman of PwC in Poland, a former treasury minister and one of the founding fathers of Poland's capital market, emphasized the importance of the Warsaw Stock Exchange for the transformation pro-cess. "Although the WSE was created in merely six months, we modelled it after developed markets. We got the trading system from the French Finance Minis-try and decided not to trade any physical papers from the beginning. We established only a single central ex-change and became the only country in the region to set up a modern securities and exchange commission that properly regulated the market from the start and introduced no barriers for foreign investors. This cre-ated favourable conditions for the healthy develop-ment of the Polish stock market, which, in turn, facili-tated privatization."

The euro question Lucas probed the panelists on their views about whether and when Poland should join the euro zone. While the businesspeople were clearly in favour of prompt accession, Bielecki advised more caution. But PwC's Socha made a strong case: "Since more than 70% of Poland’s foreign trade is with the European

Union [of which approximately 55% with the euro zone], the faster we adopt the common currency, the better for Polish entrepreneurs. It's hard to make fi-nancial models when you have to predict the exchange rate. So switching to the euro will limit the risk for the Polish economy," he said. "During the financial crisis the fact that we did not have the euro helped Poland," said Bochniarz, "but in the long run I would like us to join the euro zone in order to be able to shape it from the inside." "We’ll join the euro zone a week after the UK," Bielecki replied jokingly, referring to Great Britain's special status in the European Union. "The euro is a political and economic project. In political terms, the euro is a big work in progress. There is talk of rebuild-ing, new leadership and new financial monitoring. The big question is the political solution, and we don't see one yet. Economically it is a huge challenge, because it means that some automatic stabilizers are turned off. And our recent experiences with the energy union idea, put forward by Prime Minister Tusk, have prov-en that economic cooperation between EU member states still leaves a lot to be desired."

by Lech Kaczanowski

POLAND TRANSFORMED

People pPeople pPeople pPeople powerowerowerower

The Polish people are the strength driving the country's economic suc-cess, say business leaders Poland's main strength over the past 25 years of eco-nomic transformation have been its people, and now the country's future growth rests largely on how it manages this crucial resource – that was the key mes-sage emerging from business-focused discussion pan-


els at the Poland Transformed conference, held at the end of May in Warsaw by Poland Today. "We arrived in Poland in 1999 with a single factory and now we have six production sites and more than 3,500 staff here. Can there be a better testament to the coun-try’s attractiveness?" said Fabio Pomella, CEO of Indesit Company Poland, an Italian home-appliance maker. "What brought us here are Poland’s young and educated staff." "In the early years nobody knew what the future would bring. No one taught us market economics in school, so we had to figure things out on our own," said Joanna Nicińska, senior leasing manager at Echo Investment, a Polish-owned prop-erty developer. "Perhaps that’s the source of the leg-endary Polish creativity? Without preconceptions one naturally ends up thinking outside the box."

From the left: Judith Gliniecki, CEE Equity Partners, Andrzej Dulka, CEO of Alcatel-Lucent Poland, Beata Stelmach, CEO of GE Poland & Baltics, Fabio Pommella, CEO Indesit Poland, Joanna Nicińska, Sen-ior Leasing Manager Echo Investment, Adam Purwin, CEO PKP Cargo, Lech Kaczanowski, Business Editor Poland Today (moderator). Photo: Poland Today

"We’ve been building a market economy for just 25 years – there was so much catching up to do. It's a

myth that Poland owes its success to low-cost produc-tion. In some sectors, for instance in banking, we leap-frogged from the dark ages straight into the future by carefully managing foreign investment. Now we have some of the world's most innovative banks,” said Beata Stelmach, CEO of GE Poland & Baltics. GE owns sev-eral production sites, a banking business, and a huge R&D centre in Poland, employing a total of some 10,000 people in the country. "In the early years of transformation the challenge was to convince foreign investors to come to Poland. 1992 was the break-through moment when foreign investment started pouring in and GDP shot up." "The progress we made over the past 25 years boggles the mind," added Andrzej Dulka, CEO of Alcatel-Lucent Poland. "People tend to forget that back in the early 1990s you had to sign up days in advance to make an international phone call and could never be sure it would actually take place. Now you can't live without broadband internet. However, we are still lagging be-hind most of Europe in terms of broadband penetra-tion, so there's plenty of work to do.' Although equally positive in the long run, the experi-ence of transformation was clearly somewhat different for former state-owned enterprises, which had to un-dergo deep restructuring in order to stand the test of free competition. "Our company is a perfect example of the impact the transformation had on the market as a whole, as well as on individual companies. Once part of a state monopoly, we are now Europe's first stock exchange-listed rail freight company, operating in a fully liberalized market," said Adam Purwin, CEO of PKP Cargo, Europe's number two rail freight opera-tor. Challenges for the future The focus on people as Poland’s key asset was also the main theme in the panel that brought together young business leaders to talk about the 21st-century chal-

