WBJ Observer January/February 2015

30 PAGES 25 PAGES

JANUARY/FEBRUARY 2015

Number 01/02 (12/13)

OF REAL ESTATE N EWS

REAL EST A NEWS TE

PLN 24.50 (VAT 8% included) ISSN 2353-3714 INDEX-RUCH-332-127

FOR DAILY NEWS VISIT US AT

wbj.pl

BLACK GOLD IS CHEAP OIL GOOD FOR THE ECONOMY? > 26

ALTERNATIVE INVESTMENTS

2014

IN THE REAL ESTATE SECTOR > 62

2/27/14 1

CMY

• C o m m e n t a r y • R a n k i n g • C i t y s c a p e • N ew s • L i fe st y le

ALSO IN THIS ISSUE: C

JANUARY/FEBRUARY 2015

Making a mark

THE CRAFT REVOLUTION FROM BIESZCZADY TO YOUR LOCAL TAP > 43 ean-13_9772353371403_02.pdf

GRUPA AZOTY CEO

2:06 PM

THE ALTERNATIVE WAY INVESTING IN ART AND ALCOHOL > 20

The way to excellence between you and your customers

warehousing • distribution • domestic transport • international transport • co-packing • co-manufacturing

www.fmlogistic.com Warsaw Business Journal 210x280_EN.indd 1

2015-02-03 10:22:53

lll IN THIS ISSUE Try these:

lll NEWS

4-12 In Review Latest news 13 Dateline 14 Economy

lll COMMENTARY 15 Technology Smart cities 16 Legal Consumer protection 18 Finance Swiss franc

20-24

lll FEATURES

26-28 Commodities Oil prices 34-35 Printing Eco-friendly solutions

ALTERNATIVE INVESTMENTS

lll INTERVIEW

36-38 Krzysztof Kwiatkowski

lll ENTREPRENEURS 43-45 Craft brewery Ursa Maior 76-77 Cityscape Toruń 78-79 Ranking MBA Programs

47-74

LOKALE IMMOBILIA

30-33

lll LIFESTYLE

PAWEŁ JARCZEWSKI INTERVIEW

80-82 Gadgets 84 Events KPMG Tax and Accounting Congress 86 Restaurants Thai Wok 87 Restaurants Off the beaten path 88 On a Final Note

WBJ OBSERVER • JANUARY/FEBRUARY 2015

Visit our brand new site - wbj.pl For latest news, features and commentaries.

Morten Lindholm Publisher mlindholm@valkea.com Jacek Ciesnowski Editor-in-Chief, WBJ Observer jciesnowski@wbj.pl Beata Socha Managing Editor, Lokale Immobilia bsocha@wbj.pl Matthew Czaja Copy Editor mczaja@wbj.pl Journalists Alicja Ciszewska aciszewska@wbj.pl Wojciech Rylukowski wrylukowski@wbj.pl Contributors Ewa Boniecka Alex Hayes Vedika Luthra Brendan Melck Jacek Pawlak Sergiusz Prokurat Alex Webber Tomasz Chwinda Art Director tchwinda@wbj.pl Marta Topolewska Graphic Designer

Download latest issue of WBJ Observer on iPad. Find us on App Store. SUBSCRIBE TO WBJ OBSERVER

Choose by checking the box o Print Edition: PLN 550 Print edition (in Poland only) includes three annuals: • Made in Poland (Polish Export Scene) • Investing in Poland (featuring TrendBook Poland) • Book of Lists (covering more than 60 business sectors) o E-zine edition: PLN 450

FOLLOW THE PLAYERS, THE INDUSTRIES, THE COMPANIES, THE PEOPLE WHO ARE MOVING POLAND FORWARD. Subscriber details Name .................................................................................... Company ............................................................................... Address .................................................................................

Monika Brysiak mbrysiak@valkea.com +48 22 257 75 00 ext. 119

Agata Słowińska PR & Marketing aslowinska@valkea.com Monika Brysiak Subscriptions, Book of Lists Project Manager mbrysiak@valkea.com Krzysztof Wiliński Print & Distribution dystrybucja@valkea.com Magda Gajewska Event Director, Valkea Events mgajewska@valkea.com Contact: phone: +48 22 257 75 00 fax: +48 22 257 75 99 e-mail: wbj@wbj.pl

Postal code ............................. City....................................... Country ................................................................................. Telephone/Fax ......................................................................

Enquiries

Sales Director Tomasz Pawlak tpawlak@wbj.pl Marketing & Sales Agnieszka Brejwo abrejwo@wbj.pl Aleksander Brzeziński abrzezinski@valkea.com Magdalena Klimiuk mklimiuk@valkea.com Katarzyna Pomierna kpomierna@valkea.com Grzegorz Tarnowski gtarnowski@valkea.com

e-mail.................................................................................... NIP (Poland)/EU VAT number (EU countries) ...............................................................................................

Please fax this form to: +48 22 257 7599 or mail it to our office: Subscriptions WBJ Observer • Valkea Media S.A. ul. Elbląska 15/17, 01-747 Warsaw, Poland

WBJ.pl WarsawBusinessJournal

@wbjpl

All rights reserved. This publication or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of the publisher. Published by ul. Elbląska 15/17 Valkea Media S.A. 01-747 Warszawa Tomasz Opiela, CEO NIP: 525-21-77-350 www.valkea.com To subscribe through RUCH SA: www.prenumerata.ruch.com.pl, prenumerata@ruch.com.pl, 801 800 803 COVER IMAGE: Paweł Stelmach

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

210x

WBJ OBSERVER • JANUARY/FEBRUARY 2015

210x280_Woda_ENG_150.indd 1

21.01.2015 17:18

lll INREVIEW

NEWS

News highlights from the past months

70th anniversary of liberating Auschwitz concentration camp “Poles are the guardians of this tragic memory,” said President Bronisław Komorowski in Oświęcim

at the ceremony commemorating the 70th anniversary of liberating the Auschwitz concentration camp in Poland. As many as 300 survivors and 49 leaders attended the events. “We are standing in a place where millions of people were murdered in a barbarian way. We are standing in a place

reminding us of the murderous Nazi ideology which shook the foundations of our world,” the president said. Several ex-prisoners made their speeches during the events. The Nazi-run Auschwitz concentration camp, where over 1 million people had been killed, was liberated on January 27, 1945 by the Soviet Red Army.

oland has climbed 8 places in the 2015 edition of the Index of Economic Freedom, an annual ranking created by The Heritage Foundation and The Wall Street Journal. Poland is ranked 42nd globally and 19th in Europe. In 2014, Poland held 50th place and 4

23rd place, respectively. “Over the past five years, Poland’s economic freedom score has advanced by 4.5 points, the largest improvement in the region. Gains in eight of the 10 economic freedoms include double-digit strides in financial freedom

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

and freedom from corruption. In the 2015 Index, Poland has recorded its highest economic freedom score ever,” the Heritage Foundation website informed. The country had the lowest scores in business freedom, which is a measure of the abil-

ity to start, operate, and close a business, and in government size/spending. Hong Kong tops this year’s edition, followed by Singapore, New Zealand and Australia. In Europe, Switzerland is placed first, followed by Estonia and Ireland.

Image: Shutterstock

Poland’s best ever Economic Freedom Index score P

NEWS

olish PM Ewa Kopacz reached an agreement with the miners protesting against the closure of unprofitable mines run by Europe’s biggest coal producer Kompania Węglowa. According to the deal, the mines won’t be shut, but instead either restructured, sold to potential investors, or transferred to the newly formed Nowa Kompania Węglowa. “We saved those who work in Kompania Węglowa from a terrible thing − bankruptcy and loss of employment,” Kopacz said in a joint statement with the leader of the local Solidarity labor union Dominik Kolorz.

The worst performing mines, which faced liquidation, lost PLN 1.9 billion over the past three years. Potential investors interested in acquiring these mines include construction materials producer Krzysztof Domarecki and state-controlled utilities. “The most important thing is the targeted capital merger with the energy sector,” Kolorz said. Protests in Silesia started in early January after the government announced its rescue plan for the ailing mining sector, which would shut down four of the worst-performing mines leaving some 5,000 miners without jobs.

PLN 321 billion

is how much Poland spent on EU-subsidized projects in the 2007-2013 financial framework

SLD names its presidential candidate T his year’s presidential candidate of the Democratic Left Alliance (SLD) is Magdalena Ogórek, a Doctor of Arts and TV commentator, the party announced on Friday. “I believe in our success, I want to be a candidate of all the left-wing political parties,” she stated. “We are sure that Magdalena Ogórek is a symbol of generational change and

consensus,” SLD leader Leszek Miller said. Ogórek tried to win a mandate in 2011, running from SLD lists. She used to work at the Chancellery of former President Aleksander Kwaśniewski and for Leszek Miller while he held the PM post. She is 35 and comes from Rybnik (Silesia).

Images: European Council, Slawomirnowak.pl

PM strikes deal with protesting miners

JAKUBAS TO SELL 40% OF NEWAG’S SHARES Newag’s main shareholder, Zbigniew Jakubas has been in talks regarding selling his stakes worth roughly $116 million. Alstom, Bombardier, Stadler and Skoda are considering the purchase. Siemens may be interested as well, Puls Biznesu daily reported. As much as 40 percent of Newag’s shares has been put up for sale since December 2014. “The offer was directed at selected strategic investors,” an anonymous source said, according to the daily. “If there is a concrete proposal to buy my holding, I will take it into consideration,” Jakubas said. The company’s revenue is expected to reach PLN 1 billion this year and the multi system locomotive manufactured by Newag will enter some markets abroad, according to Jakubas. Newag is a Polish company, specializing in the production, maintenance, and modernization of railway rolling stock. The company has been listed on the WSE since 2013.

Images: Shutterstock, sld.pl

Shorts

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Warsaw_Voice_BROTHER_210x280.indd 1

16.12.2014 16:12

NEWS

“I DID NOT MISS PLN 266 MLN PRESIDENT is how much PUTIN IN PKP Cargo will pay for its AUSCHWITZ. Advisor to the president of Poland Roman Kuźniar about Vladimir Putin's absence at the events commemorating the 70th anniversary of liberating the Auschwitz concentration camp.

redundancy program

Poland’s entrepreneurs are optimistic about the condition of the economy, according to Busometr ZPP, the economic sentiment indicator for small and medium-sized companies. The indicator amounted to 53.8 percent last December. Small (58.84 percent) and micro companies (54.5 percent) are

the most optimistic about economic prospects. Firms from southern Poland see the future the brightest (56.5 percent) and those from central Poland have the worst predictions (52 percent). As many as 42 percent of the respondents believe that the condition of the economy will not change, 34.5 percent

international franchising system fair

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

of them expect it to worsen and 24.4 percent think the opposite. There were 348 entrepreneurs participating in the survey conducted in December 2014. ZPP (Związek Przedsiębiorców i Pracodawców) is a Polish employers’ organization.

Image: prezydent.pl

Polish firms optimistic about future

NEWS

Polish oil to be transported to Ukraine

he pipeline Odessa-Brody may distribute oil in the reverse direction: from Poland to Ukraine, Rzeczpospolita daily reported. Under the initial plan, in the project conducted by state-controlled operator PERN Przyjaźń, oil was to be distributed from the Caspian Sea through Ukraine to Poland. The new idea is to transport the fuel from Gdańsk to Ukraine in order to support Kiev. No decision has been made yet, the company stated. The new plan will be on the table during the sitting of the bilateral economic commission in the first half of 2015. PERN Przyjaźń is one of the leading companies for oil transportation and storage in Poland. The company is based in Płock.

Sołowow invests in biotechnology Polish tycoon Michał Sołowow invested PLN 12 million in OncoArendi Therapeutics, a company specializing in developing innovative anti-inflammatory and anticancer drugs. The sum is to cover R&D work in the next 3 years. “In my opinion, OncoArendi has an exceptional team of outstanding researchers, which increases the chance of finding a solution which may save lives. The investment has a long-time horizon,” Sołowow told Polish daily Puls Biznesu. OncoArendi was set up in 2012 and has thus far secured PLN 4 million in private financing. Its founders and the management team retain over 70 percent ownership. Michał Sołowow is one of the richest Polish businessmen with an estimated wealth at over PLN 6 billion. He is a shareholder of Synthos, Cersanit, Echo Investment and Barlinek, among others.

Greater profit for T-Mobile and fierce competition in the sector

€21 billion IS THE RECORD HIGH VALUE OF POLAND’S FOOD EXPORTS IN 2014

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Images: Shutterstock, T-Mobile,

T-Mobile is expecting to record higher revenue and less service costs due to its GTS Poland acquisition, Rzeczpospolita daily informed. In the opinion of BESI expert Konrad Księżopolski, the other operators will try to canvass some of T-Mobile’s consumers by offering new price sheets. From now on, T-Mobile will be able to offer more converged services, he pointed out. The operator acquired GTS Poland in May 2014. T-Mobile International AG is a holding company for Deutsche Telekom AG’s various mobile communications subsidiaries outside Germany. It was founded in 1990. The operator’s revenue stood at PLN 6.65 billion in 2013 and was the leader of the telecommunications market in Poland.

N N EE W W SS

W B J O B S EW RB VE • SJEARNVUEARR • Y /N FE RM UA J RO B OB VE BR E YR 22 00 11 54

11 5

NEWS

Poland’s authorities against sending Polish troops to Ukraine

President Bronisław Komorowski and Prime Minister Ewa Kopacz are critical about the idea of sending Polish troops to Ukraine which was suggested by Solidarity leader and oppositionist, Zbigniew Bujak, the press reported. In Bujak’s opinion, “it would be fantastic if Polish soldiers fought in Donetsk.” Andrzej Duda, Law and Justice’s current presidential candidate replied, “this is a very serious decision that should be taken into consideration.” The president believes that Poland should not act autonomously on this matter and the only way to help Ukraine is to speak jointly with the EU and NATO. “This declaration is frightening,” PM Kopacz said.

Poland to lend Ukraine €100 mln

Janusz Piechociński, the Deputy Prime Minister and the Minister of the Economy presented the government’s recommendations for lenders regarding the situation of Polish franc-borrowers caused by the CHF appreciation. The ministry is recommending establishing three-year ”loan vacations” (repayment suspension) and setting limits on monthly installments, Piechociński informed. What is more, the borrowers should have an

opportunity to convert francdenominated loans to the złoty. However, the conversion should be done at the current exchange rate rather than at the rate as of when their loan deal was signed, as was earlier postulated by the Financial Supervision Authority. The government wants Polish banks to take negative LIBOR interest rates into consideration while dealing with the current situation. Janusz Piechociński admitted that systemic solutions regarding

mortgages are needed. On January 15, the Swiss National Bank announced it will no longer maintain the franc’s exchange rate against the euro at 1.20, causing an upheaval on global currency markets. The price of the Swiss franc soared to PLN 4.3 from PLN 3.5 last Wednesday, putting a strain on some 550,000 Poles with francdenominated mortgages. (For more information on the CHF mortgage loan situation see our commentary on page 18.)

25 – 26 marca 2015 r. Hotel Westin, Warszawa

KONTAKT:

tel.: 22 379 29 00

e-mail: zgloszenia@mmcpolska.pl

Sympo Valkea Media 174 X 75 mm v3.indd 1

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

www.telekomunikacjaimedia.pl 2014-12-23 16:26:31

Image: Shutterstock

Government proposals for franc-borrowers

COMMENTARY / SMART CITIES

MACIEJ KOCIĘCKI DIRECTOR OF M2M AND PARTNERSHIP DEVELOPMENT AT ORANGE POLSKA

Street Smarts

hat is a Smart City? It is a city that simplifies its inhabitants’ lives thanks to its technology investments. Congestion on roads is reduced thanks to the monitoring of street traffic and the utilization of data in adjusting traffic light patterns. Street lamps light up when the need for them arises, information regarding high water levels in rivers is sent to the right authorities, and dangerous neighborhoods become safer thanks to the use of intelligent cameras, which recognize criminals or license plates on suspicious vehicles. How is all of this possible? What are the technologies enabling these benefits based on? M2M – the basis of a smart city The lynchpin of such technology is M2M communication, also known as Machine to Machine communication. Its functioning principle is quite simple – measuring devices such as movement sensors, cameras, load cell sensors (built into the road surface), or water and electric meters collect and send data to a “managing computer.” Machines that receive the data can process, compare and analyze large amounts of information independently (without human intervention). The information is analyzed with regard to the established standards such as the maximum allowable amount of cars on a given street or the water level in a river. This in turn will set certain procedures in motion where the receptor machines will send information to other devices – for example traffic lights or emergency response systems of the proper authorities. In such a scenario, streets will be less jammed with traffic, because the computers “know” that the traffic volume on a given street is too big. As a solution, traffic will be dispersed by longer green lights or through informational displays showing possible alternative thoroughfares.

A city based on M2M Like corporations or private enterprises that collect information in order to maximize profits and further own interests, cities can benefit from the above-mentioned solutions to improve their inhabitants’ standard of living, limit city budget expenses and increase the efficiency of existing systems. Besides traffic management systems, another example of utilization of M2M can be found in public transportation. Geolocating devices can send information to the system regarding the delay of

vehicles. Commuters can then be notified of the delay or given information about an alternative tram or train connection. Data regarding the number of passengers can be easily collected and consequently used by public transportation planners – to increase route frequency or initiate a new line. Other benefits? Parking space sensors, with which some shopping mall visitors are already familiar, may soon become commonplace across entire cities. The sensors are designed to send information to the management system, which in turn informs drivers of the nearest free parking space. Such improvements constitute an attractive solution for cities with existing systems created years ago. Meanwhile, totally new directions of development are being opened to architects designing cities from the ground up in Asia or Africa, where fast urbanization is the trend. In such places, modern technologies (including M2M communication) can be weaved into the city fabric at the planning stage. What about suburban and rural areas? Communication and the exchange of information, ever-present in cities, are not the only places where M2M technology and Big Data can play an important role. Collecting information through measurement devices and its subsequent computer analysis can be applied in less-populated areas as well – for example in farming. Moisture as well as soil contamination sensors are the ideal solution for the farming industry due to their ability to monitor and intervene in endangered areas in real time. Similar systems can be used to service private households. Applications include water and electricity usage as well as monitoring of other utilities, which will enable better management of the use of utilities by the customer and the issuing of invoices for actual usage (instead of forecast usage) by the providers. The future for M2M solutions Many Polish cities are already becoming “smart,” as they implement some of the systems described above. This includes “intelligent” traffic lights and public transportation management solutions. It’s probable that subsequent systems like these will be developed in the next few years, making city inhabitants’ lives more comfortable, safer and more predictable. u

WBJ OBSERVER • JANUARY/FEBRUARY 2015

COMMENTARY / LAW

TOMASZ FELISZEWSKI LEGAL COUNSEL AT WKB WIERCIŃSKI, KWIECIŃSKI, BAEHR

New regulations offer better consumer protection

the main attributes of the goods/services to be provided; w identification data of the entrepreneur (company name, a body which has registered a business, and the number under which the activity was registered, address, phone number); w the total price or consideration (including taxes) for the goods/services and any other costs that the consumer is required to pay; w the method and date of performance of the service and the applicable procedure for dealing with complaints; w liability of the entrepreneur for the quality of service; w the content of after-sales service and guarantees; w

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

w duration of the contract; or, if the contract is for an

indefinite period of time or is to be extended automatically, the method and grounds for its termination.

It should be noted that such information requirements do not apply to day-to-day contracts performed immediately after their conclusion. In respect of contracts concluded online, the act extends the withdrawal period for the consumer from 10 to 14 days. Furthermore, the act clarifies that if the entrepreneur fails to inform the consumer about the right to return the goods, the right of withdrawal will expire after 12 months from the lapse of the above-mentioned 14-day period (and not after 3 months, as it used to be under the previous regime). It is worth knowing that, if the consumer withdraws from the purchase, it is he who will bear the costs of returning the goods, and the seller, apart from reimbursing the price paid for the goods, will also reimburse the buyer for the costs of the cheapest offered method of shipment. u

Image: Shutterstock

December 25, 2014, a new law concerning consumer protection – the Act of May 30, 2014 on Consumer Rights has come into force in Poland. From the formal point of view, the act implements the provisions of the EU Directive 2011/83/EU on Consumer Rights, the fundamental objective of which is to harmonize the legislation and policy of EU Member States, so that the rights of buyers and the obligations of sellers are identical throughout the European Union. Furthermore, the act has a significant practical dimension since it gives consumers more legal tools in protecting their interest when shopping at traditional stores or online, as e-commerce becomes a more commonplace activity. If the consumer decides to shop at a traditional store, the act imposes on the entrepreneur running such a store several additional obligatory facts, which are tailored with the consumer’s interest in mind. Thus, the entrepreneur is required to provide the consumer with the following pieces of information:

Start your weekend on Thursday!