lenges facing Polish firms. Katarzyna Zawodna, presi-dent of property development firm Skanska Proper-ty Poland, said that Polish companies had to change from the authoritative, hierarchical nature of the pre-vious generation to a more collaborative approach. "In order to understand and meet customers' needs, com-panies have to be able to adapt quickly and work as a team," she said, adding, "Everyone in the company must feel accountability, and they must have the pow-er to do what needs to be done."

"Anyone with capital can buy the newest machinery so it’s really the employees that are our competitive edge, our most im-portant asset," said Katarzyna Zawodna, CEO of Skanska Prop-erty Poland. Photo: Poland Today

Rossen Hadjiev, a board member at Integer.pl Group, agreed. "It is not about managing a business, it's all about talent management; how you are going to attract people and make sure they are part of a team." Integer.pl is currently rolling out a global network of automated parcel lockers. "When we talk to our clients across the world they have a hard time believing they are dealing with a Polish firm and not someone straight from New York or London," said Hadjiev. Jul-ian Kozankiewicz, COO at COMP Innovation Cen-ter, added that modern companies need to "merge necessary functions with the flexibility that is required in today’s market."


Since EU accession, some 2 million people have left Poland to seek work in Western Europe, but the panel-ists were not particularly concerned about the impact of a brain drain on the country's future. "I don’t neces-sarily think it’s a bad thing they left. The whole point is to create conditions that would make them want to come back," said Kozankiewicz. "It’s essential in busi-ness to be able to see what the world looks like through other people's eyes and therefore the experi-ence of migration could be extremely valuable," added Jan Kasprzycki-Rosikoń, head of MillionYou, a Polish crowdsourcing-based creative agency. "Anyone with capital can buy the newest machinery so it's really the employees that are our competitive edge, our most important asset,” said Skanska’s Zawodna. "The way to keep the best people is to make them feel important as individuals but that requires wise leaders who are well versed in soft management skills, capable of providing coaching and feedback. Nourishing such skills is a challenge for the educational system." Generational shift, global push Besides learning to harness the country's human po-tential, according to the guests, the future of Polish business depends on how well it manages the transi-tion from the original founders to the next generation of owners. "Polish companies are still very new and small and need to scramble up the technology chain," argued Hadjiev. "We are entering an era of consolida-tion when many of those smaller businesses that are now focused on the domestic market begin to merge and start looking for opportunities abroad. This is a natural generational shift that will generate many op-portunities for private equity." COMP’s Kozankiewicz shared his opinion that many businesses established in the 1990s that are still being managed by their creators are facing a big challenge. "I believe cashing out is not always the best option as there is strength in continui-ty, but the question is how one passes on those large organizations to the next generation."

Interestingly, the business community is not looking to the government for help, which marks a notable change from a decade or two ago, when entrepreneurs were vocal about their expectations towards politi-cians. "Sure they can simplify rules on grants, make them more transparent, but all we really want from them is not to disturb us," said Kozankiewicz. "I would like to see the public administration better utilize its potential. There are people there with ideas but the system is not yet ready to give them a chance," added Kasprzycki-Rosikoń. "As for innovation money and startups – there is plenty of funding available from the EU, government programs and business angels. It's now up to the entrepreneurs to show enough diligence to be able to take advantage of them. Business is more than a novel idea – you need a strategy to make it work," he added.