From 95 PLN per day *

* Oferta dotyczy rezerwacji przedpłaconej przez www.hertz.pl,

dla grupy A – Kia Picanto lub podobny i obejmuje: nielimitowany przebieg kilometrów, ograniczenie odpowiedzialności Klienta na wypadek kolizji i kradzieży samochodu, 23% VAT, standard rental conditions apply. Car group C price, e.g. Volkswagen Golf, starts from 152 PLN per day.

Book now at www.hertz.pl

COMMENTARY / SWISS FRANC

BEATA SOCHA MANAGING EDITOR, WBJ OBSERVER

Poland hit by franc ricochet Central banks took center stage in the latter part of January

lthough overshadowed by the European Central Drop it like it’s hot Bank’s (ECB) decision to launch Quantitative The NBP head Marek Belka stated firmly that the Easing and pump billions of euros into the euro Polish financial system is not at risk. But that didn’t help zone, the Swiss franc has not only been on the lips of Polish banks much, whose share prices slumped. Some economists and market players but also took over dinner even recorded a drop of as much as 30 percent, as was the conversations in hundreds of thousands of Polish housecase of Getin Noble Bank, which has one of the highest holds in the last weeks of January. shares of Swiss-denominated mortgage loans. Warsaw The turmoil started with the January 15 decision of Stock Exchange index WIG Banki dropped by 8 percent the Swiss National Bank to no longer maintain a fixed over the next week before recovering slightly. exchange rate of 1.20 against the euro, which had been Then a heated debate ensued whether or not banks in place since mid-2011. In a feeble attempt to cushion should be obligated to include the negative LIBOR interthe blow, the SNB announced at the same time it had est rate in calculating their clients’ payments. Interestinglowered the Swiss interest rate to -0.75. ly, some banks, apparently in anticipation of the negative Markets responded frantically, with the EUR/CHF LIBOR, had unilaterally changed their mortgage agreeexchange rate tumbling down ments a few years back so that when the below 0.9, while the CHF/PLN “IN A SITUATION Swiss interest rate hit negative numbers, pair in turn shot up to a recordthey could instead use zero in their equaWHERE THE high rate of above 5.0 (from the tions, thus keeping their margins intact. BORROWER opening rate of 3.57 on that day). Obviously, the soaring franc exchange BEARS THE After a few nerve-racking days rate and the public outcry made it imposRISK OF THE the CHF/PLN pair stabilized sible for them to hold onto their margins EXCHANGE RATE, any more. Finance Minister Mateusz at around 4.2, a level which the National Bank of Poland had BANKS HAVE TO Szczurek even called this move a “gross considered an “extreme” scenario CARRY THE RISK violation of risk symmetry.” In a situation only a couple months earlier. In the borrower bears the risk of the OF THE INTEREST where stress tests conducted in Novemexchange rate, banks have to carry the RATE. ber 2014, one bank was even listed risk of the interest rate, he stated. as being in danger of insolvency at that exchange level. Heads weigh in Polish officials responded immediately. First to calm Still, franc borrowers began to demand that they be aldown the markets, then to assure the 550,000 Poles with lowed to convert their mortgage loans at a conversion rate franc-denominated mortgages that they won’t be left from before the CHF surge. Victor Orbán’s decision to stranded in their predicament. do just that with Hungarian mortgages was cited on more

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

COMMENTARY / SWISS FRANC

Image: WIkimedia/National Museum

than one occasion, as a stellar example of how a country takes care of its people. Naturally, some pointed out the differences between Hungarian mortgage loans (which had a fixed interest rate and LIBOR cuts did nothing for the borrowers) and Polish ones (where the CHF climb has been partially cushioned by lower interest rates). Hopes were raised when the head of the Financial Supervision Authority (KNF) Andrzej Jakubiak posited the possibility of debt conversion at the exchange rate from when the mortgage deal was originally signed, so long as the borrower covered the difference between his actual payments over the years and an equivalent mortgage denominated in złotys (franc loans were, until recently, cheaper than the złoty-denominated ones). The idea has been tabled for the time being and for now the government has suggested alternative means of relieving franc-borrowers, either by establishing a three-year “loan vacation” (repayment suspension) or by setting limits on monthly installments, so that the borrowers remain solvent. Now, if any debt conversion is mentioned, it is always at the current exchange rate, and that’s not a rosy picture for those whose house’s loan-to-value ratio greatly exceeds 100 percent. A political matter As with most socially-relevant issues, the debate on franc mortgages is on its way to becoming a political tug of war. The opposition claims that it was the ruling coalition’s inaction that “has brought tens of thousands of Poles to the verge of bankruptcy,” as Law and Justice

member Mariusz Błaszczak told TVN24. Some deemed it necessary to remind Law and Justice that they had fought tooth and nail for banks to keep granting Swiss franc loans back in 2006 when the Banking Supervision Commission (absorbed by the KNF in 2008) was already considering doing away with foreign currency mortgages. Looking for balance After the ECB decision of January 22 to start Quantitative Easing, the franc started a gradual decline towards PLN 4.1, still nowhere near the levels from before the shock. The situation of Polish borrowers is still far from resolved and it is likely to remain one of the key issues in the upcoming presidential election (due in May) and later parliamentary election (slated for October). The number of all those affected by franc mortgages (including the families of franc-borrowers) is estimated at some 2 million, a force that could easily sway the vote one way or the other. For instance, in the previous presidential election, President Bronisław Komorowski received less than 7 million votes in total in the first round of voting and some 9 million in the second. Where the franc debate will lead, remains to be seen. For now, markets are beginning to settle down and the banks that were hit the hardest in the aftermath are slowly recovering. One thing is certain – the Swiss franc seesaw has taught Poles a valuable lesson they are unlikely to forget any time soon. u

WBJ OBSERVER • JANUARY/FEBRUARY 2015

CO V E R S TO R Y / A LT E R N AT I V E I N V E S T M E N T S

B Y JA C E K C I E S N OW S K I

Alternative investor Can you make money on alcohol and paintings? BY DEFINITION, AN ALTERNATIVE INVESTMENT IS AN INVESTMENT IN ASSETS OTHER THAN STOCKS, BONDS AND CASH, MAKING IT A RATHER VAST CATEGORY. NOWADAYS, YOU CAN INVEST IN VIRTUALLY ANYTHING FROM GOLD BARS AND FOREIGN CURRENCY TO STAMPS AND FAMOUS ACTORS’ AUTOGRAPHS. WHAT WAS ONCE CONSIDERED A HOBBY, CAN NOW BE A LUCRATIVE BUSINESS

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

CO V E R S TO R Y / A LT E R N AT I V E I N V E S T M E N T S

Investors are always on the lookout for assets that could generate hefty returns, especially in times when stocks are underperforming. That’s why alternative investments have been around for centuries, although you could hardly call them “alternative.” Trading commodities such as silk or spices was the best way to raise fortunes centuries ago. One of the first investment bubbles dates back to 1637 when inflated prices of tulip bulbs suddenly collapsed. The popularity of such investments has been on the rise since the 2008 global stock crash. People who put most of their savings in stocks were looking for other ways to expand their investment portfolio. “Some 20 percent of retirement funds invest in alternative solutions, because such investments offer some counterbalance to securities.

r guide:

WBJ OBSERVER • JANUARY/FEBRUARY 2015

CO V E R S TO R Y / A LT E R N AT I V E I N V E S T M E N T S

They can also have higher return rates,” said Krzysztof Kamiński, member of the board at Millennium TFI investment fund. The downside is that you usually have to freeze your assets for a longer period of time. “Investors should approach the [fine wine] market with an investment horizon of 5-7 years for optimum returns, however, some strategies we take can generate our target returns in a shorter time frame of 24-36 months. The underlying demand/supply imbalance that drives wine prices up over time does mean however, that the longer the investor is in the market the greater and less volatile the returns become,” said Philip Gearing, CEO of Cult Wines, a British company which plans on opening its Polish branch this spring. “Traditional investments are regulated by a country’s financial supervisory authorities, units [such as shares or bonds] are being valued constantly and can be sold in a matter of seconds. With alternative investments, such as wine or art, it’s hard to verify who is on the other side of the deal, especially when we’re dealing with companies registered in such countries as the Caymans or Cyprus, the risk is greater,” Kamiński explained, adding that in

order to exit such an investment, one needs to find a buyer first, which can take a significant amount of time. Pretty pictures The most popular form of such investments is probably art. Every so often, you can stumble upon a piece of news of another record-high transaction of a painting or sculpture, sparking the public’s interest in the market. But finding pieces of art that could be sold for millions is impossible, unless you already have millions to spend. You can always be on the lookout for the next Picasso or Pollock, but it’s not easy. Without expert knowledge it’s hard to evaluate an artwork and trusting an expert can sometimes backfire. A few years ago, auction house Abbey House signed exclusive contracts with several young Polish artists for their future works which were later put on sale at highly inflated prices. Paintings from Anna Szprynger were priced between PLN 20-35,000 while her previous works sold for PLN 400 and PLN 1,400. Independent art experts quickly saw the writing on the wall. After much contro-

While there isn’t a definitive list or a definition of what constitutes a “fine” wine, most of the vintages that are considered such are listed in the Bordeaux Wine Official Classification which dates back to 1855. The majority of wines traded on the benchmark Liv-ex Fine Wine 100 Index are red Bordeaux wines, with a few other French vintages as well as foreign varieties.

Images: Shutterstock

In vino veritas

Fine Wines

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

CO V E R S TO R Y / A LT E R N AT I V E I N V E S T M E N T S

THERE ARE CURRENTLY 462 COMPANIES LISTED ON THE WARSAW STOCK EXCHANGE, INCLUDING 49 FOREIGN FIRMS

Images: Shutterstock

versy, Abbey House was sold (to Artnews) and has ditched its art trading branch, focusing now strictly on publishing. The aforementioned paintings are now being discounted by 80 percent. Other risks concerning investing in art involve counterfeiting and lack of transparency. “Many transactions are done behind closed doors, between two collectors, very often prices are not publicized,” said Izabela Depczyk, publisher at Artnews, adding that prices are very often not driven by market but by emotions “People often buy something because they really want it, not because it is an investment for them.” In Poland, according to various estimates, there are 50,000 people who collect and invest in art. “Collecting has never been a part of our culture, but that is changing. It has become very popular worldwide and Poles are following it,” Depczyk added. Red turns green While art is strictly market-driven by auctions, there are markets where prices are determined similarly to securities. Fine wines (see box) are being traded on the London International Vintners Exchange (Liv-ex), founded in 1999 which provides monthly calculated indexes of the most sought after wines. For a long time, the benchmark Liv-ex Fine Wine 100 Index was hovering around 100 points. But around 2007, it started going up, sparking investor interest. At its high point in May 2011, it reached 360 points and soon thereafter fell to around 250, where it hovers around to this day. What was behind such a rollercoaster? Greed and China’s fast growing elites who

were buying cases at highly-inflated prices. “We could blame China, but sellers offloading products at much higher prices are to be blamed as well,” Krzysztof Maruszewski, CEO of Stilnovisti explained. The reasons behind the Chinese thirst for fine wines were numerous. Its newly rich elites tried to emulate their Western counterparts. In 2008, Hong Kong abolished all taxes and duties on wines and wine became one of the most popular forms of bribery in China. But in 2011, after a few years of overspending on wines, the Chinese realized that they were overpaying for it. The tipping point was the 2010 Bordeaux futures (merchants are able to buy vintage still in barrel, 12-18 months before it’s bottled). But once the futures were made available to distributors and prices dropped instantly, many orders from China were canceled leaving wineries cash-strapped and desperate to move stock. That’s when the bubble burst. And while some think that the best moment to invest in wines has already passed, others are hoping that the market will rebound. “In the H2 2014, we saw the main fine wine indices post consecutive monthly gains

“COLLECTING HAS NEVER BEEN A PART OF OUR CULTURE, BUT THAT IS CHANGING.

with the Liv-ex 50 reaching its highest point in the first 15 days of trading in 2015 since June 2014. This is an indication that the market has not only found a bottom, but prices have started to respond in a very positive manner,” said Gearing. On the rocks Recently, whisky has overtaken wine when it comes to being the investor’s alcohol of choice. The spirit’s popularity has skyrocketed. Over the last decade, exports of Scotch whisky have grown by 87 percent, more people are starting to treat it as an investment opportunity rather than a spirit. “People are looking for alternatives. Bank interests are at an all-time low, making deposits not so attractive. We’ve started our company as a financial advisor dealing with securities, but after the latest crash, we decided to look elsewhere and find a niche,” said Paweł Morozowicz from Wealth Solutions, a company which besides standard financial advisory offers investing in wine, art and whisky. His company specializes in finding unique barrels and bottles. “We help our clients build a collection. They come to us, saying that they have a specific amount they wish to invest in whisky. We then look for hard-to-find products which are valuable enough to be put in someone’s portfolio,” Suchocki explained. They either buy selected bottles at online auctions or buy whole barrels and bottle them with the help of carefully selected companies which specialize in such processes, which is just as important an aspect as the distillery which produced the whisky. “ Each distillery has its own specification and distinct tasting notes. Even with old products of high qual-

WBJ OBSERVER • JANUARY/FEBRUARY 2015

CO V E R S TO R Y / A LT E R N AT I V E I N V E S T M E N T S

Too much too soon? Too much too soon? With Poles consuming and investing in whisky in growing numbers, producers are treating the market as one of the more important ones on the world scene. In December 2014, Poland was chosen as one of the first countries to host the world premiere of the 50 year-old Glenlivet Winchester Collection. Out of the 100 bottles, three were earmarked for Poland, each priced at $ 25,000. But that might be a little too much for Polish customers, because as of press time, only one bottle found its buyer.

ity, if the distillery doesn’t have a proven track record its products won’t increase in value as fast as renowned producers’ spirits,” Suchocki explained. His company works hard to find unique whiskys all over the world. Sometimes they just get lucky. “Two years ago we bought a barrel from the closed down Karuizawa distillery. We had to use our personal connections to get a hold of it. Still, if everyone knew how popular and expensive the distillery would become over that period, no one would have sold it to us,” Suchocki explained. So far, Wealth Solutions has imported three, very limited whiskys for its clients, the first one has increased over 70 percent in value over the course of two years. Barrels vs bottles While Wealth Solutions is dealing with very old and very unique bottles, which are sold at auctions, not unlike paintings, Stilnovisti has a different approach, opting to invest in newlyfilled barrels instead of old bottles. “If someone can spend £5,000 for a single bottle, he can surely spend a couple thousand for a barrel from which 300 bottles can be made. We’re inter-

“IF SOMEONE CAN SPEND £5,000 FOR A SINGLE BOTTLE, HE CAN SURELY SPEND A COUPLE THOUSAND FOR A BARREL FROM WHICH 300 BOTTLES CAN BE MADE. ested in the consumer market, not a collectors’ one,” said Maruszewski. He explained that since there is more and more whisky being made and sold, the barrels will be hot property after three years (which is how long the spirit needs to mature in order to be called whisky) and distilleries will spend a pretty penny to acquire them to use in their production. “Blended whisky makes up 95 percent of the whisky market, that’s where the companies make money and will need top quality ingredients to keep making their products,” Maruszewski explained. His company is

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

getting distillate thanks to existing deals signed before the production skyrocketed, but he’s not afraid that once the contracts expire, he will be left with nothing. “If producers stopped selling their distillate it would make the one our customers already own even more expensive. But I don’t expect all manufacturers to stop selling it after the current deals run out,” Maruszewski said, explaining that right now a fresh-filled barrel costs about £2,000 while a three-year old one is worth £4,000 and according to Maruszewski there is a shortage of new barrels on the market. “All distilleries are now working overtime. There’s little room to increase production and to set up a new production line, the waiting list for proper equipment is three years.” After distillate turns into whisky, the investor has a few options. Sell the barrel to the distillery, bottle it and sell it under his brand or wait even longer for it to mature. The old barrels are quickly disappearing from the market. According to the Scotch Whisky Association, only 13 percent of currently stored whisky has matured 13 years or more and with the current volume of production such stock will disappear in four years. u

Images: Shutterstock, Glenlivet

$25,000

FEATURE / O I LR I C U L T U R E AG

Crude awakening FROM MID-2014, SPECIFICALLY FROM JUNE 19, WHEN A BARREL OF OIL WAS WORTH $116, OIL PRICES HAVE BEEN SYSTEMATICALLY DECREASING. CHEAP OIL IS NOT ONLY GOOD NEWS FOR POLAND AND ITS CITIZENS. IT ALSO CONSTITUTES A WARNING LIGHT FOR THE BUDGET

Images: Shutterstock

B Y S E R G I U S Z P R O K U R AT

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

F E AT U R E / A G R I C U LT U R E

For

the last couple of months, oil prices on global markets have dropped to $45 per barrel, ultimately stabilising around $50. This is the lowest level in 6 years. We are seeing a dangerous trend of oil prices coming close to 2008/2009 levels. Because oil as a resource is absolutely key in producing energy, it is a strategic element of any economy. The reason for the drop is, according to many analysts, due to the fact that the supply is too large and maladjusted to demand. As a result of an economic downturn, economic growth in several key countries has flagged. Meanwhile both the OPEC countries and the US, which is producing over 9 million barrels per day for the first time in 30 years thanks to shale, don’t want to reduce their production. The traditional OPEC strategy, aimed at maintaining high prices by reducing production, was suddenly replaced by a new course, whose aim is to maximise the market share of the cartel and not of its profits. US oil production increased by 1.1 million (in barrels per day) in the past 12 months alone, according to federal data, and is now over 9.1

million barrels produced every day. So who’s playing poker here? Maybe it’s the US, convincing their strategic partner Saudi Arabia, while simultaneously finding an ideal way of fighting their political enemy Russia, even at the expense of its own infrastructure investment in shale oil exploitation. Oil production costs in Russia are about 45 dollars. At the current prices, extraction is no longer profitable. The OPEC cartel is a very different story, having the lowest production costs in the world, with Saudi Arabia claiming the top spot, boasting production costs at around

25 dollars. If the US has struck a deal with the Saudis the world might have to wait some time to see a 100 dollar barrel again. For citizens of countries which depend on oil imports, such as Poland, the global rivalry of its producers is very beneficial. In Poland, cheap oil means slight price cuts at petrol stations. Only slight, because intermediaries cannot follow the market seamlessly, as they take on the risk of currency fluctuations. And these have been quite large in recent weeks. Ultimately, the average Kowalski will save more when filling his tank and

US oil production increased by 1.1 million (in barrels per day) in the past 12 months alone WBJ OBSERVER • JANUARY/FEBRUARY 2015