From the left: Julian Kozankiewicz, Managing Direc-tor at COMP Innovation Center, Rossen Hadjiev. Member of the Management Board at Integer.pl Group, Katarzyna Zawodna, CEO Skanska Property Poland, Mirella Panek-Owsiańska, President and Di-rector General of the Responsible Business Forum (moderator), Jan Kasprzycki-Rosikoń, Head of MillionYou. Photo: Poland Today

When asked if we would ever see the emergence of a globally recognized flagship Polish business, GE’s Stelmach replied: "A Polish Nokia? We already have such companies. Former state giants KGHM, PKN Orlen or Azoty are already present in international markets, but there are also some inspiring examples among smaller private firms, for instance Inglot, whose makeup products are present on dozens of global markets, bus maker Solaris, train producer PESA – both winning prestigious foreign contracts, and finally companies such as Asseco, which built their position on innovation and made global expan-sion their strategic goal." Hadijev also pointed to Inglot. "In a marketplace that’s extremely competitive a small company from Poland found a new way to sell cosmetics and now they have shops in tens of coun-tries across the globe. They came at the forefront of R&D development."

According to Echo Investment's Joanna Nicińska, a powerful player could emerge from the business pro-cess outsourcing sector, now that Poland has become a hub for European offshoring. “The sector already em-ploys more than 130,000 people and drives job crea-tion in many Polish cities. What started little more than a decade ago with a handful of bookkeeping and contact centres is now a large part of the economy, of-fering a wide range of complex, knowledge-based ser-vices," she said.

"We Poles like to complain but it's not because we're pessimistic; it's because we set very ambitious goals for ourselves," concluded Stelmach. "The Poles are stubborn and creative, used to finding solutions where others don't see any. This is our strength and the chal-lenge is not to lose it," said Kasprzycki-Rosikoń. "Keep up the energy and don’t become complacent," added Hadjiev.

by Lech Kaczanowski


POLAND TRANSFORMED

Master of its own Master of its own Master of its own Master of its own destinydestinydestinydestiny

Poland is well-positioned to become a more active regional leader Poland's political significance in Europe will increase over the coming years, with the country well-placed to become a strong regional leader, said participants in the Poland Transformed conference held by Poland Today in Warsaw at the end of May. George Friedman, the founder and chairman of the American geopolitical analysis company Stratfor, and Edward Lucas, a sen-ior editor at weekly news magazine The Economist, argued that Poland will have to take a more active role in safeguarding peace on the continent. Crucially, the country is finally the master of its own destiny, said Lucas. Poland emerging Geopolitics has often been an existential issue for Po-land – squeezed between the various incarnations of German and Russian statehoods throughout its histo-ry, the country has many times found itself invaded by aggressive neighbours. The vulnerable position of Po-land has often made the country unable to carry out any successful defence policy and, at times, resulted in the loss of independence. The predicament is often re-ferred to as Poland’s geopolitical "curse". Today, Poland may still be voicing fears about an un-predictable, aggressive Russia and an economically dominant Germany, but its geopolitical position is ar-guably much better than it has been in centuries. Friedman stressed that both Russia and Germany have their vulnerabilities as they both largely depend on

other countries for their economic performance. Po-land could therefore benefit. "Russia is much weaker than it looks," Friedman said. He pointed to the fact that the country is dependent on energy exports and has actually little control of en-ergy prices. Meanwhile, other sources of oil and gas are becoming increasingly available.

Stratfor Founder and Chairman George Friedman (left) and The Economist Senior Editor Edward Lucas (right) discussed Poland’s place in the global context with Poland Today Editor Andrew Kureth (centre). Photo: Poland Today

Strange as it may sound given Europe’s current poli-tics, Germany is also a highly vulnerable country, Friedman said, because its economy is largely based on exports,. "An exporting country is a hostage to its cus-tomers," he added. According to Friedman, Poland, which has a more balanced economy that Russia and Germany, is likely to grow in significance and emerge as a regional leader in the coming years. The country will be able to truly emerge on the European scene when the two powers neighbouring it weaken. "We are going to see a very different line-up in Europe in 25 years," Friedman said.