F E AT U R E / A G R I C U LT U R E

companies will make more on services, as their costs such as logistics, transport will turn out to be lower. Interestingly, if the oil price will fall too low the country may be prone to deflation. On the other hand, low oil prices on global markets are a worry for the Finance Minister. This means less money in state coffers. These funds will have to be raised from somewhere else. In 2010, when oil prices were slightly higher, they made up one fifth of the budget revenue amounting to PLN 250 billion. Currently, the income planned for 2014 is PLN 300 billion. The price of oil is merely 40 percent of the entire petrol cost at a Polish gas station. A further 6-8 percent is processing, transport and sales margin, and a staggering 52-54 percent is made up of a variety of taxes including VAT tax (23 percent of sales of all products and services). Meanwhile petrol prices in neighboring countries that lie outside the EU, like Ukraine or Belarus, continue to shock. They are more than 40 percent lower than in Poland. High petrol prices in Poland were a temptation for inhabitants of border zones to smuggle it through

the frontier and sell it in Poland. With lower prices these practices are no longer as profitable as before. What is more, the petrol in the east is of much lower quality than in the European Union. Reputable chains struggle with it, not to mention smaller stations. Quality studies – both official or conducted by journalists – show that the problem is huge, both in smaller and reputable stations. An important fact is that as of January 1, 2015 Poland has introduced the so-called reserve payment, which will raise prices from PLN 0.03 to 0.08 per liter. This will be especially true for LPG. Why was this additional payment introduced? According to European law, Poland has to have oil and processed petrol reserves for at least 90 days of use, to cope with the effects of a potential fuel crisis. The reason behind establishing this new law is last year’s implementation of one of the EU directives from 2009 which changed the setting of the petrol and LPG mandatory reserves. The government decided to radically change the rules governing their stockpiling from 2015 on, in order to help entrepreneurs and reduce budget spending dedicated to maintaining oil reserves. However,

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Poles saw this as a new tax aimed at maintaining a higher petrol price. Low oil prices may be the death knell for the development of the shale industry in Poland. In theory, companies engaged in shale gas prospecting are investing with long-term profits in mind. However, each company prospecting in our country is assuming a certain price. When oil and gas prices are low, it may arise that what had been profitable up to now will cease to make economic sense, even after successful findings. As a consequence of this situation, investments may be halted, slowed down or companies may even back out. This may be a very difficult year for the shale industry in Poland. Current prices at petrol stations are at the lowest level in four years. Alas, world price decreases do not automatically translate into lower retail prices. A strong US dollar is an impediment for Poland. A rising dollar and falling oil price, with a very volatile euro, will be setting the pace for the Polish economy this year. This means more expensive imported products in retail, albeit excluding petrol. u

Images: Shutterstock

POLAND HAS TO HAVE OIL AND PROCESSED PETROL RESERVES FOR AT LEAST 90 DAYS OF USE

NOW ALSO PROVIDING: Shelf Companies of all types

Cross-border Tax Structuring

Accounting/Tax Compliance

Wealth & Asset Protection

Company Management

Private Clients Solutions

Corporate Secretarial

Relocation & Residence

Payroll Outsourcing

International Banking

Company Formation

Family Office Support

Registered Address

Offshore Companies

Fund Services

IP Rights Structuring

Incentives Plans

1,300 professionals across 32 jurisdictions Expand Further

+48 22 379 9440 www.trinitycs.com

www.vistra.com

INTERVIEW / PAWEŁ JARCZEWSKI

WBJ OBSERVER TALKS WITH PAWEŁ JARCZEWSKI, CEO OF GRUPA AZOTY, EUROPE’S SECOND BIGGEST FERTILIZER PRODUCER, ABOUT THE COMPANY’S GLOBAL REACH AND POLISH INDUSTRY

I N T E R V I E W B Y J A C E K C I E S N OW S K I

Fertile prospects WBJ Observer: Grupa Azoty was present at the World Economic Forum in Davos for the first time this year. Why did you decide to attend it? Paweł Jarczewski: The Forum is attended by people who manage funds worth some $4 billion, 15 Nobel Prize winners and some 200 top political figures from all over the world and 1,700 of the biggest global companies. It’s the most important place in the world to discuss global business and politics. Grupa Azoty is Europe’s second biggest fertilizer producer and we’re very active when it comes to foreign markets, as well as international forums and discussions regarding our sector. We take part

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

in such events to be a part of all the decisions and regulations which concern our sector. In Davos, we can meet top political figures from all over the world. Thanks to such meetings and discussions, we not only become a recognizable brand, but we hope that in the near future it will translate into business. We will be a first or second-choice company for various investments. We won’t be a no-name company but a well-known partner with a good offer. Before the Forum in Davos, you’ve said that you want to “popularize the Polish way of developing an agricultural business.” What did you mean by that?

Images: GrupaPhotos: Azoty Bartosz Bajerski

INTERVIEW / PAWEŁ JARCZEWSKI

WBJ OBSERVER • JANUARY/FEBRUARY 2015

INTERVIEW / PAWEŁ JARCZEWSKI

About 8 percent of the Polish GDP comes from agriculture, there are some 2 million people employed in the sector. Over the course of 25 years, Polish agriculture was successfully and effectively transitioned from smallholder and backwards farming to a modern sector. This is something that we should be proud of and continue to improve. Today, one of the hot topics is food security. A few years ago, in Northern Africa and parts of the Middle East, where food was scarce or very expensive, nations toppled their governments. The tensions stemming from this continue to this day. This is a crucial concern in parts of Asia and Africa. Bill Gates said recently that Africa should be self-sustainable when it comes to food by 2020, which is a very ambitious statement, although I doubt that this is possible in the current situation. Africa is a continent with the highest potential for demographic growth, huge industrial expansion and self-sufficiency when it comes to food. Today, many global organizations propose to introduce modern and sustainable agriculture there, based not on extensive but intensive activities, requiring the use of quality fertilizers, as opposed to high-quantities.

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Will you be increasing your presence in Africa? Grupa Azoty is a global corporation and we want to operate globally. We’ve already invested in Africa, having our own phosphate mine in Senegal and we’re interested in investing there more. We’re looking for new deposits and are planning on building a phosphate processing plant. We’re also thinking of producing fertilizers to be sold on the African market. If we want to become a major player in Africa, we have to be present there now. Besides investing in Africa, we also offer our products there. We have our own experience, as a country, on how to successfully transform agriculture and we can offer not only our advice, but play an active role in such transformations. All of the major fertilizer producers are very interested in Africa. Still, for the company, the biggest market right now is Europe. Yes, we’ve announced our long-term strategy for 2013-2020 a few months ago. It encompasses three major aspects – operational effectiveness, internal investments for which we’ve earmarked PLN 8 billion and mergers and acquisitions. Along with consultancy EY, we’ve looked at 2,000 potential acquisition targets. We’ve slimmed the list down to about 10 companies of which the majority is European.

“ALONG WITH CONSULTANCY EY, WE’VE LOOKED AT 2,000 POTENTIAL ACQUISITION TARGETS. WE’VE SLIMMED THE LIST DOWN TO ABOUT 10 COMPANIES OF WHICH THE MAJORITY IS EUROPEAN.

INTERVIEW / PAWEŁ JARCZEWSKI

When can we see any M&A activity? Such transactions in our sector have to be done in a calm manner. We have experience in such processes, as you have to remember that Grupa Azoty is a holding of 57 companies. This experience will be helpful in the future.

So we should be even lower in those rankings? Obviously, we have a lot of catching up with the world when it comes to academia and scientific inventions, but when we have opportunities we know how to use them. Grupa Azoty itself has implemented many innovative solutions so far.

The EU is currently negotiating with the US regarding the Transatlantic Trade and Investment Partnership (TTIP). With North America in the midst of a shale gas revolution which is strongly affecting the chemical sector by decreasing the cost of both raw materials and energy, aren’t you afraid that after such an agreement is signed, US companies will flood Europe with their products? The US is now the biggest food producer in the world and we think that the supply will stay there. We’re not afraid that Europe will be flooded with American products. What’s more important is how we can transfer their knowledge and competences to Europe. It is also important that both sides of the agreement are treated equally. In order to prevent imports from damaging its domestic market, the US, just like Europe, has special measures in place like anti-dumping duties. With the TTIP in place such duties will be curbed.

You’ve discussed the company’s long-term strategy, but what about plans for 2015? We want to change Poles’ approach when it comes to growing food. We’re proposing something that others call biomodeling. It’s something that combines effectiveness and ecology. We want to introduce nutritional elements for plants in their early stages of development. It’s not really a product, it’s a technology. Public opinion in Poland seems to think that the country is backward because so many people here work in agriculture. That couldn’t be further from the truth. We use advanced technology, just like in other industries. The whole production chain from growing crops to storing the finished products are of the best quality. Today, people are changing their eating habits. They’re choosing quality over quantity. That’s why we need top quality crops, not necessarily the biggest yields.

Image: Grupa Azoty

What about EU’s strict CO2 emissions targets, which are more demanding than in the rest of the world? We’ve been talking about this for years now. The EU is shooting itself in the foot implementing such strict targets and killing its own industry in the process. Other countries, including the US and China, are polluting way more than the Europeans and because of the regulations, Polish companies now have to spend millions of złotys that could be spent elsewhere on meeting these criteria. Like for example on innovation, which has always been the sector’s backbone. Yet, Poland places at the bottom in all rankings when it comes to innovativeness. In my opinion, there are a lot of misconceptions when it comes to measuring innovativeness. When it comes to the statistics, the most innovative city in Poland is Warsaw. But when you take a closer look, you can see that many of the so-called “innovative projects” are simple, administrative solutions. Introducing a new computer program in one of the banks or buying a product and implementing it in your company can hardly be considered an innovative process.

In the last year, the biggest news stories regarding Grupa Azoty concerned not the company’s products and activities but attempts made by Russian Acron to increase its stake in the company. We have limited contact with that shareholder. They own 20 percent of our shares and since they’ve split their shares into two entities (Norica Holding and Rainbee Holdings) they have not reached out to us. With the Annual General Meeting approaching, I expect they will send their representatives and voice their opinion as usual. With 20 percent of the shares they are able to introduce their representative to the company’s supervisory board. They can, but it’s a very complicated process and needs to be approved by the supervisory board first. Aren’t you worried that Acron will make further attempts to increase its stake? I know that there are legislative attempts to prevent hostile takeovers from happening in the future. The Ministry of the Treasury is working on a bill which should come into force in the first half of this year. It would apply to share purchases in companies seen as strategic in Poland, such as Grupa Azoty. u

WBJ OBSERVER • JANUARY/FEBRUARY 2015

FEATURE / BITCOIN

The future of printing is green With EU requirements for businesses to report on the environmental and social aspects of their operations tightening, as part of wider endeavors to reduce the impact of business on the environment, recent years have seen an increasing focus on environmental issues within managed print services (MPS). Environmental concerns tie in with a focus on the bottom line

B Y B R E N D A N M E LC K

Environmental concerns tie in with concerns about resource management when it comes to printing. MPS involves the use of software to manage and monitor the volume of printing, and to ensure that only authorized employees are able to use printers, thus limiting their usage. This not only reduces printing costs, but also reduces environmental impact. According to major printer manufacturer Xerox, the costs of printing constitute around 15 percent of all business costs, while they estimate the potential cost-cutting from outsourcing printing management at around 30 percent. With printing continuing to be a very important aspect of the operations of businesses and public-sector institutions, in spite of the drive towards the so-called ‘paperless office,’ ensuring that there is an environmental element to printing management within organizations is an important way of reducing their carbon footprint. Lower energy and paper use MPS providers present lower environmental impact among one of the principal benefits of their services. Generally, they will carry out an audit of the current printing practices of an organization, and, on the basis of this, develop a plan to optimize these. This would potentially involve the reduction of the number of printers in an office – immediately helping to reduce electricity use – and their positioning in particular locations, ensuring sufficient access. It could also involve switching to more environmentally-friendly printer types,

OCTOBER 2014 • WBJ OBSERVER

which ensure lower energy use. Implementing solutions such as pull printing, requiring user authentication before printer use, is an important way to reduce paper wastage – which represents the main environmental impact created by printing. The electricity used by printers, in contrast, represents only a small proportion of this impact. Another simple change which can be implemented to ensure reduced paper use, is the introduction of duplex-only printing (i.e. double-sided printing). MSP providers offer one-stop shop By outsourcing printing to an MPS provider, companies can put the task of ensuring their green credentials are enhanced, while at the same time introducing a change in practices which is most likely to result in some important cost savings. This includes managing the recycling of ink cartridges, using sustainably-sourced paper, and using ink which has a lower environmental impact (e.g. soy ink). According to technology business news source Quocirca, the leading companies in the MSP market are all suppliers of printing equipment offering these services as an add-on to their main businesses. Reportedly, global leaders include Xerox, Ricoh, Lexmark and Canon. Other MSP providers include systems integrators and resellers, which offer MPS as part of a wider offering of managed IT services, and also independent software vendors, which include print management products in their offer.

FEATURE / BITCOIN

Environment not yet key motivator for MPS introduction As Quocirca’s 2014 report on the competitive landscape for MPS states, the main motivation behind organizations’ decisions to use MPS solutions is to ensure more predictable costs, with reducing the environmental impact only in the eighth position. It can only be expected that as the requirements for reporting on the environmental impact of business become stricter, and businesses react by imposing more ambitious and far-reaching environment goals, this consideration will increase in importance. All MPS providers feature environmental concerns prominently in the description of their offerings in their websites. This attests to the fact that there is – already – a real urgency among a large proportion of the business community to improve their environmental record. MPS is widely predicted to boom in the coming years, with Quocirca research showing that nearly half of companies are planning to expand their usage of MPS, thanks to its proven ability to reduce costs. Also, in its 2014 report, a remarkable number of companies which did not currently have MPS already were planning on introducing it. MPS providers are likely to become increasingly more focused on environmental issues as these rise up the political agenda.

Images: Shutterstock

The optimal strategy

In today’s business climate, reducing and controlling costs is more important than ever. What is more the ability to effectively manage valuable knowledge and convert it into ‘information capital’, is a company’s most vital asset. According to IDC Research Institute, the volumes of digital information we can access continues to grow. By 2020, this digital information will have grown by a factor of 30. When a business is preparing its strategies to increase revenues or improve business processes, it is essential to take document and print management into account and optimize print and electronic information infrastructure. It leads to not only improved cost control, but also smarter, more efficient information workflow, tighter security and governance of data and enhanced sustainability performance. >> PAWEŁ BARSKI, MARKETING DIRECTOR AT RICOH POLSKA WBJ OBSERVER • OCTOBER 2014

JUNE 2014 • WBJ OBSERVER

INTERVIEW / KRZYSZTOF KWIATKOWSKI

INSTITUTING IMPROVEMENT I N T E R V I E W B Y E WA B O N I E C K A

Image: Jan Malinowski/WBJ

KRZYSZTOF KWIATKOWSKI, PRESIDENT OF THE SUPREME AUDIT OFFICE (NIK), TALKS WITH WBJ OBSERVER ABOUT NIK’S ACTIVITY IN IMPROVING THE FUNCTIONING OF THE POLISH GOVERNMENT AND OTHER PUBLIC INSTITUTIONS, MEANWHILE STRESSING THE IMPORTANCE OF THE APOLITICAL NATURE OF NIK’S REPORTS

WBJ Observer: Many Poles complain about poor functioning of the Polish government and other public institutions. How do you find the condition of public institutions in the light of NIK audits? Krzysztof Kwiatkowski: I don’t agree with this black vision. The present situation in Poland should be viewed from a broader perspective. In my opinion, the point of reference is the year 1989 when Poland set the course for democracy. Nowadays, we are part of the European Union and NATO. Poland has a strong international position as well as a stable and developing economy. These are the facts. But NIK is there to highlight areas for improvement – this is the core of its activity. Our audit reports and recommendations translate into numerous changes in legal provisions. Many institutions are eliminating irregularities identified by NIK and as result are better primed to serve the citizens. We help improve the state. Studies show that NIK has earned Poles’ trust and is considered the most credible of all public institutions in Poland. It turns out that Polish courts, the Constitutional Tribunal and also public institutions in the European Union and other countries value your activity as very objective and reliable. How does that credit of trust help you change the legal system and the functioning of public institutions? We cannot force any changes, we may only propose them. Our recommendations – as is the case with any other audit institution worldwide – are not obligatory. However, the credit of trust we have is a powerful argument to convince the Parliament and other public institutions to implement changes in the law and public administration. The auditees carry out 90 percent of the recommendations already during the course of NIK’s audits, others are implemented in the following months. The changes proposed by NIK are often the subject of legislative processes in the Parliament. For instance, recently we have published a very critical report concerning safety on Polish roads. There was a postulate to take away the municipal guard’s right to control the speed of vehicles. Now the Parliament has taken the initiative to follow that recommendation. Some time ago, we presented a report on the lack of regulations concerning the extraction of shale gas in Poland. A law was passed as a result of our audit which regulated many matters related to that

WBJ OBSERVER • JANUARY/FEBRUARY 2015

INTERVIEW / KRZYSZTOF KWIATKOWSKI

was born in 1971 in Zgierz. He is a Law graduate from the University of Warsaw. Kwiatkowski was a member of the leadership at the Independent Students’ Association, a Solidarity students' arm. From 1997 to 2001, he was Advisor and Secretary of PM Jerzy Buzek. Subsequently, he was appointed Minister of Justice and Prosecutor General in 2009 and in 2011 he received a seat in the Sejm. On August 27, 2013, after being sworn in, Krzysztof Kwiatkowski started his six-year term of office as President of the Supreme Audit Office.

area. When we reveal crimes or corruption incidents in public institutions, we refer the cases to the Prosecutor’s Office or specialized law enforcement bodies, such as the Central AntiCorruption Bureau, which then take proper actions. But changes in the law need majority support in the Parliament and in many cases you are dependent on the moves of the political class. Some of your very important reports – like the one regarding the healthcare system - do not lead to any changes. In such cases, the political reality prevails. NIK is an apolitical body. The majority of our post-audit recommendations are carried out by the National Health Fund (NFZ) or hospitals. And the proposals we make have nothing to do with politics. They are an outcome of objective, in-depth analyses. Even if controversial, they are usually accepted by parliamentary commissions (composed of members of all parties), which among other things look into NIK reports. Publishing our reports in the media provides fertile ground for improvements. The apolitical nature of the Polish Supreme Audit Office is guaranteed by the Polish Constitution. All audit bodies in any democratic country are ensured political independence. And international statistics show that the post-audit recommendations of NIK are followed more often than is the case in many other countries. Can NIK also audit Polish private companies and institutions and foreign entities operating in Poland?

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Image: Jan Malinowski/WBJ

Krzysztof Kwiatkowski

INTERVIEW / KRZYSZTOF KWIATKOWSKI

Yes, we can audit private companies and institutions, Polish or foreign, on one critical condition: if they use public money. We have the right to audit any Polish or foreign private company operating in Poland which received even one złoty from the state budget or from the EU. At the moment we are running a very interesting audit, in which we check whether our tax system treats Polish and foreign entrepreneurs on equal terms. The audit objective is to check whether the Ministry of Finance and tax offices have a proper and transparent approach to companies paying taxes. The question is whether tax offices have properly implemented all tax provisions. Our audit will answer this question. What kind of audits do you consider to be the most demanding? Each and every audit is demanding in its own way. We conduct 200 planned audits and about 200 ad hoc checks every year. There are about 7,000 requests for auditing. Unfortunately, due to the limited number of auditors, we are not able to meet all requests. But sometimes we combine similar requests and run a single, joint audit of a given area. NIK’s most important audit is the annual state budget audit. We enter ministries and central institutions selected at random to check how they spend public money. I want to stress that we not only want to know if they comply with legal provisions but we also look into the effectiveness of public expenditures. One of the issues in that area, identified in some of the audited institutions, was the improper handling of public tenders. It was at the request of NIK that the Polish Parliament changed various acts in that area so as to make the public procurement procedures transparent and reliable. Do you receive requests for audit from individual citizens, social groups or small institutions?

Each citizen and every small or big institution has the right to lodge a complaint or a request for audit to NIK if they believe public money is spent improperly. We have a special unit of experts at NIK dealing with such requests. We have, for instance, received many individual and group requests concerning the installation of electric windmills. Based on those requests and complaints, we have conducted an audit in a dozen or so municipalities as to the adequacy of decisions concerning the location of windmills, which was brought to light by citizen protesters. Our recommendations deal with changes in the law. Several laws and ordinances need to be changed to make sure the clean energy sector develops properly and is safe for citizens. How do you audit the flow of funds granted to Poland by the European Union? We have conducted a series of audits checking whether agreements for EU grants are implemented in line with their assumptions. So if subject A received money to conduct activity in domain B, we check it in terms of its task performance and the use of funds, that is if the whole amount was used as intended. Recently, NIK was the first of all the EU national audit institutions to check how the state is prepared for the new EU financial perspective for the years 20142020. Poland appeared to be one of the first three EU member states, who have signed the partnership agreement with the EU for the new financial perspective. And only on the basis of such an agreement is it possible to announce competitions for the use of EU funds. You have put politics aside now. But your present role in shaping the political environment in Poland is seen as very active and significant. How do you see yourself? I am an auditor who helps improve the Polish state. u

“INTERNATIONAL STATISTICS SHOW THAT THE POSTAUDIT RECOMMENDATIONS OF NIK ARE FOLLOWED MORE OFTEN THAN IS THE CASE IN MANY OTHER COUNTRIES.