Lucas agreed that in the long-term Russia will weaken, even if its current policy, which allows for the use of military force even in the face of economic pain, is a major problem for Poland. But he stressed that Poland currently has very good relations with Germany. There was a sea change in German opinion about Po-land after Foreign Minister Radosław Sikorski called on Berlin to lead in Europe almost three years ago, Lu-cas noted, and Germany is a key trading partner. A de-teriorating German position in Europe therefore may not help Poland's rise, he said. Leadership needed Security remains an important issue for Poland and here the country has a role to play. The United States and NATO in general will continue to be guarantors of peace in Europe but Poland also has to shoulder more responsibility for defending the eastern part of the continent, they said. Poland will need to keep the Americans and the British involved in European secu-rity, but it will also have to do part of the defence work itself. Poland, as a prominent regional (but not global) actor, should take a greater leadership role within the Visegrad Group (comprised of the Czech Republic, Hungary, Poland and Slovakia), said Friedman. The al-liance has been a disappointment so far, he said. The United States will support Poland, but Warsaw will have to take part in the building of a more robust alliance structure in Europe, Lucas and Friedman said. According to Friedman, Warsaw could head a defence alliance that will predominantly be based on Poland and Romania, potentially with the addition of Turkey. He added that the United States expects Poland to make more defence commitments. (During US Presi-dent Barack Obama’s visit to Poland in June, the coun-try committed to raising defence spending from 1.95% of GDP to a full 2%.) But Friedman added that there is a need for the move away from the 'symbolism' of alli-ance to the nuts and bolts – Poland simply needs to purchase more weaponry. Warsaw’s defence readiness


will be key since the United States is unlikely to pro-vide the country with as many troops it would like to see on its soil. Foreign Minister Radosław Sikorski has recently called for the deployment of some 10,000 NATO troops in Poland. Lucas pointed to the leadership role that Poland is al-ready playing with regard to the crisis in Ukraine. Po-land is the EU country which best understands the sit-uation in Ukraine; it is the "place to go" for expertise, he said. However, he pointed out that Poland would also be expected to lead in the early stages of any po-tential conflict in the Baltic states. The question is whether Poland would be ready to send its troops, Lu-cas said. Energy woes Energy security remains a major problem for Poland, with the country being largely dependent on Russian oil and gas, and here the participants in the conference admitted that a good solution will be difficult to find in the short-term. "There is no single silver bullet," Lucas said, referring to the big hopes that many people are currently pinning on shale gas. Instead, Poland must take an array of small measures if it is to gain a greater measure of energy security, he added.

by Adam Zdrodowski

POLAND TRANSFORMED

Through the lens of Through the lens of Through the lens of Through the lens of historyhistoryhistoryhistory

How is Poland perceived abroad, and how have perceptions changed? Poland has difficulty escaping the shadow of its past. History looms large in Polish culture, but outside of

Poland too, the country is often viewed through the lens of past events. However, when foreigners visit the country, their preconceptions are smashed. Seeing the Polish transformation in person, it seems, is believing. For that reason, Poland Today asked some of the 50 in-ternational journalists that joined the Poland Trans-formed conference to share their thoughts in a panel discussion on how Poland is perceived in their home countries, and how perceptions about the country have evolved. 'Big cemetery' For decades, Israelis have viewed Poland as a "big Jewish cemetery" said Lily Galili, a reporter from Tel Aviv-based i24News. This is a result of the "bitter his-tory" Israel and Poland share, she said, but added that Poland’s image is changing. More Israelis are coming for tourism, and Israeli media are more careful about how they portray Poland, she said. Historically inaccu-rate terms that Poles find highly offensive have begun to filter out of the vocabulary Israeli media uses, she added.

From the left: Lily Galili, i24News, Israel, Rick Lyman, CEE Bureau Chief, New York Times, USA, Vladimir Vodo, Kommersant, Russia, Marie Charrel, Economic Correspondent, Le Monde, France, Derek Scally, The Irish Times, Ireland. Photo: Poland Today

But Israelis are certainly not the only ones to use phrasing that Poles find hurtful. US President Barack Obama himself mistakenly referred to "Polish death camps" two years ago. The New York Times' Rick Lyman noted that "the very first thing" his editors told him when he began covering Poland was to avoid mak-ing that same mistake, as well as to never say that Po-land is in Eastern Europe (Poles prefer Central Eu-rope). Vladimir Vodo, from Russia's Kommersant newspaper, also spoke at length about history – a sensitive subject for Poles and Russians. He pointed out that Warsaw's most distinctive edifice, the Palace of Culture and Sci-ence, which was originally built as a "gift" from Joseph Stalin to Poland, is seen by many Poles as a "symbol of the communist enslavement and a tombstone on the grave of all Polish dreams about liberty and independ-ence; a most clear indication that Russia will never abandon its imperial ambitions." Why we are together Marie Charrel from French daily newspaper Le Monde also hearkened back to the past, speaking of Poland's "historical connection" with France (Fryderyk Chopin and Marie Skłodowska-Curie both ended up there). However, she offered a more con-temporary view of Poland, pointing to the two main contexts in which the French view the country. In France, she said, Poland is seen either as a nation of "Polish plumbers" or as an EU success story – some-thing that she said there should be more focus on. Suc-cesses like Poland's are the reason "why we are all here, together" in the European Union, she added. Derek Scally of The Irish Times had the most positive things to say about Poland. He told the story of his first-ever visit to Poland, in 2001, during which he found himself in a pub being sung to by Leszek Miller – who that very evening had been elected prime minis-ter. Scally said that since his first eventful trip to Po-


land, the country has steadily become "more and more exciting ... more and more beautiful as a place to visit." Scally also noted that the image of Poland in Europe is due to change considering the UEFA European foot-ball championships which took place in 2012. Just as Germany became "a place to go" two to three years fol-lowing the 2006 FIFA World Cup, Scally said he was "confident" that something similar would happen in Poland. As a Berlin-based journalist, Scally also noted that Germany's impression of Poland is due to change for the better because of Chancellor Angela Merkel's continuing praise for the country. Just taking off What happens when the focus is turned on contempo-rary Poland? In short, it becomes clear that things have changed. Lily Galili said that she was very posi-tively surprised by "the good things which are happen-ing to Poland" since its EU accession and added that it was "all very surprising and new."

'You are coming to Poland when it is just about to take off' Rick Lyman, head of The New York Times' newly re-established Warsaw bureau, described the change in view of Poland from inside the newspaper. "Before, when you became the Warsaw correspondent, people would always say, 'That’s OK, don’t worry, it will all end soon,'" he said. "But when I got the job, people were coming up to me saying, 'You’re so lucky! The city is so alive. You are coming to Poland when it is just about to take off.'"

by Piotr Narel

POLAND TRANSFORMED

Telling Poland's story Telling Poland's story Telling Poland's story Telling Poland's story to the worldto the worldto the worldto the world

Poland Today hosted a tour of 50 journalists, ensuring that the story told at the Poland Transformed con-ference was heard by an internation-al audience Fifty journalists from around the world took part in the Poland Transformed conference held by Poland Today at the end of May. Their home countries ranged from Albania to Argentina, Iceland to Japan. The con-ference aimed to give them the information they need-ed to tell the story of Poland’s successful transfor-mation to their home audiences – and that they did. Some of the resulting articles in foreign press include: “25 years of the Polish miracle” by Paul R. Suanzes of Spain’s El Mundo, “A tale of two Polands: the cowed country that has turned into a European leader”, by Derek Scally of the Irish Times, “The (New) Beginning of a Beautiful Friendship” by Martin Ehl, chief inter-national editor at the Czech Republic’s Hospodářské Noviny newspaper and “Why Poland is a new success story” by Albina Kenda in Slovenia’s Finance.si. Also check out what they were saying in Greece’s To Vima, Finland’s Suomen Kuvalehti, the Netherlands’ Nederlands Dagblad and Turkey’s Dumya. Along with attendance at the conference, the journal-ists took part in a special informational session at Warsaw Stock Exchange to hear from officials there about the Poland's transformation and the stock mar-ket's role in it. The conference's partners received ex-clusive access to the journalists – special interview

sessions were held where they were able to tell their story. The journalists also received detailed infor-mation packages about each of the conference part-ners.

The countries represented in the Poland Today jour-nalist tour were: Albania, Algeria, Argentina, Austria, Belgium, Bulgaria, Brazil, China, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germa-ny, Greece, Hungary, Iceland, Ireland, Israel, Italy, Ja-pan, Latvia, Lithuania, Mexico, Netherlands, Norway, Portugal, Romania, Russia, South Africa, Slovenia, Spain, Sweden, Turkey, United Kingdom, United States. Photo: Poland Today

"Since I consider myself to be advanced Polonophile, the conference for me was excellent opportunity to enhance my knowledge and contact base," said Hospodářské Noviny’s Martin Ehl. "It was very interesting to visit your country for the first time and now I can definitely say that I fell in love with Poland," said Maria Ivanina, a reporter for the Russian ITAR-TASS news agency. "The conference was highly informative and stimulat-ing. ... A gateway to contacts with Polish managers and others in key positions, and also a great meeting of no less than fifty colleagues from all over the world. Thoroughly enjoying and useful," said Hilbrand Rozema, a journalist at Nederlands Dagblad in the Netherlands.

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