WBJ OBSERVER • JANUARY/FEBRUARY 2015

Awakening

of transfer pricing B Y JA C E K PAW L A K

ransfer pricing – the concept presented in Polish tax law for the last few years is currently one of the hottest tax issues. Just as a reminder – transfer prices are prices used in transactions conducted between two related entities. If their relationship has an impact on the determination of non-market conditions of such a transaction (i.e. different than the conditions that would be determined between independent entities), the tax authority will calculate income disregarding the conditions

SELF-STORAGE

resulting from such relations. Then such an additional income will be taxed with a 19 percent or 50 percent(in case of lack of a TP report) tax rate. Last July, a substantial amendment of the Regulation of the Minister of Finance governing the basic set of rules for analyzing taxpayers’ transfer pricing by the tax authorities came into force. Since the beginning of January 2015, the provisions concerning transfer pricing included in the corporate income tax act

WHAT DO YOU FORESEE AS THE NATURAL COURSE OF PROGRESSION REGARDING TP REGULATIONS IN POLAND AND TAXPAYERS’ ADJUSTMENT TO THE NEW DEMANDS?

Mateusz Chłosta Tax Advisor RSM POLAND KZWS

Despite appearances, the answer is quite obvious – growth. The permanent growth of business structures, which is a totally natural and required process for every modern and successful business organization, causes the number and volume of intercompany transactions to rise at an enormous rate. Corporations establish separate entities to specialize in a particular field of activity – there are intra-group service centers, research and development facilities, entities responsible for purchase, etc. All of these are set-up, in principle, to increase the efficiency and cost effectiveness of the whole organization, however it brings also the temptation to use such type of entities/transactions to transfer profits into more tax-friendly regions of the world. That is why transfer pricing became a subject of interest not only for the Polish tax authorities, but also for other countries. The expression of this international interest is the intensified work of the OECD, which currently seems to play a major role as the main driver in introducing measures aimed at preventing countries from conducting transfers of corporate incomes.

}

ndeed, for a couple of years we could observe a renaissance in transfer pricing. Although the Polish TP regulations are adjusted with delay to solutions based on OECD guidelines, which are widely adopted in other countries, the process has begun and we should expect more changes in the coming years. The tax authorities are also active. Every tax audit of corporate income tax calculations results in the audit of transfer pricing and one of the first official papers received by the taxpayers is a request for submission of TP reports. Unfortunately, it is still quite common that the taxpayers do not prepare such reports on a regular basis, which causes a lot of unnecessary nerves and stress. The statutory deadline for submission of TP reports is 7 days from receipt of the request. This is definitely very short notice and in practice makes it impossible to prepare a comprehensive and high-quality TP report, not to mention the possible consequences of not submitting the reports within the deadline. Taxpayers should realize that comprehensive and well-considered TP reports will constitute one of the strongest lines of defense supporting the arm’s length nature of transfer prices.

have also been changed and we should expect further amendments in the future. Moreover, this sudden “transfer pricing awakening” concerns not only legislative changes, but also the actual actions of the tax authorities which are gradually gathering in strength and detail the scope of conducted tax audits. What is the cause of such a situation?

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

In 2013, the OECD published a report called “Addressing Base Erosion and Profit Shifting” (BEPS) and on its basis created an Action Plan consisting of 15 actions that should support a global economy taking into account fair distri-

Image: Shutterstock

bution of profits. The first package of reports, concerning seven actions, was already published in September 2014, and the remainder should be finished till the end of 2015. Several reports relate directly to transfer pricing and even though they are not considered as binding law, for sure those reports indicate the direction of the upcoming changes in local jurisdictions, including the Polish law. What does it mean for Polish entities? Firstly, they should track more attentively than usual all changes in regulations and familiarize themselves with the work of the OECD. The principle that prevention is better than the cure, seems to be the most appropriate advice in this case, but prevention requires knowledge on how to act in order to increase transfer pricing safety. Secondly, TP reports/documentation, which are required for most intercompany transactions (threshold criterion), should not be treated as a negligible obligation that taxpayers need to check off when they are requested to do so by tax investigators, but mainly as a very powerful tool, which, if well prepared, may provide a very high level of protection. Even today, many taxpayers are still convinced that TP reports are just a formality. The tax of-

fice asks. The tax office gets. The tax office does not investigate and review it. Nothing could be more wrong. Every year, the professionalism and knowledge of tax investigators increases and they do not just read provided reports, but also analyze them and compare them with market conditions. Teams of professionals investigating TP issues and supporting their colleagues from tax offices are being appointed and employees of the Ministry of Finance actively participate in the work of international groups involved in transfer pricing. For several years, transfer pricing is announced as one of the main objectives of tax audit/inspections. In 2013, there were 3,157 tax audits concerning transfer prices. Of those, 1,621 cases were considered as incorrect, resulting in an upward adjustment of taxpayers’ profits by a total of PLN 206,575,389. This means that in more than 51 percent cases of tax audits, there were upward adjustments on average amounting to PLN 127,437. These figures vary considerably if total tax audits are divided into those conducted by tax offices and tax audit offices. The first category conducts more audits (3,015), but their average (in terms of additional profit estimation) is lower (PLN 82,000). The tax audit offices conducted “only” 142 audits and

28 have finished with upward adjustments amounting to PLN 2,674,550 on average. Taking into account data from previous years, a tendency can be observed that the numbers of audits and amounts of upward adjustment are consistently increasing. What is interesting, partial data considering the first half of 2014 shows that out of 1,462 tax audits conducted 1,307 were positive, which means that tax investigators have found irregularities in the total amount of PLN 52,754,000. The 89 percent rate of accuracy, raises the question whether it is a coincidence or a result of the organized and planned activities of tax authorities. The above gives a clear signal that a subject of transfer pricing, in particular the TP reports, should no longer be treated only as a hypothetical threat and tax risk. Development of transfer pricing policies and ensuring ongoing preparation for high-quality and comprehensive TP reports should start to be recognized as one of the priorities for taxpayers, especially for those, where intercompany transactions represent a significant portion of their costs or revenues, and challenging the applied transfer prices by the tax authority may cause some serious financial consequences. u

WBJ OBSERVER • JANUARY/FEBRUARY 2015

COMMENTARY / LAW

DECEMBER 2014 • WBJ OBSERVER

ENTREPRENEURSHIP / URSA MAIOR

BEAR NECESSITIES B Y B R E N D A N M E LC K

Vintage cars, jazz concerts, camping under the stars, wild cuisine - that’s how beer is done in Poland’s Bieszczady mountains

A blend of beer and local culture The center features a brewery, which produces a range of beers, including ales, wheat beers and the stronger, Belgian trappiststyle beers. Agnieszka Łopata is in charge of brewing, as well as of the entire Ursa Maior operation. She is an environmental engineer by trade, who has been producing beer for a number of years already. Agnieszka also has her own blog promoting beer as an accompaniment to food, kuchniapiwowarkiagi.pl. Her right-hand man in the project, and deputy CEO of Ursa Maior is Andrzej Czech, who is behind Centrum Ursa Maior’s

Image: shutterstock

Agnieszka Łopata and Andrzej Czech have created a unique cultural Center in the Bieszczady Mountains, including a brewery producing distinctive craft beers. Centrum Ursa Maior – loosely translated as the Great Bear Center (as in the constellation) – was opened in December 2013, in the village of Uherce Mineralne in the Bieszczady mountain region of the Podkarpackie voivodship in Poland’s far south-east. The center combines at least two important and growing cultural and economic trends in Poland today – first, eco-tourism, for which its unspoiled surroundings are perfect, and second, craft beers brewed using traditional methods and natural and locally-sourced ingredients.

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

ENTREPRENEURSHIP / URSA MAIOR

The brewery was founded by Agnieszka Łopata, environmental engineer, who made homemade beers for years before starting production on larger scale ecological philosophy. Having already run an ecological, energy self-sufficent guesthouse in the Bieszczady region for some years, Czech, a Bieszczady native, is also passionate about the regional culture, and this has driven the opening of an auction house for local art at the Center. It also houses a shop with regional products and an exhibition hall. The Center offers the opportunity for larger or smaller groups to visit the brewery, and taste a selection of beers, with or without a food accompaniment. “We thought it was important to put the cultural and social function of beer at the heart of the project – not treating beer simply as a way of consuming alcohol. Beer is a fantastic drink, in terms of taste, nutrition and health benefits when it’s made from natural ingredients using traditional methods. We also wanted to create a unique meeting place, to help revive the local community, and contribute to the local economy by creating jobs and selling local products,” said Czech. Lady in charge Beer drinking, is likely to be associated with groups of rowdy men – so it is all the more fitting that at Centrum Ursa Maior, it is a woman who is in charge of making the beer. Czech explained how Łopata’s hobby became a serious professional occupation. “Since Agnieszka became interested in homebrewing, she’s won many awards. In 2012, she won the award for best homebrewer in Poland. We have decided to put to use her undoubted tal-

ent in this area at a professional level and on a wider scale,” he said. A diverse range Ursa Maior’s beer is presented in bottles – as befits a serious beer producer – which feature distinctive labels. The beer is unpasteurised, unfiltered, and made with water from the local source. “Up to now, we have created 16 different types of beer,” explained Andrzej Czech. “They are all selling at about the same rate, but the ones which are selling faster are Śnieg na Beniowej (an American golden ale style beer), Royzbawiony (a wheat beer), Megaloman (an India Pale Ale style beer) and Deszcz w Cisnej (a ‘smoked’ ale style beer).” As well as having the opportunity to sample the beers as part of brewery tours, customers can buy them in the shop, or order them online; they are also available in a number of pubs and retail outlets around the country. Craft beer trend set to continue A look around most Polish cities will tell you how significant the shift in taste towards craft beers has been in recent times. Described variously as “piwa niszowe” (niche beers) and “piwa regionalne” (regional beers), new shops entirely dedicated to these beers have sprung up, and they occupy an increasing amount of shelf space in established outlets. While in the 1990s and 2000s news about breweries closing down seemed to dominate, in recent years, the

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

trend has been reversed and, according to Rzeczpospolita daily, Poland now boasts the largest number of new breweries in 20 years – and this number is only going to increase. According to a press release from the Treasury Ministry, while beer sales fell overall by 2 percent year-on-year in 2013, “niche” and regional beers (including beers made by larger producers) maintained their double-digit year-onyear sales growth. Of course, the scale and method of production, as well as the ingredients used, means that the price of craft beer is higher than mass-produced beer. Nonetheless, Czech believes that the beer revolution in Poland will carry on. “We obviously don’t intend to compete with mass-produced beers in terms of price, aiming instead to deliver quality to clients who value natural products which are made in an environmentallyfriendly way. People are seeking new tastes and increasingly value local products, and I think this trend will not only continue, but also intensify.” Accent on the local and ethical The Ursa Maior approach to beer is much the same as its approach to other aspects of the Center’s activities. As well as giving local artists a platform to pres-

All Images: Ursa Maior, Shutterstock

ENTREPRENEURSHIP / URSA MAIOR

ent and sell their works, the Center’s shop also upholds an overall local focus and ethical values. “Even though the Center has only been open for a short time, visitors have commented on its unique design and function. You won’t see here any mass-produced plastic souvenirs which have flooded into Poland, pretending to be folk art,” said Czech. All of this is to be found in the unspoiled Bieszczady region, the natural beauty of which will become more of a rarity in Europe. We’ll drink (an unpasteurised and unfiltered beer) to that. u

{

“PEOPLE ARE SEEKING NEW TASTES AND INCREASINGLY VALUE LOCAL PRODUCTS, AND I THINK THIS TREND WILL NOT ONLY CONTINUE, BUT ALSO INTENSIFY.

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Conference 26.03.2015

Zebra Tower, ul. Mokotowska 1, Warsaw

The Made in Poland project, a comprehensive guide to Polish exports will be concluded with a conference where businesspeople, experts and officials will debate the most pressing topics for exporters Panels include: New export destinations. With the Russian embargo on Polish products, domestic producers need to find new markets to sell their products to. Which are the most promising? Africa? Americas? Or the BRICS? Small and medium exporters and start-ups. The challenges and barriers facing SMEs. Which sectors have the best export potential? For more information visit wbj.pl To register contact us at rsvp@wbj.pl

January/February 2015

PUBLIC AND PRIVATE WILL PPP INVESTMENTS FINALLY TAKE OFF? > 54 YEAR IN REVIEW WHAT HAPPENED IN 2014 AND WHERE IS THE MARKET NOW? > 62 RECORD SALES RESIDENTIAL DEVELOPERS HAVE NEVER SEEN A YEAR AS GOOD AS 2014. AND FOR A GOOD REASON > 73

30 pages of real estate content

SECTION PARTNER

INTERVIEW WITH CBRE’S JOANNA MROCZEK ON INVESTMENT OPPORTUNITIES AND INVESTOR EXPECTATIONS IN 2015 > 70

LOKALE IMMOBILIA / NEWS

>LOKALE IMMOBILIA

NEWS

DOMINIKAŃSKI was purchased by Union Investment

l INVESTMENTS

Skanska sells two more schemes in regional markets

December 2014, Developer Skanska Property Poland sold two of its properties: the Green Horizon office complex in Łódź to a fund managed by Griffin Real Estate, and Dominikański in Wrocław to Union Investment, a German-based real estate investment firm. Green Horizon is the firm’s first investment in Łódź. It was commissioned for use in Q2 of 2013 and features 33,000 sqm of class A office space. The complex is almost entirely leased to companies predominantly from the business services sector, with Infosys occupying the largest space at over 21,000 sqm. “The sale of Green Horizon illustrates the investment attractiveness of Łódź, which, until

now, has been recognized by many investors as merely a second-choice city. In fact, Łódź saw the third biggest growth in employment in the business services sector in Poland over the last two years (57 percent). This trend is likely to continue into the future,” said Krzysztof Wilczek, Regional Director at Skanska Property Poland. The Dominikański office complex is currently under construction in Wrocław and is scheduled to be completed in Q4 2015. It will offer 40,000 sqm. The building is already 50 percent pre-leased, with its largest tenant being HP Global Business Center occupying 16,400 sqm. “Seven years ago, Skanska decided that Wrocław would be the first office market outside Warsaw that the company would in-

vest in. Due to the city’s rapid development, it is currently the location where we have the highest number of projects. In 2014, the city registered the biggest leap in the prestigious Tholons ranking of the best outsourcing locations in the world,” said Mariusz Krzak, Regional Director for Skanska Property Poland. Neither of the transaction values have been disclosed. In November 2014, Skanska sold another office project, the first phase of Kapelanka 42 in Kraków, to an SPV of REINO Dywidenda FIZ, a closed-end dividend real estate fund managed by REINO Partners. The value of the deal was €29 million. Kapelanka 42 features 11,700 sqm of office space and is 88 percent leased. u

l INVESTMENTS

olish developer Capital Park has purchased two convenience-type retail schemes, currently under construction in Warsaw’s Ursynów district, altogether totaling 4,500 sqm. Both properties are located on the ground floor of residential buildings and both will be anchored by super-

market chain Piotr i Paweł. The lease agreement with the chain has been signed for 10 years. The first project, with the largest unit of 1,000 sqm, is located on ul. Pileckiego and set to be delivered in H2 2015. The other scheme is situated at the intersection of ul. Belgradzka

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

and ul. Rosoła and scheduled for H2 2016. It consists of nine retail units, the largest of which offers 2,200 sqm and will be leased by the supermarket chain. The two properties will be included in Capital Park’s planned new dividend fund. u

Images: Skanska Property Poland, CBRE

Capital park buys two retail properties in Warsaw

LOKALE IMMOBILIA / NEWS

l INVESTMENTS

Hines acquires Sky Office Center

eal estate investor Hines Poland has purchased Sky Office Center in Warsaw on behalf of the Luxembourgbased Hines Poland Sustainable Income Fund (HPSIF), the firm said in a statement. The value of the transaction was not disclosed. “Sky Office Center complements HPSIF portfolio with its excellent location and high-quality finishes, which add to the appeal of the building,” said Leo Chen, senior managing director of the fund. Sky Office Center is a modern class A office building located in Warsaw. The six-storey building totaling 4,800 sqm is fully leased. Hines Poland focuses on real estate development and acquisitions for Hines’ various investment entities. u

LIBRA BUSINESS CENTRE features 16,000 sqm of office space

l INVESTMENTS

VIG buys two office projects in Warsaw

ienna Insurance Group has acquired Jasna 26 and Libra Business Centre office buildings in Warsaw from Mermaid Properties. CBRE advised the buyer on the transaction. The value of the deal has not been disclosed. Jasna 26 is a historic office building that has been converted by Mermaid Properties into predominantly class A offices, offering approximately 5,700 sqm of office space spread over seven

levels and 49 underground car parking spaces. The majority of the building has been preleased to law firm Sołtysiński Kawecki & Szlęzak. Located next to Al. Jerozolimskie on ul. Daimlera, Libra Business Centre opened at the beginning of 2013 and provides 16,000 sqm of class A offices. Current tenants include Infovide-Matrix, Wydawnictwo Naukowe PWN and Canon Polska. u

€7.7 billion was the total real estate investment volume in the CEE region (excluding Russia) in 2014, 28 percent more than in 2013, according to CBRE.

l INVESTMENTS

CBRE GI Fund acquires Ideal Idea Park

BRE Global Investors announced that it has purchased Ideal Idea Park from BPH TFI investment fund for some €32 million. “It is our third acquisition in the area. Previously, we acquired Warsaw Distribution Center in December 2012 and Manhattan Business & Distribution Centre in November 2013,” said Richard Everett, managing director of CBRE Global Investors. Ideal Idea Park is located on ul. Działkowa, Warsaw. It has 20,200 sqm of warehouse space and 10,400 sqm of office space. u

l INVESTMENTS

Plac Unii sale finalized

iebrecht & Wood Group and BBI Development SA have signed a final agreement on the sale of Plac Unii mixed-use complex to Invesco Real Estate (IRE) for €226 million. Plac Unii comprises three buildings featuring 41,300 sqm of class A+ office space and a three-level shopping center offering 15,500 sqm. It is located in the southern part of Warsaw’s city center. u

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / NEWS

MARATON will add 25,000 sqm of office space to the Poznań market

l OFFICE

Skanska launches new office scheme in Poznań The developer was advised by CBRE on the land purchase for the Maraton project. The scheme was designed by CDF Architekci architectural studio. Maraton is Skanska’s second office project in the city, after Malta House, delivered in 2013 and awarded with the LEED Platinum certificate. In November 2014, Skanska started construction of a project called Axis in Kraków, the firm’s second development in the southern city. u

l MIXED-USE

West Station complex launched

PKP chooses partner for Kraków Główny development

HB Reavis together with Polish Railways PKP have launched construction of the new railway station Warszawa Zachodnia. The new station will be accompanied by an office complex dubbed West Station, totaling 67,000 sqm of office space within two 13-storey buildings. The project is located on Al. Jerozolimskie, in Warsaw’s Wola district. The station building is scheduled for completion in Q4 2015. Phase one of the office complex will be delivered in Q4 2016, while the second phase – in H1 2018. The scheme’s tenants include companies from the PKP group: PKP SA, PKP Informatyka and PKP Intercity. The complex was designed by FS&P ARCUS. u

71st 52

was Warsaw’s rank on the list of the world’s most expensive office locations at the end of Q3 2014, down from 60th in Q1 2014, CBRE stated.

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Polish Railways PKP has selected GD&K Consulting for its partner in the re-development of the Kraków Główny Railway Station. The project will involve the construction of 21,000 sqm of office and retail space at the estimated cost of €55 million. Construction is set to be launched in 2017 and completed in 2019. The investment also involves refurbishing three existing buildings which are considered historic monuments: the old printing house, water tower and roundhouse. u

Images: Skanska Property Poland, HB Reavis, JLL, Immofinanz,

kanska Property Poland has started construction of its second office investment in Poznań, dubbed Maraton. Phase one of the new scheme will be completed in Q4 2016, the firm said. The Maraton project will feature over 25,000 sqm of office space within six floors plus two underground levels with 300 parking spaces. The first stage will include underground garage structures as well as 13,000 sqm of space.

LOKALE IMMOBILIA / NEWS

l INVESTMENTS

PZU fund buys property portfolio The closed-end real estate investment fund of insurer PZU has acquired a logistics property portfolio, encompassing four parks located in Wrocław, Gdańsk and Łódź. The deal value was about €140 million. Clifford Chance, JLL and Tebodin were the buyer’s advisors. The deal is the first in history involving the purchase of a real estate portfolio by a Polish investor, PZU said . u

C200 OFFICE will offer 17,600 sqm

l OFFICE l OFFICE

Echo begins new Wrocław project Echo Investment has started construction on Nobilis Business House, a 16,000-sqm office scheme in Wrocław. The property is located at the intersection of ul. Marii Skłodowskiej-Curie and ul. Mikołaja Reja, next to the Pasaż Grunwaldzki shopping mall. The project is set to be delivered in Q2 2016. u

Euro Styl launches construction on two office buildings

roperty developer Euro Styl has launched construction on two office schemes in the Tri-City, Tensor in Gdynia and C200 Office in Gdańsk. Tensor will be a complex consisting of three buildings, X, Y and Z, with a GLA

adding up to 19,750 sqm. Building X, with 4,960 sqm in GLA, is due to be completed in late January or early February 2016. The C200 Office involves the redevelopment of a former shipyard office building. It will have a GLA of 17,600 sqm. u

l R E TA I L

Immofinanz launches VIVO! mall in Krosno

mmofinanz Group has launched construction of a shopping center in Krosno, south-eastern Poland, under the VIVO! brand. The construction should be completed in Q1 2017. The project is valued at €37 million. The new mall will feature 22,000 sqm of GLA within 70 units. It will be located in the southern part of the city, near the

recently delivered ring road. The scheme will be carried out in cooperation with Acteeum Group. Krosno will be the third city in Poland with a VIVO! shopping center, after one was opened in Piła, western Poland, in October 2014 and another one is under construction in Stalowa Wola, south-eastern Poland. u

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / NEWS

INTERVIEW

Arie Koren, CEO of OKAM Capital

New heart of Praga l MIXED-USE

OKAM buys former cosmetics factory

esidential developer OKAM Capital has purchased a 19th century cosmetics factory in Warsaw’s Praga district to be transformed into a mixed-use development dubbed Nova Praga. The factory was constructed in 1899 and is one of Warsaw’s oldest

industrial facilities. In the 1970s, the facility operated under the Pollena brand. The developer will refurbish the industrial property into retail and office space, and will erect two residential schemes, that will be designed by the Grupa 5 architectural studio. u

MERCURE BYDGOSZCZ SEPIA offers 90 rooms

l H O S P I TA L I T Y

Mercure opens four-star hotel in Bydgoszcz

ercure Hotels has opened its first hotel in Bydgoszcz, a four-star scheme dubbed Mercure Bydgoszcz Sepia. It operates under a franchising agreement with the Orbis hotel group. It features 90 rooms, including 23 singles and 62 doubles, as well as four premium suites and an apartment with a view of

the Old Town. The hotel also offers two conference rooms and a fitness center. Orbis is the largest hotel chain in Poland, offering 12,000 rooms within 64 hotels in 33 Polish cities. It operates under brands such as Sofitel, Novotel, Mercure, Ibis, Ibis Styles and Ibis Budget, and Orbis Hotels. u

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Why did your company decide to purchase the former factory? I am an enthusiast of old industrial buildings and I strongly believe in their potential. The former cosmetics factory Pollena was built in the late 19th century and once you are there you can still feel the spirit of those old times. As a real estate developer, I feel pretty honored that our company has the opportunity to save such places and breathe new life into them. What are your plans for the property? How much of it will be revitalized and how much will be built anew? Our goal is to create a new “heart of Praga” that’s open for all citizens and tourists. A place where residents will be able to find entertainment, do shopping, spend their free time, and also live comfortably. I strongly believe that this neighborhood needs to be explored because of its great potential for becoming a fashionable, cultural and modern place. The 20,000 sqm of post-industrial buildings will be revitalized and transformed into a shopping and leisure center with 2,000 sqm of a food market. We are planning to build about 900 new apartments. Soon the district will also have an even better connection to the city center – the Szwedzka subway station is planned to be open in 2018. When will the apartments enter the market? We are planning to open the investment, including shopping and leisure center and apartments in January 2018. However, our plans depend on the progress of the subway construction. u

Images: OKAM Capital, Mercure Hotels, Mayland Real Estate, JLL

THE 20,000 SQM FACTORY will be transformed into a shopping and leisure center

LOKALE IMMOBILIA / NEWS

l FINANCING

l LOGISTICS

Pekao and BZ WBK grant €95 million credit for Serenada mall in Kraków

P3 to build a 46,000-sqm BTS scheme for ID Logistics

enders Pekao and Bank Zachodni WBK have signed a deal to provide €95 million funding for the construction of the Serenada shopping center in Kraków. In addition to the loan, Foncière Euris Group and Mayland Real Estate will invest

€45 million of their own funds in the scheme. The Serenada mall, scheduled to be completed in 2017, is currently 50 percent leased. It will deliver 35,000 sqm of retail space within 170 units. u

P3 Logistic Parks will build a 46,230sqm warehouse for ID Logistics. The built-to-suit facility will be located in the P3 Mszczonów park near Warsaw. The scheme is scheduled for delivery in Q3 2015. ID Logistics said the facility will serve as a hub for a major international retailer. u

PHN to build 100,000 sqm of warehouse space near Warsaw A subsidiary of Polski Holding Nieruchomości has signed a joined venture agreement with Parzniew Partners for the construction of warehouse park Parzniew Logistic Hub. The project will consist of four stages, altogether set to deliver 95,000 sqm of space. It will be located near Pruszków, west of Warsaw, close to the A2 highway. u

Biedronka opens 21,500-sqm distribution center near Warsaw Jeronimo Martins Polska, the owner of retail chain Biedronka has opened its 15th distribution center, located in Pruszków, west of Warsaw. The scheme comprises 21,500 sqm of space and will service 120 Biedronka stores. The center will employ 280 workers and will generate another 260 jobs in partner companies. The construction was launched in April 2014 and took eight months to complete. It cost PLN 60 million. u

SERENADA is set to be completed in 2017

TALKING POINT

“A large influx of capital from such directions as the United Arab Emirates, Saudi Arabia, Qatar and India will come to Poland ... The investors declared to buy land in various sites, not only in Warsaw.” Daniel Puchalski, the director for JLL Land & Sites Department

1 MLN SQM

OF NEW WAREHOUSE SPACE WAS DELIVERED TO THE MARKET IN 2014, ACCORDING TO CBRE.

l FINANCING

l RESIDENTIAL

Echo Investment signs loan deal for PLN 700 million with HSBC

Złota 44 to be completed by Inso, investor procures loan

Developer Echo Investment has signed an agreement with British lender HSBC and HSBC Bank Polska for a loan of over PLN 700 million (€165 million of investment loan plus PLN 14 million for VAT payment). The funds are earmarked for refinancing Galeria Echo in Kielce as well as for the development of two office schemes: Tryton Business House in Gdańsk and Opolska Business Park in Kraków. u

talian construction company Inso has been appointed once again to complete the Złota 44 residential tower. The firm has signed an agreement with the new owners of the scheme, BBI Development and Amstar, which acquired Złota 44 from Orco in August 2014. Inso was the building’s general contractor also under the previous owner. However, due to Orco’s finan-

cial difficulties, work on Złota 44 was halted back in December 2013, and the contract with Inso was terminated. BBI is going to finance the completion of the Złota 44 project with a loan. “The owner of the building is not in debt. We have been in talks with banks to get a PLN 180-190 million loan in order to complete the project,” BBI Development CEO Michał Skotnicki said. u

WBJ OBSERVER • JANUARY/FEBRUARY 2015

GALERIA KATOWICKA WAS OPENED IN SEPTEMBER 2013. IT WAS DEVELOPED BY NEINVER WITH STRABAG AS THE GENERAL CONTRACTOR. IT FEATURES 52,000 SQM OF GLA.

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

LOKALE IMMOBILIA / INVESTMENT MARKET

When public turns to private WITH EU FUNDS DESIGNATED FOR POLAND LIKELY TO BECOME SCARCER, COULD PUBLIC PRIVATE PARTNERSHIPS HELP BRIDGE THE INVESTMENT GAP? B Y A L E X H AY E S & B E ATA S O C H A

he public authorities in Poland would like to build yet more new roads, yet more new hospitals and still more new railways and metro lines, but now the EU is becoming distinctly less generous in its funding of such projects in Poland. Taking on further debt is no longer an option for the authorities as they are nearing the limits of their borrowing capacity. But help is at hand. With Public Private Partnerships (PPP), the burden of financing a new project is placed on the private partner and so officially can be kept off government books. Indeed, since the project is a “partnership,” it is not always necessary to contribute to the initial costs of the investment at all, deferring payment until the facility is built. Is this the ultimate buy-now-pay-later scheme? Pay nothing till September One recent example of such a project is the renovation of the student dormitories at the Jagiellonian University Medical College (UJCM) in Kraków, for which Bank Pekao granted PLN 80

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / INVESTMENT MARKET

€530 million is the estimated value of the Warszawa Gdańska

project PKP is taking on with developer Ghelamco

“DESPITE BEARING THE BULK OF THE RISKS INVOLVED IN THE PROJECTS, PRIVATE COMPANIES HAVE LONG BEEN INTERESTED IN THE PPP FORMULA, BECAUSE IT IS EASIER TO OBTAIN THE REMAINING FINANCING IF YOU ARE BACKED BY A LARGE PUBLIC INSTITUTION.

million as a long-term loan. The project is funded by Polish Investments (PIR) as the majority stakeholder, Cofely and BYPolska Property Development. “In addition to raising equity, BYPolska also secured the debt side of the transaction by bringing lender Pekao, a subsidiary of Unicredit Group, on board. So the University did not have to finance the project or increase its debt,” stated Gilles Leonard, the chairman of BYPolska Property Development (a subsidiary of Bouygues Construction). “The development risks were 100 percent borne by BYPolska which structured the project based on a PPP agreement originally established by the UJCM and discussed during a competitive dialogue process,” he added. According to Kamil Jankielewicz of the Allen & Overy law firm, there is nothing unusual about the private partner bearing most of the responsibility for financing a project. “Generally with PPP the majority of the risk and the majority of the financial burden is on the private partner,” he stated. Why so few? Despite bearing the bulk of the risks involved in the projects, private companies have long been interested in the PPP formula, not only because they can count on an injection of public money but also because it is easier to obtain the remaining financing if you are backed by a large public institution. “Private companies are not Santa Claus,” said

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Tomasz Sawicki, a transaction manager at the state-owned Bank Gospodarstwa Krajowego (BGK). “Their involvement in PPP projects is strictly businessoriented and one cannot accuse them of not wanting to make money. PPP projects widen portfolios of both building companies and operators as well as give good alternatives for capital investments, especially if the project is availability payment-based.” However, despite the financial attractiveness of PPP, only a limited number of such projects has been implemented in Poland so far, mainly due to opposition from public authorities. The Ministry of the Economy runs a database that lists 77 such projects currently in progress throughout the country, with another 125 proposed. One of the main reasons for that is the ready availability of EU funds for infrastructural projects within the previous and the current EU budget. Tapping EU funds is far easier than partnering up with a private business, as it requires less preparation on the part of public authorities, including hiring experienced advisers and negotiating with banks. As Jankielewicz put it, PPP “is not a simple way of doing business and I guess the Polish public authorities lacked that knowledge.” BGK’s Sawicki concurs: “In previous years, there have been large amounts of ‘free’ EU money relatively easily available for top-priority public projects. Nevertheless, one can observe

LOKALE IMMOBILIA / INVESTMENT MARKET

from design to implementation

WE DESIGN AND BUILD OFFICES WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / INVESTMENT MARKET

a growing number of increasingly well prepared PPP projects, which shows that the parties involved are moving up the learning curve.” Rafał Petsch, director at Bank Pekao also seems cautiously optimistic about PPP. “The fact that a mere 20 percent of all PPP proceedings get to the stage of selecting a contractor clearly points to a number of legislative shortcomings. However, we are seeing a gradual improvement in this area which has already sparked an uptick in the number of new PPP contracts.” Keeping hands clean Another reason why public authorities in Poland have been wary of direct links with the private sector is because they have wished to remain beyond any suspicion of corruption. “Such has been the public perception of any deals between the private and public sector. I guess what has changed this is the fact that PPP is known in all other markets in Western Europe, especially in the UK, so it’s not something that Poland would have to invent itself,” Jankielewicz explained. Still, public bodies have long been accustomed to doing only what the law told them to do and seemed intimidated by the range of possibilities that Public Private Partnership offered. “For years there was a discussion about whether you actually could do any PPP, because nothing like that was provided for in the law,” Jankielewicz said. “In private law, there is a rule that whatever is not forbidden is permitted, while the overriding principle of public law is that public authorities only act on the basis of what is permissible to them under the law. It’s not easy for public authorities to understand that when they are doing deals they are not within the confines of public law,” he explained. Then there came a period of overregulation which bound the hands of public authorities so tightly that no actual PPP project was implemented under that legislation. Now, after years

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

PKP’s public-private track record State-owned Polish Railways PKP seems to be a poster child for Public Private Partnerships in its real estate projects. After successfully investing in rebuilding railway stations in Poznań and Katowice as well as combining them with large-scale malls, the operator took on further refurbishing projects in cooperation with private investors. Apart from the two investments currently under construction (Warszawa Zachodnia and Warszawa Gdańska) the company has a number of projects in the planning stage, both in major agglomerations as well as in secondary cities. The scale of PKP’s investment plans has prompted the firm to spin off a real estate subsidiary, dubbed XCity Investment. PKP will transfer land to the new company as well as 14 planned investments and the two that are under construction. According to PKP’s board member Jarosław Bator, XCity Investment will have an asset portfolio worth PLN 24.2 billion in 2018. In the future, XCity Investment could be traded on the stock exchange or sold to a private investor. The State Treasury will make the decision in a few years’ time, Bator said.

Warszawa Gdańska

One of PKP’s large-scale investment projects, currently being carried out in the capital by PKP, together with Ghelamco. It involves the construction of 160,000 sqm of commercial space for an estimated sum of €530 million. It’s scheduled for completion in 2028.

LOKALE IMMOBILIA / INVESTMENT MARKET

Poznań City Center was developed by Trigranit, Europa Capital and PKP. It features 60,000 sqm of retail space. Delivered in October 2013, it was sold for some €250 million to a consortium of Resolution Property and ECE Fund in one of the largest real estate deals of the past year.

Warszawa Zachodnia

PKP launched the Warszawa Zachodnia project together with HB Reavis in December 2014. The new station will be accompanied by an office complex dubbed West Station, totaling 67,000 sqm of office space within two 13-story buildings. The project is located on Al. Jerozolimskie, in Warsaw’s Wola district. The station construction is scheduled for completion in Q4 2015. Phase one of the office complex will be delivered in Q4 2016, while the second phase – in H1 2018.

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / INVESTMENT MARKET

“LOCAL GOVERNMENTS ARE PUTTING A LOT OF WEIGHT ON MEDICAL INVESTMENTS, REFURBISHING HOSPITALS AND EQUIPPING THEM.

of going from one extreme to the other, a better balance has been struck (although further changes to the law have already been proposed). The current regulations mainly define PPP schemes as projects implemented through a competitive dialog as defined by EU rules or as a concession for services or construction work, which Jankielewicz describes as very flexible mechanisms. Long-term planning However, Marta Piotrowska of Interhealth Canada disagrees that the current legislation facilitates public-private projects. “The current legal system is not always compatible with the nature of PPP projects,” she said. Interhealth Canada has signed a PPP contract to build and run a large regional hospital in Żywiec, the first such PPP investment in the health care industry in Poland. In her opinion, additional regulations are necessary to facilitate long-term projects. “PPP agreements assume, more often than not, a 30-year contract period. It’s a curious exercise to have to forecast all the possible areas of change at the time of the tender process so as to adhere to the limitations of the current Polish procurement law.” The government seems to understand that the current legal provisions are inadequate and are working to remedy the situation. The Polish Agency for Enterprise and Development (PARP) has

stated that, “Currently, the Ministry of the Economy as well as the Ministry of Regional Development have undertaken an effort to strengthen Public Private Partnerships in the Polish economy. New amendments to the Act governing PPP and the Act governing public finances with regard to the implementation of PPP projects have been prepared.” Still, even if all the kinks in the law are fixed, there are other obstacles that PPP projects, particularly those long-term ones, will need to overcome. Sawicki claims that there are only three banks in Poland (including Bank Gospodarstwa Krajowego) capable of providing the kind of long-term financing that such projects require. Also, the scale of PPP projects may be an issue. “Given the number of parties and institutions involved, the minimum viable size of such an endeavor is some PLN 40 million in most cases,” said Igor Bilski, CEO of BIPRO, a Łódź-based architectural and engineering firm specializing in public utility schemes. “First, there are specialist legal, accounting and advisory services, then there is the design stage and investment execution,” he enumerated. Go hybrid Are we going to be seeing many more of these types of projects then? The probable answer is yes, especially

when EU funds can be combined with PPP projects. “We already have the first few examples of such hybrid projects, such as the waste incinerator in Poznań and the railway station in Sopot, which have already paved the way for more investments. We can also see increasingly strong signals from the European Commission that such undertakings need to become more common,” said Pekao’s Petsch. He added that although no major breakthrough is expected, “the number of hybrid projects should increase as the entire PPP market develops.” The range of PPP investments will be larger too, going beyond road, energy and environmental infrastructure. “Local governments are putting a lot of weight on medical investments, refurbishing hospitals and equipping them,” said Bilski. Major cities are also taking on projects involving revitalization of their downtown areas. “The city of Łódź received some PLN 2 billion for city revitalization in the new EU perspective, and a part of that sum will likely be spent on PPP projects,” he explained. Even though PPP is still something of a novelty on the Polish market, we can expect that with each new successful public-private investment more institutions and private firms will be inclined to team up and use the formula to their advantage, and for the public benefit. u

PLN 40 mln is the minimum viable size

of a PPP endeavor in most cases 60

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

WBJ Observer presents

A BALANCED PORTFOLIO PHN has recently announced that it intends to buy an A-class office building in one of the major regional cities. Could you let us in on the secret?

What is your strategy for the next year? Last year, PHN mainly oversaw construction projects in the Warsaw office market. Does the announcement about purchasing an office building outside Warsaw mean that you will now focus on regional markets and finished project takeover? PHN’s long-term strategy assumes value creation, among others, through optimum use of the potential of the company’s properties and through a change of the investment portfolio structure to ensure high return on investment, hence the new additions to the property portfolio. We will continue to focus on commercial properties in Warsaw, while actively following the situation and analyzing the possibilities for further growth on regional markets. It is worth remembering that PHN owns investment and development properties in cities such as Wrocław, Łódź or the Tri-City which enable us to implement new ambitious projects. What is the current state of implementation of other commercial projects? The implementation of all PHN projects is proceeding according to schedule. In mid-year, we will receive tenants in our flagship investment – Domaniewska Office Hub, which is being constructed at ul. Domaniewska 37c in Warsaw. Just like all properties constructed by PHN, this seven-storey office complex is characterized by remarkable, timeless architecture, which makes it stand out from its surroundings. Domaniewska Office Hub is being built with the use of the highest quality finishing materials and green solutions compliant with BREEAM. The investment is currently in the course of obtaining the BREEAM certificate with an “excellent” rating. All of this attracts tenants to the Domaniewska Office Hub. Moreover, we are undertaking other ambitious projects in cooperation with high class partners. We recently signed a Joint Venture agreement with Parzniew Partners B.V. – a company established by Menard Doswell & Co. and Hillwood Europe – on the construction of the Parzniew Logistic Hub, which is located close to major highway junctions

ARTUR LEBIEDZIŃSKI, CEO OF PHN

(A2) of the Warsaw agglomeration, namely Konotopa and Pruszków. The project includes 95,000 sqm of warehouse space together with supplementary office space. Moreover, we have teamed up with mLocum S.A. for the implementation of the first phase of the Port Rybacki investment in Gdynia, consisting of the construction of six residential buildings on the property belonging to Dalmor S.A., a company from the PHN Group. We are currently conducting talks with potential partners regarding cooperation in the second (commercial) phase of this complex which will be constructed in the area of the Molo Rybackie pier, close to the Gdynia port. How do you assess the situation in the Warsaw office market (an expected increase in vacancies until 2016 and rent pressure) and in regional markets? The property market in Warsaw remains under strong pressure due to high supply, so tenants still have the last word. In order to attract clients, developers use very competitive pricing policies and numerous incentives. At the same time, the institutional office market in key Polish cities significantly increased and is more “balanced” than Warsaw, which is important for our long-term strategy. Which other market segments are important for your strategy? To date, Polski Holding Nieruchomości has been known mainly for its investments in the office sector. In our longterm strategy, a vital role will be played by modern warehouse areas constructed with high class partners, such as the already mentioned Parzniew Logistic Hub. We are also implementing retail segment projects, mainly in the BTS (built-to-suit) formula. These are “tailor-made” projects designed to meet the tenant’s needs, where PHN designs, constructs and finances a facility in accordance with the local master plan, taking into account the tenant’s requirements and standards. Our strategy also assumes selective residential projects at the sites we own in key Polish cities.

WBJ OBSERVER • JANUARY/FEBRUARY 2015

BROUGHT TO YOU BY PHN

Over the last few months, when searching for an appropriate acquisition target, we have analyzed a number of properties in Warsaw and the major regional cities. As a result, we signed a letter of intent in mid-January on the purchase of an A-class office building of 15,000 GLA, which is located in the center of one of the major regional cities in Poland. This acquisition is aimed at increasing the share of modern commercial space in the property portfolio of Polski Holding Nieruchomości.

LOKALE IMMOBILIA / YEAR IN REVIEW

Shifting perspec t WHAT DID 2014 BRING IN REAL ESTATE? WHERE IS THE MARKET HEADED IN 2015? BELOW WE PRESENT AN OVERVIEW OF THE INVESTMENT, OFFICE AND RETAIL MARKETS. NEXT MONTH WE WILL COMPLETE THE PICTURE WITH LOGISTICS AND HOTEL SEGMENTS

What will investors Germany’s supplylook baseto in 2015?

his year will see transactions involving new retail schemes and portfolios of so-called small projects, that is below 5,000 sqm. We can see a significant surge both on the supply side, as developers deliver many properties in this retail format, as well as the demand side, as evidenced by increased investor interest. This year, two more funds, whose strategy is to acquire such assets, will be created. Both demand and supply in this segment are growing. Developers’ plans for

the transaction volume in 2015 will 2015 are ambitious. There are several be comparable to or will exceed that warehouse portfolios available for sale of 2014. Last year we saw increased at the moment. Several projects that activity among both private and have already been leased will institutional funds with Polish be delivered within the next capital. In 2015, new Polish funds couple of months, so we can exwill be created which will invest pect they will enter the investPolish capital, either directly or inment market. directly, in commercial real estate. Considering the number and We expect to see Polish investors the value of assets which are being analyzed now as well as Kamila Wykrota, increase their share in the total head of Consulthose that will soon be delivtancy and Market investment volume over the next ered to the market, we believe Research at DTZ few years.

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

LOKALE IMMOBILIA / YEAR IN REVIEW

c tive

B Y B E ATA S O C H A

oland’s investment volume reached €3.13 billion in 2014, more or less on par with the 2013 score, with a large chunk of all deals made in Q4 (€1.26 billion), according to Cushman & Wakefield. Poland is no longer the sole green island in Central and Eastern Europe. While the investment volume in Poland remained largely unchanged last year, the total deal volume in the region increased by 41 percent to reach €7.3 billion for the five core CE markets (Poland, Czech Republic, Romania, Slovakia and Hungary), according to CBRE. The entire CEE region excluding Russia saw €7.7 billion worth of real estate transactions, 28 percent more than in 2013. Poland accounted for 40 percent of that volume (last year it was 54 percent). The reason why Poland’s share in the total CEE market is decreasing is that the Czech Republic experienced a 96 percent increase on 2013 volumes with €1.99 billion transacted in 2014. Romania saw the highest annual increase (141 percent) and achieved €1.07 billion in 2014. The investment volume in Hungary was at €616 million in 2014 (73 percent increase on the year). Slovakia recorded an 116 percent y/y surge and reached €504 million in 2014, Cushman & Wakefield reported. “Central Europe has become an established part of any pan-European investment strategy. Warsaw has been the gateway for this but activity is clearly growing rapidly in secondary cities and across all CE countries,” said James Chapman, partner and head of CE Capital Markets at Cushman & Wakefield.

Segment breakdown

The reason why investment volume in Poland is not growing as quickly as in the other CE markets is largely due to the limited supply of assets for sale, particularly retail properties. Last year, the sales volume of retail properties stood at €1.32 billion. This year it was at less than half of that sum – €570 million. “The largest retail schemes changed hands over the past few years. They will return to the market once their owners reach the expected return on investment,” said Kamila Wykrota, head of Consultancy and Market Research at DTZ. Meanwhile, the office and the industrial/logistics segments more than made up for the loss, with €1.65 billion in office deals and €710 million in logistics transactions, according to CBRE data. “The office sector recorded the highest investment activity in Poland since 2006, while the industrial sector turned over the highest-ever transaction volume on the Polish industrial investment market,” Cushman & Wakefield wrote. Regional paradise

One of the reasons why the office segment dominated the investment market last year is the growing prominence of regional office markets in Poland. It is no longer only Warsaw that’s of interest to international money managers. They are more and more inclined to consider secondary locations. That is why last year’s office investment deals in regional cities increased by over 100 percent compared to 2013 and amounted to €370

Skanska’s recent divestments

Kapelanka 42 in Kraków, 11,700 sqm, €29 million

Dominikański in Wrocław, 40,000 sqm

Green Horizon in Łódź, 33,000 sqm

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / YEAR IN REVIEW

million, according to Cushman & Wakefield. This is also why over 400,000 sqm of brand new office stock is scheduled for delivery this year. Developers are more than eager to capitalize on improving investor sentiment towards regional markets. Skanska, for instance managed to sell three projects in the last two months of 2014: Dominikański in Wrocław to German-based Union Investment (the developer’s fourth office sale in the city), Green Horizon in Łódź to a fund managed by Griffin Real Estate and Kapelanka 42 in Kraków to Polish REINO Dywidenda FIZ for €29 million. It has also launched two new projects: Axis (20,000 sqm) in Kraków and Maraton (25,000 sqm) in Poznań, both set for completion (and likely for sale) in 2016. Who’s buying?

Polish investors are increasingly active on the investment market. The share of Polish capital in the total transaction volume has increased from 6 percent in 2013 to 10 percent in 2014. “In 2015, new Polish funds will be created which will invest Polish capital, either directly or indirectly, in commercial real estate,” said DTZ’s Wykrota. More importantly perhaps, they were not afraid to take on some major deals last year. “The single largest logistics deal was made by Polish insurer PZU, which purchased a portfolio of five Panattoni warehouses for around €140 million,” said Łukasz Lorencki, senior surveyor at the Capital Markets Department at Cushman & Wakefield. Besides the growing participation of Polish capital, the past year has also seen more interest from oversees. “In previous years, investment activity was fueled invariably by German investment funds, but in 2014, US entities were the most active investors in Poland for the first time since 2011, accounting for nearly 40 percent of deal volume,” Lorencki said. “This was largely due to the strong activity of a new entrant to the Polish market, Starwood, which acquired Łopuszańska Business Park, T-Mobile Office Park and Katowice Business Point from Ghelamco and Quattro Business Park in Kraków from the Buma Group.” Two other US investment funds, Blackstone and Prologis, focused largely on the warehouse sector with five transactions totaling around €310 million.

REGIONAL OFFICE MARKETS INCREASINGLY POPULAR Warsaw remains the key office market in Poland. Last year saw the sale of some top Warsaw office buildings, like Rondo 1 and Metropolitan. The sale value of these two buildins alone was close to €500 million. As far as sales of individual assets outside Warsaw are concerned, they were dominated by two regional cities: Kraków and Wrocław. Other regional cities have also seen office sale transactions, with the most remarkable ones being portfolio sales. Recent sales included office properties in Łódź, Gdynia and Poznań comprising the Arka BZWBK fund, as well as a portfolio of three properties, including Katowice Business Point, acquired by Starwood Capital Group. Transaction prices of office properties in regional cities stood between €1,900 and €2,600 per sqm, with the newest properties fetching the highest prices. The most important transactions include the sale of Green Day and Dominikański in Wrocław, the Quatro Business Park complex and Kapelanka in Kraków, as well as Green Horizon in Łódź. Judging by the recently closed transactions, the lowest yields for office buildings outside Warsaw were approximately 7 percent. In the case of older office buildings, the lowest yields stood at about 8 percent. In January, Polski Holding Nieruchomości announced its plans to purchase a class A building in one of the largest regional cities, but without specifying the exact location. The high supply of office space under construction in Wrocław and Kraków is the result of the growing position of these locations on the international market.

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

INVESTORS WHO ACCEPT HIGHER RISK LEVELS ARE LOOKING FOR OPPORTUNITIES IN THE REGIONAL MARKETS, BECAUSE THEY CAN COUNT ON HIGHER YIELDS THAN IN WARSAW, WHERE THESE ARE CURRENTLY ESTIMATED BELOW 6.5 PERCENT FOR THE BEST PROPERTIES.

Robert Korczyński, head of Commercial Property Valuations at Emmerson Evaluation

LOKALE IMMOBILIA / YEAR IN REVIEW

OFFICE – REGIONALLY ATTRACTIVE

Images: Skanska Property Poland, Wikimedia, Emmerson Evaluation, HB Reavis, Capital Park, Ghelamco, Shutterstock

Despite Warsaw facing increasing oversupply over the next two years, developers are tireless in delivering new space to the capital’s market

Poland already has 7.3 million sqm of modern office space and the market will grow by another 10 percent (730,000 sqm) this year, according to JLL analysts. Warsaw, which has 4.36 million sqm of office space, the biggest amount in CEE, will gain an additional 320,000 sqm in 2015. Kraków will see the second largest increase by 114,000 sqm, followed by Wrocław (91,000 sqm) and the Tri-City (87,000 sqm). Warsaw – too hot for comfort

Office vacancy rates in Warsaw stood at 13.3 percent at the end of 2014, up from 11.7 percent seen at the end of 2013. The areas that have thus far been the hottest for developers because of the highest rents (CBD and the CBD fringe) saw the greatest surge in empty space volumes. The two central zones had 15.2 percent of vacant space at the end of 2014 (up from 10.6 percent a year earlier), while vacancies in peripheral areas stood at 12.4 percent, Warsaw Research Forum (encompassing seven real estate advisory firms: CBRE, Colliers International, Cushman & Wakefield, DTZ, JLL, Knight Frank and Savills) stated in a report. “Looking forward to 2015, competition for tenants is anticipated to become more fierce while developers, having confidence in

the market, will be launching new projects,” said Piotr Capiga from the office department of Cushman & Wakefield. Take-up for the entire 2014 amounted to 612,000 sqm, 6 percent below last year’s value. The largest lease transactions over the past year were 19,500 sqm leased by Raiffeisen Bank in Prime Corporate Center, 17,500 sqm renegotiated by the Agency for the Restructuring and Modernization of Agriculture in Poleczki Business Park and a pre-let of 15,000 sqm by PKP companies in West Station.

7.3 million sqm total modern office stock across Poland. 4.4 million sqm is the entire modern office stock in Warsaw. 276,900 sqm of office supply hit the Warsaw market in 2014.

Despite a decrease in office space absorption last year, developers remain cautiously optimistic about 2015. For one thing, the drop of 2014 was a cyclical thing (there weren’t all that many firms eager to sign new leases back in 2009 when the crisis was at Poland’s doorstep, and most office leases are in fact five-year deals). Secondly, there are a few new trends shaping the office market in Warsaw that will help halt or at least cushion the vacancy climb over the next two years. Publicly acceptable

Until recently almost completely dormant, many public sector institutions decided to take advantage of the tenant’s market and upgrade their offices last year. The list of institutions that took up office space both in B-class buildings and in new top grade office buildings last year includes the Polish Office for Registration of Medicinal Products, Medical Devices and Biocidal Products (13,000 sqm), the General Inspectorate of Road Transport (7,054 sqm), the Agricultural Property Agency (5,700 sqm), the Civil Aviation Authority (6,500 sqm) and the Customs Chamber (3,500 sqm). “Given the tenders currently taking place, public sector tenants will continue to increase their presence on the Polish office

Major office completions in 2014

Source: Centre for Retail Research / RetailMeNot

Gdański Business Center, phase one, 44,500 sqm

Eurocentrum Office Complex, phase one, 38,700 sqm

Warsaw Spire, building B, 20,000 sqm

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / YEAR IN REVIEW

market in 2015. Entities looking for new office space include the Ministry of Foreign Affairs, the National Health Fund, the Treasury Office in Warsaw and the National Fund for Environmental Protection and Water Management,” said Capiga.

Piotr Capiga from the office department of Cushman & Wakefield

Revitalize and re-market

Another trend that has already taken hold and will likely continue to become more prominent in 2015 is revitalization of old buildings and converting them into modern, class-A office space. In 2014, a number of buildings were upgraded, including Pl. Bankowy 1, Małachowski Square, Moniuszki 1A, Spektrum, Jasna Residence, Mazowiecka 2/4 and Adgar West Park. Further schemes are also undergoing revitalization such as Ethos on Pl. Trzech Krzyży, Cedet on Al. Jerozolimskie and the tenement house at ul. Smolna 40. “Office space in such buildings was taken up mainly by law firms, such as K&L Gates and Sołtysiński, Kawecki & Szlęzak,” Capiga explained.

70%

of new office completions in Warsaw were delivered outside the city center (mainly on the CBD fringe).

15.2%

was the vacancy rate in Warsaw’s CBD and the CBD fringe at the end of 2014. BPOs going strong

As Warsaw struggles to find its balance, regional cities in Poland are more and more visible on developers’ radars. Even those that until recently focused exclusively on the capital are turning their gaze to secondary markets. In the main Polish regional cities, tenants from the BPO and SSC sectors continued to account for a major share in the total take-up. The largest deal of the past year was Infosys’s lease of around 21,000 sqm in Łódź. “Regional cities are becoming increasingly successful in competing with Warsaw for tenants and we expect this to continue in 2015,” Capiga added.

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Wola – CBD’s little brother

remarkable highlight of 2014 was the growing importance of the Wola district on Warsaw’s office space map, following the completions of Atrium 1 and Warsaw Spire B. Further schemes are currently under construction in that district, including Proximo, Generation Park, Atrium 2 and Skyliner, while concept designs are being prepared for Mennica Tower, Spinnaker Tower and Liberty Tower. Given the dynamic expansion of this part of Warsaw, the Wola district is anticipated to become a major office hub in the capital in a couple of years, as has happened with the Mokotów district. Despite very strong market competition, developers that constructed buildings on the border of the Śródmieście district and neighboring districts, particularly Ochota, Wola and Żoliborz, have successfully commercialized their schemes. This was followed by the launch of the next phases of Eurocentrum Office Complex, Gdański Business Center and Atrium. Atrium 2 will feature 20,000 sqm of office space

LOKALE IMMOBILIA / YEAR IN REVIEW

RETAIL – CHANGES, CHANGES

Images: Shutterstock, Cushman & Wakefield, Skanska Property Poland, Mediadem Consulting, Echo Investment, JLL

The digital revolution, including but not limited to online sales, has been making waves in Western markets for almost a decade. It is high time Poland faced the same dilemmas and challenges

Retail is arguably where we saw the most significant and rapid changes over the past year. Granted, the investment volume in this market segment was modest (€570 million according to JLL) and the new supply was far from staggering (425,000 sqm, CBRE data). But retailers, shopping center owners and managers are well aware they are in for some major challenges. They are increasingly aware of the growing competition from e-commerce and are doing everything they can to stay ahead of the curve. One format they have begun experimenting with is pop-up stores – a good way to build brand awareness and to get a read on the market. Some retailers open up in shopping malls for only a couple of days. The new tactic has been readily adopted by market entrants, particularly in the fashion segment; but even major players from the e-commerce business, such as Zalando, are looking into this form of promotion technique. “Pop-up stores are an interesting phenomenon, increasingly common on the Polish retail market. Last year’s examples include H&M in Factory Annopol, Zalando and Abstrawear in Złote Tarasy in Warsaw. Outside of Warsaw we saw Aloha from Deer in Poznań’s Stary Browar. It’s a trend that makes shopping centers more

dynamic, so we expect to see it continued this year as well,” said Marta Augustyn, associate director at the Retail Agency of JLL. A balancing act

Incorporating the digital and the traditional channels seems to have been the number one item on many retailers’ agendas last year. “Some retailers continue to experiment cautiously with stores being used as showrooms for product presentation rather than the default place for sales transactions. This trend is the market’s response to the growing importance of ecommerce on the retail market,” Magdalena Sadal, senior consultant at Cushman & Wakefield, commented. Also electronics retailer RTV Euro AGD has been praised for its “click-and-collect” retail model. “You can’t operate only in brick-andmortar stores or only online. Clients expect retailers to offer both and those chains that can balance the two channels will gain the most,” said Marek Noetzel, head of the Retail Department of Cushman & Wakefield. Technology is also increasingly mak-

ing its way into shopping malls which have started using beacons to guide shoppers to where they are most likely to buy products as well as their mobile phones to track their movements. Happy birthday

“Until now, property managers did not have such information at their disposal and management was based mainly on simple footfall figures, experience and expertise or on market research. What used to constitute a success was the attraction of several ‘cash cows’ to the center, i.e. large and popular brands,” said Paweł Henke, CEO of research firm Cherry BPM. “Business Intel-

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / YEAR IN REVIEW

Atrium Felicity in Lublin, 73,000 sqm

Galeria Amber in Kalisz, 33,500 sqm

ligence solutions as well as Big Data are a must have for the retail industry these days. Indoor location tracking is a perfect example of such tools,” he added. The tool was used to measure the increase in footfall at the Riviera mall in Gdynia during a celebration of the mall’s first birthday. It analyzed data from mobile phones connecting to the mall’s wi-fi network to find out the dwell time as well as the clients’ most frequented pathways. Available data not only included the footfall for the entire mall (which increased by 22 percent compared to the reference period), but also the highest increase per tenant (youth fashion brands were visited by up to 262 percent more people on the day of the event, while the mall’s drug store was visited by 286 percent more clients). The dwell time of the center’s customers also increased (36 percent more clients spent between 3 and 3.5 hours in the mall). The study also showed that 16 percent of

clients returned to the shopping center within a month of the event, suggesting that events might be the next big thing for mall owners looking for a boost. Conveniently close

Changing shopping behaviors, mainly the growing preference among customers to do daily shopping close to home rather than in large supermarkets or hypermarkets, are putting more and more emphasis on convenience. Retailers are well aware of that. Corner store chain Żabka Polska, operating under brands Żabka (Polish for “frog”) and Freshmarket, already has some 4,000 stores and is growing at a pace of 800 a year. Opening up small supermarkets at gas stations seems a good way of grabbing a part of the daily shopping market. Last year, Tesco launched a 12-month testing period for 10 Tesco Express stores at Orlen’s stations in Warsaw, Kraków and Łódź. u

Major shopping center completions in 2014 City

Property

GLA (sqm)

Developer

Lublin Olsztyn Siedlce Kalisz Ostrołęka Piła

Atrium Felicity Galeria Warmińska Galeria Siedlce Galeria Amber Galeria Bursztynowa Galeria VIVO!

73,000 41,000 34,000 33,500 27,000 23,800

AERE Libra PK Konstanty Strus Echo Investment Narev Inwestycje Rank Progress

Source: CBRE

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Galeria Bursztynowa in Ostrołęka, 27,000 sqm

LOKALE IMMOBILIA / YEAR IN REVIEW

Anna Bartoszewicz-Wnuk, head of Research and Consultancy, JLL

What types of retail assets will be delivered this year?

hopping centers remain the dominant format on the Polish market. Altogether, 476,000 sqm of new retail supply in all formats (shopping malls, retail parks, outlet centers and stand-alone retail warehouses) was added to the market in 2014. At the end of December 2014, 707,000 sqm of space, both in new schemes and as extensions to existing schemes, was still under construction. Nearly 547,000 sqm of this amount has been slated for completion in 2015. This figure is likely to decrease, however, as delays are not uncommon. The largest projects that will be commissioned in 2015 are Zielone Arkady in Bydgoszcz (50,000 sqm) and Sukcesja in Łódź (45,000 sqm). Noteworthy is the fact that extensions are a trend that has been prominent on the Polish market for a few years now and will continue this year as well. Several extensions are

planned for delivery this year, including Galeria Pomorska in Bydgoszcz, Centrum Bielany and Magnolia Park in Wrocław, Galeria Sudecka in Jelenia Góra, Atrium Copernicus in Toruń, Ogrody in Elbląg and Wola Park in Warsaw. According to estimates, extensions will make up as much as 27 percent of the 547,000 sqm of shopping center space planned to be completed this year. Convenience centers, that is small retail schemes targeting everyday shopping customarily done on the way home from work or school, continue to be in. We expect such schemes will be opened predominantly in smaller cities. These are small properties and even if they are delivered en masse, their total volume will not exceed that delivered in shopping malls.

New brands entered the market in 2014.

424,670 sqm

of new retail space was delivered last year.

268 sqm per 1,000 people was the retail density at the end of 2014. Source: CBRE

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / INTERVIEW

Looking back to the future It’s crystal ball gazing time again, when we reflect on the previous year and try to predict the trends that will shape the current new year. We spoke with Joanna Mroczek, the head of research consultancy and marketing at CBRE Poland I N T E R V I E W B Y A L E X H AY E S

WBJ Observer: What was the biggest surprise of 2014? Joanna Mroczek: Frankly speaking, there were no big surprises – things are progressing as expected. In fact, the big events that might be seen as a surprise rather confirm the general positive trends. These are for example large investment transactions such as Rondo 1, Metropolitan, and Poznań City Center. We could call the purchase of Złota 44 by Amstar a surprise, but on the other hand it only shows that there are no hopeless situations and Poland is attracting foreign investors that believe in its potential. Poland is interesting for different types of capital coming from Europe and the US, but also from Dubai. Not only are there funds, but also developers looking for new sites and new opportunities, even despite the huge pipeline and intense competition. Global companies always have a wider perspective and a different perception of the situation and that difference has always been seen as a surprise from a local point of view. I understand that now office take-up is at a cyclical low while there is a lot more space coming onto the Warsaw market. Is that true? The 2014 total office take-up in Warsaw was slightly below the 2013 level and this was due to the situation five years ago when many fewer leases were signed in a crisis year. However, 2015 should

see continued growth as companies are still very active. A lot of corporations see the current opportunity and they are looking for a better office in a better location, corresponding with their growing needs and flexible enough to adjust to a changing business environment. Newcomers are mostly coming from the outsourcing sector such as shared service centers and BPOs, which usually take up a lot of space. Warsaw, even if it is a little more expensive in terms of labor and in terms of rents, has comparable prices to regional cities in its non-central locations, while providing a larger choice of students and potential employees. Is this the trend for the coming year? I generally think that this sector has been constantly getting stronger, expanding not only in Wrocław and Kraków, but also in many other locations. The service sector has become one of the most important in the Polish economy and a mature approach of the cities is encouraging newcomers and existing companies to expand. The international situation, in countries such as Russia and Ukraine, is also helping us to some extent in terms of offshore investments. CBRE is talking of a downward pressure on rents. Is this set to continue for some time? For sure. Because of the oversupply

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

and because there is a lot of new space under construction, particularly in the city center, which directly impacts the prime headline rents. There are buildings like Rondo 1, which will always keep high rents, but there is only a small number of these prime buildings. Average rents will continue to fall, at least till the end of 2016, when hopefully the majority of the new space, such as Warsaw Spire and Q22, should be absorbed to some extent. Moving onto the industrial and warehouse sector, was 2014 a successful year? I think that it was the best performing sector in fact. Because of the expansion of logistics operators, related to growing e-commerce and industrial investments, logistics assets have attracted a number of investors and the market has been revived. This was the sector where you could see much of the growth in rents resulting from the drop in vacancy rates and a lot of new speculative construction being launched. There’s been a lot of talk about e-commerce lately. How much do you expect this sector to grow? CBRE has stated that e-commerce takes up around 5 percent of the warehouse space. The e-commerce sector has been developing rapidly for a few years. When I see Amazon coming to Poland, sooner or later they’re going to enter the

LOKALE IMMOBILIA / INTERVIEW

Joanna Mroczek,

head of research consultancy and marketing at CBRE Poland

market with their sales strongly competing with others. Many of these companies will have to reorganize, to speed up deliveries for example, which means that a lot of parcel delivery companies will have to change their locations and adjust to the customers’ expectations and this is going to impact their locations. It’s difficult to say in what direction it’s going to move, but for sure it will cause movement to more opportunistic locations. I would expect a growing demand for small business and warehouse units within the cities, which is difficult to provide due to land prices. On the other hand, Amazon’s decision to enter Poland as an investor will encourage others. The retail market, whether it is e-commerce or not, should continue to grow and diversify, feeding the warehouse sector as well. We see the take-up of warehouse space at a level of 2 million sqm per year and for the last four years it’s been quite stable. On average it’s been quite high and quite stable and this will be the base for investors’ and developers’ strategic decisions.

Image: CBRE Poland

You’re saying that there’s not going to be any rapid change but would you say that e-commerce is nonetheless revolutionizing the market?

“THE RETAIL MARKET, WHETHER IT IS E-COMMERCE OR NOT, SHOULD CONTINUE TO GROW AND DIVERSIFY, FEEDING THE WAREHOUSE SECTOR AS WELL.

I think it is happening, this revolution. At the beginning, when e-commerce was starting up you could order things that were stored in Western Europe. In some cases, you could buy things and they were shipped to you from France or Spain. So some time ago, when you were buying things on Zalando it took you two weeks to get the goods. Right now they do it within a few days so that means that they are adjusting to the needs of the market. The more orders they receive, the more they will need to move to Poland and organize their deliveries within Poland. Particularly in light of Amazon’s decisions, this revolutionary retail thinking and adjustments will get stronger.

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA / INTERVIEW

That also brings up the question of whether e-commerce is replacing traditional retail formats? I don’t think so right now. Doing shopping in a mall is not only about buying things but also about spending time. And I think that e-commerce is making the malls try harder and of course this is a challenge. In some cases, such as electronics, they have changed formats and some retailers have already decreased the size of their stores, but at the same time the fashion brands simply need to try harder to provide better service, they need to advise the clients and e-commerce is forcing retail to reach for a higher level. So I don’t think it’s going to impact malls because if you look at the number of new openings, it’s still high. Developers have moved from small cities to large cities looking for opportunities; high street retailing is becoming important, so I would say that e-commerce is making the retail market in Poland more interesting. But is it true that there are no more locations for new malls in Warsaw? There are still a few places where you could place a large mall in Warsaw. And mostly those places are former retail parks or locations where retail to some extent has existed like Centrum Jupiter on ul. Towarowa or first generation centers where you have Tesco or Auchan. These locations have already been recognized and can be expanded into something more exciting. I think that this is the safest way of expanding retail. When you look at totally new places it is more difficult because then there is already a lot of retail in existence and it is quite difficult to find tenants that would locate their stores one next to another. There are still districts, like Wawer and Rembertów, where you don’t have anything and the Promenada center is benefiting. I think that developers are rather trying to focus on those locations because if you are looking for another Złote Tarasy or another Arkadia or Galeria Mokotów, then it would be quite difficult to find a place. CBRE reported that 21 brands entered the market last year, how many do you expect to come this year? We are seeing a lot of restaurants opening; we have seen interested fashion retailers;

we have seen American retailers coming but it all depends on the availability of the best units. There are some retailers looking for high street units and without a good opportunity they just don’t want to open anywhere else. There is no room for them in Złote Tarasy. They would like to have a brand with the first store in the best location and there aren’t many such locations. Because we are seeing new projects coming to the high streets, we should expect new retailers to come as well. Over the past three to four years the development of high streets has been marginal. Why are you saying that it is sure to happen now? We are seeing new projects coming on ul. Marszałkowska, Al. Jerozolimskie and Pl. Trzech Krzyży. Ul. Świętokrzyska has gone through a major improvement with the new metro line. Projects like Cedet, Centrum Marszałkowska and Ethos that will provide prime space are coming to mind,

attitude of the city authorities in attracting new investors to Warsaw, who will not only buy real estate but also provide employment. I would not worry about other cities as the markets have been quite flexible and cautious there. I always worry about the agency market. The market is becoming more mature and all the players on the market need to be open to more mature cooperation and trust as is the standard in Western countries. The market and particularly transactions should be more transparent and the value of the independent advisory should be highly appreciated. We can see this trend developing and in the longer term it should become stronger. Also the public sector is becoming more open to cooperating with advisers and is entering the modern real estate market. Well we’ve already seen a few such deals. Is this a trend for the future?

“IF LARGE PROJECTS DON’T FIND TENANTS, THEN THE WHOLE MARKET IS GOING TO HAVE PROBLEMS.

This is a kind of trend and we see a number of modern office lease transactions signed by state-owned companies or public institutions. There are also Polish companies that previously couldn’t afford A class buildings. They have been located in C class buildings and right now they can afford B class buildings. The market is becoming mature and there are more and more opportunities appearing. Developers are becoming increasingly flexible and they see how they can find advantages even despite a very competitive environment.

and we think that this is the moment when the high streets can improve.

The Polish economy has seen uninterrupted growth for a number of years now. Surely we can expect these good times to come to an end sooner or later?

So you think 2015 will be the year of the high street? Let’s hope so. Perhaps not 2015 because those projects will be delivered in 2016. The agreements are being signed right now but it’s rather 2016 that will see new openings. What are your biggest worries for the coming year? I would worry a bit about the office market in Warsaw. Are tenants going to expand further and if not then who is going to fill this empty space? If large projects don’t find tenants, then the whole market is going to have problems. This also relates to the

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

But this is very moderate organic growth (3 percent expected in 2015). It’s not rapid jumps. We are still very much behind Western Europe in terms of salaries. In terms of investments, Warsaw has only half of its ring road, two metro lines and I think there is still lots to be done. I think that we don’t need to worry about our economy, as Poland has proved resistant and flexible enough following the global trends. We can see structural changes in employment and this may turn out to be a challenge. For example, forecasts show growth in technology sectors rather than public or financial companies. Such trends will for sure bring many changes, but I believe all are positive to the economy and real estate. u

LOKALE IMMOBILIA /RESIDENTIAL

Record year for residential developers The residential market is doing better than ever: stable prices, record sales. Can the success of 2014 be repeated this year? Or was it just a onetime thing? B Y B E ATA S O C H A

Last year proved to be one of the best years for the Polish residential market. Sales figures surged for most developers, even those that had seemed to be in serious trouble only a year earlier. Prices increased only marginally over the past year, which makes market players hopeful for the future of the market. As many as 11,200 apartments – a record high figure – were sold in Q4 2014 in the top six residential markets in Poland (Warsaw, Kraków, Wrocław, the Tri-City, Poznań and Łódź). Throughout the entire year, 43,000 newly-built apartments were sold in the six biggest markets, which is 20 percent more than the previous records in 2007 and 2013, according to residential real estate research firm REAS. “We can see three kinds of clients now. There are the newcomers, that is, people who are looking to buy their first apartment. There are also those who are looking to upgrade their current living conditions. They put their plan on hold during the crisis but are now back in the game. And finally, there are well-to-do people who buy apartments as a form of investment. They have been on the fence too, waiting to see if the market has reached its bottom, and now they are likely to start buying again,” said Arie Koren, CEO of developer OKAM. Demand drivers Yet, one cannot discard the two major underlying factors for the increase in apartment sales last year. First, the launch of the government subsidy program MdM (“Apartments for the Youth”) in January 2014 drove up sales of apartments, particularly in cities where the imposed price ceilings were more or less on par with market prices. The program’s introduction in January increased sales in Q1 2014, as “in cities,

where MdM price limits were especially favorable, some buyers put their investments on hold in 2013 and made the purchase in the first quarter of 2014,” said REAS president Kazimierz Kirejczyk. The second main driver shaping last year’s residential demand was the “S” recommendation, which is gradually decreasing the maximum loan-to-value ratio (in 2014 it was 95 percent and starting 2015 it is 90 percent). This prompted clients with less than 10 percent of the price to purchase an apartment by the end of 2014. “Such an extraordinary coincidence will not happen again. We expect a drop in the number of transactions compared with 2014,” said Kirejczyk. “The situation should start improving in the second quarter of the year, especially if the price ceiling in the MdM program continues to rise in Warsaw, Wrocław and Kraków.” Developers’ view Developers seem prepared for the revival of the market. Last year, they introduced 47,500 apartments to their sales offer in the six largest markets, nearly 50 percent more than a year earlier. They are also planning ahead – during the first eleven months of 2014 they launched construction of 64,300 apartments across Poland (33 percent more year-on-year) and obtained permits for another 70,700, a 41.2 percent increase y/y, according to preliminary data compiled by statistics office GUS and cited by REAS. What could stir things up is the new regulation that is currently being prepared. The new law will shut down escrow accounts for developers, which means that they will not have access to money paid from bank loans until the

WBJ OBSERVER • JANUARY/FEBRUARY 2015

LOKALE IMMOBILIA /RESIDENTIAL

apartments are delivered. Currently, developers receive the financing in portions, after each stage of the construction is completed. This could prove to be a hardship for smaller developers, but even the larger ones might decide to start building their investments sooner, before the new law kicks in. “The offer will once again increase unreasonably quickly, and if demand starts to waver at the same time, it could put pressure on prices,” Kirejczyk explained. Better investment What also increased last year’s sales figures was the number of apartments purchased as a form of investment. “Record low interest rates, stable prices and rents make renting out an apartment more profitable than deposits or other safe investments,” he added. Analysts from domiporta.pl say that the return on such an investment increased quite significantly over the past year and now stands at some 4.33 percent, significantly more than interest rates on bank deposits (currently up to 3 percent) and treasury bonds (2.43 percent). Investors can get the highest return in Gdańsk (4.82 percent), while an apartment in Warsaw brings in 4.47 per-

Number of apartments sold in 2014 by developer Robyg Budimex Nieruchomości LC Corp Atal Marvipol Ronson Lokum Deweloper Vantage Development JHM Development Source: Developers

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

2,118 1,685 1,220 1,093 766 711 355 255 219

cent of net profit (after tax and all fixed payments and assuming that the apartment remains vacant for 1.5 months each year). “Small apartments are considered a safe investment because the purchase price is one of the lowest, while the liquidity of such an apartment is high, so if there are any problems, you can sell it fast,” said Maciej Górka from domiporta.pl. Those interested in buying apartments for rent must however be aware of the growing competition on the market. The state Apartments for Rent Fund has earmarked PLN 5 billion for entire apartment blocks in major Polish cities. The fund has already purchased its first property – an apartment block in Poznań with 124 units. Once investment is completed, the fund will have between 2,000 and 5,000 rental apartments at its disposal. These apartments will be rented out below market prices which may in some areas lead to a slight decrease in rent rates. However, some claim the fund will also lead to an increased interest in renting out as opposed to buying apartments. Compared to Western Europe, Poles are still reluctant to live in rented apartments and prefer to buy instead. u

CITYSCAPE / TORUŃ

Did you know? Toruń is probably best known for its gingerbread, which has been made there since the 13th century. Poet Fryderyk Hoffman wrote in his 17th century poem that the four best things in Poland include “Gdańsk vodka, Toruń gingerbread, Kraków ladies and Warsaw shoes.” The city has the perfect location to make such a delicacy. High-quality soil provides fine wheat, the local bee population makes great honey, while spices were brought either from the nearby port of Gdańsk or by a trade route linking the Black Sea with Germany. The city used the delicacy’s popularity and made special gingerbread cookies honoring the most prominent Polish leaders, artists and nobles. Molds representing the likeness of King Zygmunt III have survived to this day. Toruń continues to be proud of its gingerbread cookies, hosting the annual Gingerbread Festival.

City where the Earth moved L

ocated on the banks of the Vistula river, Toruń enchants with its unique synergy of beautiful historical edifice and dynamic development of modern districts. Splitting the governing functions of the voivodship between Toruń and Bydgoszcz, the voivodship marshall’s seat is in Toruń. The history of the city starts as early as the 10th century. From there on, the city flourished due to its role as a center of trade and education. During the middle ages, Toruń was home to Nicolaus Copernicus, the world-famous astronomer who “stopped the Sun and moved the Earth,” debunking the theory that the Earth is the center of the universe.

The Old Town, already appreciated by UNESCO and included on the World Heritage List, never ceases to amaze tourists with its antique architecture. The citizens of Toruń do not remain passive, organizing numerous festivals and cultural events in the city’s Old Town. Toruń is well-known for its trademark “pierniki” a special kind of a gingerbread cookie. Their reputation is firmly established by legends and traditions, as well as their specific recipe. The city is moving forward, using EU subsidies to enhance the development of infrastructure, especially focusing on the city’s most important industry – tourism. u

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Mikołaj Kopernik Undoubtedly, the most famous person to ever come out of Toruń is Nicolaus Copernicus (Mikołaj Kopernik), the astronomer who formulated a heliocentric model of the solar system, placing the sun in its center instead of the Earth. His book De revolutionibus orbium coelestium (“On the Revolutions of the Celestial Spheres”) triggered the Scientific Revolution. Despite being best known for his work as an astronomer, Copernicus was also a skilled lawyer, physician, translator, diplomat and economist. He derived a quantity theory of money – a key concept in economics – and, in 1519, formulated a version of what later became known as Gresham's law.

Images: Shutterstock, Wikimedia, michalzaleski.pl

Favorite son

LONDON 1,283 KM PARIS 1,226 KM BERLIN 354 KM

MOSCOW 1,265 KM

PRAGUE 435 KM

ROME 1,321 KM

MAYOR: MICHAŁ ZALESKI AREA CODE: 56 AREA: 115 SQ KM

MAJOR AIRPORT BYDGOSZCZ AIRPORT

POPULATION (DEC. 2012) 203,447 HIGHWAYS A1

WORKING-AGE POPULATION (DEC. 2012)

132,841

UNEMPLOYMENT RATE (DEC. 2013)

9.1%

MEDIAN PAY (2012)

PLN 3,719.69

NUMBER OF STUDENTS (VOIVODSHIP)

NUMBER OF UNIVERSITIES (VOIVODSHIP)

49,494

NUMBER OF GRADUATES A YEAR (VOIVODSHIP)

14,307

PERCENTAGE OF CITY COVERED BY ZONING PLANS: 44.5% MAJOR INDUSTRIES: Tourism Electronics BPO/SCC

MODERN OFFICE SPACE 45,700 SQM OFFICE VACANCY RATE 11.8% PRIME HEADLINE RENTS €9.00-€11.00

WBJ OBSERVER • JANUARY/FEBRUARY 2015

OBSERVER TOP 10 MBA Programs RANKED BY NUMBER OF GRADUATES IN 2012/2013

Kozminski University

Executive MBA Number of graduates: 94 Program tuition: PLN 49,800 Year launched: 1989 Language of program: Polish; English Foreign partner: NA Accreditation: EQUIS; FORUM; AMBA; AACSB; CEEMAN; ISO 9001:2009 Foreign academy issuing MBA: NA

Koźminski MBA with specialized semester

Executive MBA

General MBA

Number of graduates: 92 Program tuition: PLN 31,500 Year launched: 1997 Language of program: Polish Foreign partner: NA Accreditation: EQUIS; FORUM; AMBA; AACSB; CEEMAN; ISO 9001:2009 Foreign academy issuing MBA: NA

West Pomeranian Business School

WSB Schools of Banking in Gdansk

Number of graduates: 75

Number of graduates: 60

Program tuition: PLN 22,000 Year launched: 1998 Language of program: Polish Foreign partner: Leeds University Business School (UK); Abertay University Dundee (UK) Accreditation: FORUM; KSU accreditation Foreign academy issuing MBA: NA

Program tuition: PLN 24,500 Year launched: 2011 Language of program: Polish Foreign partner: University of Northampton (UK) Accreditation: SEM Forum Foreign academy issuing MBA: University of Northampton (UK)

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Image: Shutterstock

Kozminski University

WSB Schools of Banking in Chorzow Executive MBA

Number of graduates: 58 Program tuition: WND Year launched: 2011 Language of program: Polish; English Foreign partner: Coventry University (UK) Accreditation: NA Foreign academy issuing MBA: Coventry University (UK)

Warsaw University of Technology Business School Executive MBA

Number of graduates: 58 Program tuition: €14,300 Year launched: 1996 Language of program: English Foreign partner: HEC School of Management (France); Accreditation: EPAS Foreign academy issuing MBA: NA

WND = Would Not Disclose; NA = Not Applicable. Research for the list was conducted in February 2014. Companies not responding to our survey are not listed. Only 10 institutions are listed. Full list is available at: bookoflists.pl

Gdańsk Foundation for Management Development MBA with support from Business Centre Club

Number of graduates: 48

Kozminski University

Executive MBA in Minsk Number of graduates: 35

Program tuition: PLN 46,800 + 23% VAT Year launched: 1991 Language of program: Polish; English Foreign partner: RSM Erasmus University (Netherlands) Accreditation: International Quality Accreditation - CEEMAN (Slovenia); FORUM Foreign academy issuing MBA: RSM Erasmus University (Netherlands)

Program tuition: WND Year launched: 2001 Language of program: Russian Foreign partner: Institute of Privatization and Management in Minsk Accreditation: EQUIS; AMBA; AACSB; CEEMAN Foreign academy issuing MBA: Institute of Privatization and Management in Minsk, Kozminski University

Executive MBA Praktycy dla praktyków

Executive MBA Marketing and Management

French Management Institute

Cracow School of Business CUE

Number of graduates: 36

Number of graduates: 33

Program tuition: PLN 24,000 + 23% VAT Year launched: 1991 Language of program: Polish Foreign partner: WND Accreditation: WND Foreign academy issuing MBA: Institute of Privatization and Management in Minsk, Kozminski University

Program tuition: €8950 + €150 registration fee Year launched: 1994 Language of program: Polish; English Foreign partner: Stockholm University School of Business (Sweden); Accreditation: 7th place in Perspektywy 2013 MBA Programs ranking; EFMD Foreign academy issuing MBA: Stockholm University School of Business (Sweden)

WBJ OBSERVER • JANUARY/FEBRUARY 2015

TECHNOLOGY TO MAKE YOUR LIFE EASIER

The memory -foam pillow

GADGETS

WE LIVE IN AN AGE OF GADGETS: some are useful, but most are just a waste of time and money. We sift through the latest tech available to pick those that we believe will help you live your life more comfortably and confidently.

Sleepow, plays binaural beats through high-quality speakers to create calming low-frequency beats that reduce stress and ease you into a deep sleep. If you’re not a fan of their preloaded sounds, you can add your own to the built-in mp3 player. Price: $129

sleepow.com

Ricoh MP C3003SP

Price: N/A

ricoh.com

All in one functionality with print, copy, scan and optional fax make the Ricoh MP C3003SP a workhorse color MFP for demanding departmental environments. A4 output at 30 pages a minute ensures high productivity with comprehensive finishing options available to generate professionally finished documents inhouse. Paper up to SRA3 and 300gsm can be utilized and the optional high-spec E-22C color controller improves RIP productivity of even the most sophisticated print jobs. A nine-inch color panel makes operation simple.

Kobo Aura H2O Is the first premium eReader to have a waterproof and dustproof design that allows you to take it worry-free anywhere from the beach, to the bath or to your bed. Plus, with up to 2 months of battery life, you have the freedom to keep reading, wherever you go. So if you drop it in the bath or accidentally spill a drink on it, your Kobo Aura H2O will still work like new. Just use the included drying cloth to dry the screen, so you can get back to reading. Price: $179

kobo.com

80 82

NU U AA R R YY // FF EE B BR RU U AA R R YY 22 00 11 55 •• W WB B JJ O OB B SS EE R R VV EE R R JJ AA N

18 – 19 February 2015 Warsaw

Smart City Forum A new initiative dedicated to the development of smart cities in Poland. Will provide a platform for dialogue and business cooperation with local and central government.

Participate in the Forum and… • Become an active participant in exchange of knowledge and “smart” solutions • Build business cooperation platform with central and local administration • Benefit from the best and legit practices within the scope of building sustainable, inhabitantsfriendly and modern cities STRATEGIC PARTNERS

Contact: Aneta Pernak

a.pernak@mmcpolska.pl

PARTNERS

tel. +48 22 379 29 18

www.smartcityforum.pl

Multi-Device Keyboard

The Logitech Bluetooth Multi-Device Keyboard K480 is a wireless gadget billed as ”the first desk keyboard designed for use with up to three devices, regardless of computing platform”. The K480 can connect to three different Bluetooth wireless devices at once, whether they’re Windows, Mac or Chrome OS computers, or Android, Windows, and iOS tablets or smartphones. Switching between paired devices is done using the selection dial located just above the escape key. Price $49.99

logitech.com

Canon Connect Station CS100 is a unique photo-storage device that allows you to quickly and easily save, view and share photos and movies. It is a central hub for up to 1TB of content. Files can be transferred by linking your NFC camera with the Connect Station, sending via wi-fi or simply by plugging in a memory card or camera. You can also quickly and easily share images to your social networks or another Connect Station. The device can connect to large screen TVs via HDMI, allowing you to display images and movies in stunning Full HD resolution. Price: PLN 849

canon.com

>> The Fujitsu Lifebook U904

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

Is an attractive fully-featured Ultrabook for business professionals. The thin design (5.5 mm) weighing only 1.33 kg allows you to travel in complete comfort, while the solid magnesium housing ensures durability. Its super-crisp 35.6 cm (14-inch) frameless WQHD+ IGZO display also supports touch input. What’s more, extended battery runtime, a backlit keyboard, solid security features and an optional embedded 4G/LTE offer you exceptional mobility outside the office. With the optional port replicator ultimate convenience is guaranteed in the office. Lifebook U904 is available with the biometric sensor – Fujitsu PalmSecure. This technology uses biometric technology that authenticates users based on vein pattern recognition rather than iris scanners or fingerprint readers. As veins are internal and have a wealth of differentiating features, attempts to forge an identity are extremely difficult, thereby enabling a high level of security. Price: PLN 4,999

fujitsu.com

NEW YEARâ&#x20AC;&#x2122;S SALE 2014 editions

100 PLN

69 PLN

79 PLN

49 PLN

-30%

THE DEFINITIVE GUIDE TO POLISH EXPORTS AVAILABLE NOW The annual export guide surveys the industries, firms and organizations fuelling Polish exports: > profiles fastest growing Polish export industries: this year e.g., design, IT, pharmacy, polish food > legal analysis > available at foreign chambers, Polish embassies consulates abroad, key Polish and foreign conferences and trade fairs > 12 500 copies distributed annually plus online version

TO ORDER CONTACT: MBRYSIAK@VALKEA.COM

EVENTS / GALA BOOK OF LISTS

The 5th KPMG Tax and Accounting Congress has come to a close THE 5TH KPMG TAX AND ACCOUNTING CONGRESS TOOK PLACE IN WARSAW ON JANUARY 15, 2015 AT THE HILTON HOTEL IN WARSAW. THE EVENT WAS ATTENDED BY CHIEF FINANCIAL DIRECTORS AND CHIEF ACCOUNTANTS OF MAJOR POLISH AND FOREIGN COMPANIES. OVER 600 PARTICIPANTS LISTENED TO SPEECHES OF KPMG EXPERTS ON CHANGES IN THE FIELD OF TAX AND ACCOUNTING PLANNED FOR 2015

PMG’s Tax and Accounting Congress is the biggest event of its type in Poland. The agenda was prepared by KPMG’s Partners and Directors, who bring many years of experience in work as directors of tax and audit teams. The speakers closely examined changes to VAT, CIT and PIT in 2015, and discussed the latest amendments in transfer-pricing regulations. At the accounting session they outlined the subject of the upcoming changes in the regulations in terms of revenue (IFRS 15), changes in the accounting for financial instruments (IFRS 9) and financial statements in the context of value in use and fair value. Lectures were delivered by KPMG Partners and Directors with longstanding professional practice, all of whom are licensed Tax Advisers, Legal Advisers and Certified Auditors. All issues could be followed in real-time on KPMG’s official Polish Twitter account (twitter.com/KPMGPoland) and a transmission online. KPMG in Poland is the exclusive organizer and patron of the Congress. The Congress was established as a KPMG initiative and has been organized on an annual basis since 2011. The 5th edition was supported by 22 patrons: ACCA, Puls Biznesu daily, business radio Tok FM, Bank magazine, Gazeta Finansowa financial newspaper, Harvard Business Review Poland magazine, Nowy Przemysł magazine, Polish Market magazine, Przegląd Podatkowy tax newspaper, Rachunkowość accounting monthly, WBJ Observer, Wolters Kluwer publishing house and portals: bankier.pl, eGospodarka.pl, gf24.pl, interia.pl, inwestycje.pl, ksiegowosc.org, PIT.pl, rachunkowosc.org, VAT.pl and wnp.pl. Participants of the Congress took part in a survey on the Polish tax system. The survey results will provide a report titled: “The Polish tax system in the evaluation of the participants of the 5th KPMG Tax and Accounting Congress”, which will be published at the end of January.

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

10-13 MARCH 2015 PALAIS DES FESTIVALS

CANNES - FRANCE

ARE YOU READY FOR THE DIGITAL REVOLUTION*? CROWDFUNDING: INDUSTRY GAME-CHANGER? 10 March, 14:30 Panel session sponsored by Wealth Migrate

THE END OF OWNERSHIP? 10 March, 17:00 Panel session sponsored by Allianz

DIGITAL ECONOMY DISRUPTS REAL ESTATE SECTOR: CRUSADERS AT THE DOOR 11 March Keynote address sponsored by Lennar International

mipim.com Learn and share with digital, property and finance experts MIPIM educational programme *Real Estate Revolution

LIFESTYLE / RESTAURANTS

THAI WOK: 10 AND COUNTING Ten locations around Poland have made Thai Wok the largest Asian restaurant chain in the country – and one of the only Thai food chains. There’s a fitting explanation for this: a good concept, good food and good organization, which are their keys to success. The Brusikiewicz family owns multiple wellknown restaurants, including Silk&Spicy and Monique, so it is no surprise that Thai Wok is also part of their repertoire

use the best ingredients and the freshest ingredients,” Brusikiewicz said. In order to create quality dishes, he must negotiate with a variety of companies, purchasing different ingredients from different venders. A tedious job, though it results in the best food. Their cuisine is no doubt a success. But it is the set-up that really allows the chain to thrive. The Brusikiewicz family has over twenty years of experience as restaurateurs, which gives them an advantage. “I think it works well together,” Brusikiewicz said. Because it is a family business,

each member can contribute different ideas. “I bring new blood to it, I look at things from a different perspective more from the western world, from overseas.” Thai Wok is well known throughout Warsaw. Locations include Galeria Mokotów and Złote Tarasy as well as a few other shopping center locations. Chances are that the chain will continue to grow. “I don’t think we have competition in the Thai fast food sector,” Brusikiewicz added. Chances are they won’t have competition for a while, not with their success. u

hai Wok is the only fast food chain in the organization. “During difficult economic times, people want something that is affordable with the same quality of food that you would get in a restaurant,” said Bartek Brusikiewicz, the main curator of the branch.

Their restaurants play on these characteristics to serve tasty Thai cuisine fit for a Pole’s palate. The most popular item served is Pad Thai, offered in three different styles with three progressing levels of spiciness. “Pad Thai is typically Western Thai food,” Brusikiewicz explained. “It is also popular in Thailand but not as popular as in the Western world.” Another important factor is the ingredients. “Its important for us to

JANUARY/FEBRUARY 2014 • WBJ OBSERVER

Images: Shutterstock, Thai Wok, Vedika Luthra

“In 2005, when urbanization took its toll and shopping centers began populating the city’s skyline, Thai Wok was born. We wanted to do Asian because there was nothing like that in the market except for Chinese,” Bruszikiewicz told me. “Everyone was talking about Thai food as being one of the best foods in the world. It has a great taste: it has spice, sweetness and sourness all mixed together.”

L I F E S T LY ILFEE S/ TRYELSET A/ UHROATNE TL SS

DIAMONDS IN THE ROUGH Two off-the-beaten-path places; one in Warsaw’s center, the other in a leafy suburb are sure to catch your attention

SUEÑO TAPAS BAR AND CAFÉ

Located nearby Warsaw University, Sueño has seduced much of the younger generation – and for a good reason. The simple décor, inspired by the traveler’s way of life, provides a casual yet lively atmosphere. Surfboards and beach photographs decorate the walls and hammocks hang from the ceiling. The owners are kite surfers and avid travelers. They have combined ideas from various countries – evident not only in the décor but also in the menu. Tapas, of course, are usually associated with Spanish appetizers and these are present in the menu. But I was pleasantly surprised to see tapas inspired by a variety of countries: soft corn tortilla chicken quesadillas (simple yet satisfying) and golden deep-fried chicken wontons fried to a light crispiness. But obviously, there are Spanish options: their spicy Chorizo melts in your mouth.

The beauty of tapas is the small portion size: you can order six different tapas and share them between two people, and in this case combining flavors never tasted this good. The menu, while diverse, is a concise affair. This is evident in the quality of food that is served: fresh and full of flavor. Immensely satisfied with the meal, I moved to dessert, a cheesecake made with goat cheese served with a cherry & red peppercorn sauce – the presentation was impeccable. It was by far the most original dessert I have ever tasted with the spicy kick of the red peppercorns complementing the sweetness of the cherries. Dining here for a light lunch is particularly pleasant – lunchtime is obviously the most popular time because of their daily fixed menu, and is favored among faculty and students from the university. This place is also perfect for appetizers and drinks before hitting another venue. Definitely not traditional in their food and décor, Sueño supports this nation’s culinary renaissance, so to speak. ul. Oboźna 9

FUSION CAFÉ

Businesses have been fleeting at this particular location in Stara Papiernia, an old-paper mill located at the heart of Konstancin. But it looks like Fusion Café is here to stay. Warsaw teems with cafés and coffee shops; however, the majority of the decent ones are located in the city center. Fusion is yet another attempt to steer away the clichés that surround Poland’s restaurants.

so it is difficult to seat a large group of people. Most of the tables there were, in fact, two-seaters. We were the only customers dining on a lazy Sunday afternoon, so the atmosphere was relaxed and the service was quick. And while the décor itself is extravagant in style, the prices are not. The menu was limited to several options in terms of food - a few variations of sandwiches, desserts and soups. I was drawn to the Thai soup – an aromatic blend of coconut, lemongrass and shrimp. It did not disappoint, and the serving portion was generous. On to dessert – the options were far more appealing than the other dishes offered. I went with a mascarpone white chocolate tart topped with pomegranate and served with whipped cream to balance the richness. But I preferred their crème brulée – incredibly smooth and perfectly crisped on top – a classic that had little to do with fusion, though. The café offers a business menu and different variations for breakfast. It seems most pleasant earlier in the day, for a breakfast or light lunch. While it is called Fusion, I didn’t see very much emphasis on fusion. Rather, they offer different continental options. While the best cafés will always be found in central Warsaw, Fusion is good. Very good. al. Wojska Polskiego 3, Konstancin-Jeziorna

Undoubtedly, the interiors are tasteful. The brick backdrop of the old paper mill provides a rustic feel, and during the day, sunlight streams in. Shelves of kitchen accessories adorn the walls, which add a slightly Parisian touch, combined with the slow French music playing in the backdrop. The space is small,

WBJ OBSERVER • JANUARY/FEBRUARY 2015

RN E S AT AFUI R LIFESTYLE / O N AA N L TNS O T E

ALEX WEBBER EDITOR OF THE WARSAW INSIDER

Love is in the air

JANUARY/FEBRUARY 2015 • WBJ OBSERVER

that eschews fads and fashions in favor of slow food sourced from regional farms. In short, it’s a menu that you understand. Even better, it’s one that naturally suits winter canoodling: Mazurian-farmed snails, gooey camembert or Swiss-style raclette. There’s a warmth and honesty to this project that marks it out as a Valentine’s must. That’s not the only new arrival that’s impressed me either – 6 Cocktails is just about the best bar I’ve ever seen in the capital. Being frank, it’s a place I wanted to hate – you see, it’s one of these speakeasy haunts that refuse to publish their address. Instead, invites are scored via groveling appeals to their facebook. Sounds hideous, right?

So here’s the surprise: it’s fantastic. Set inside a rambling apartment on Mokotowska, you get the sense that Audrey Hepburn will come gliding in at any given moment. Owned by Enyo, a charming 20-year-old student who inherited the flat when his grandmother died, it’s a magical space – a cross between Eyes Wide Shut and a house party (one with an exceedingly good liquor cabinet). There’s sophistication and elegance by the bucket, but that’s counterbalanced by a raw, divey energy. As for the drinks, enjoy bespoke cocktails fixed by the most competent bar staff in the city. Really, your date will look at you like you’re James Bond. Thank me after. u

Image: Shutterstock

ot like the old days, is it? This winter has been less ruthless than ever before, more mild than wild, but just because the weather is upbeat that doesn’t mean February will be straight forward. Why? VD is upon us. No, not the thing sailors catch after a weekend of shore leave, but something far, far worse: Valentine’s Day. I’ve been at war with this day for as long as I can remember. Example one: setting myself on fire at the now expired Villa Rossini. At the time, this was the most prestigious restaurant in town and my date was smoking hot – alas, after coming into contact with a rogue candle, so was I. That night we left in separate taxis. Over the years, I’ve gotten better at this Valentine’s malarkey, and the thanks for that go to Warsaw. Where once the city was a Mordor-like place cast from Soviet concrete, today it’s been polished, paved, brushed and buffed. Its rehabilitation has been remarkable, and while I wouldn’t regard it as romantic, it’s no longer a grim Stalinist afterthought. Helping Warsaw’s cause – and your chances of a peaceful night – is the continued growth of its restaurant sector. Of course, your chances of getting a table for the 14th at one of the big ticket restaurants – Nolita, Atelier, etc. – are zip, but that doesn’t mean you should spend the night sitting around home languishing in your pants. One place that’s to be considered is Bubbles, a venue whose one fault is sounding like a 90s nightclub in small town Britain. The modest footprint belies a hangout that’s going to be a household name in the coming months. Busy with blackboards and bottles, crates and clutter, its primary role is that of a champagne bar. Now, I’m largely dismissive of champagne bars, so it speaks volumes for Bubbles that I cut it such slack. Of course, it’s handy that the price points are seriously accessible (a flute of champers from PLN 30), but the real reason for its success is Tomek, the proprietor. Here’s a man who loves working the frontline, harrying between tables and uncorking bottles with a theatrical flourish. But there’s more to Bubbles than bubbles alone: it also works as a restaurant, one with an articulate menu