by Michał Poręcki | Interview

Dorota Wysokińska-Kuzdra, Senior Partner, Head of Corporate Finance and Living Services for Central and Eastern Europe at Colliers talked to Property Forum about the rapid development of the PRS market and the current state of affairs on the residential market in Poland.

Colliers` new business line - Living Services – delivers services offered so far by the Corporate Finance department. Could you please explain to us the reasons behind that change?

Within the scope of Corporate Finance, we advise clients on debt and equity. The definition of “debt” is pretty clear – we advise clients in the process of arranging various types of financing. On the equity side, we deal with different types of equity needs of our clients, for example – equity financing, fundraising, companies acquisitions and – the most popular on our market – establishing various forms of joint ventures between parties. We are not limited to any asset class, but today majority of our business is somewhere around the broadly understood living sector. We did three major transactions in the living sector this year: advisory to YIT in the underwriting of their PRS portfolio and transaction with NREP, the purchase of Budimex Nieruchomości by a consortium of Crestyl and Cornerstone, as well as the sale of part of the Budimex Nieruchomości portfolio on a forward basis to Heimstaden. But that is not everything: we advised Kajima Proporties in two transactions in the PRS and PBSA sectors and few other undisclosed developers and funds who are active in this area. Moreover, we have delivered a few bank financings for rental products in Poland as well.

Taking into account the growing interest from market players to be active in the broader residential sector, we have decided to create a dedicated business line within Corporate Finance department, which will constitute a genuine “one-stop-shop” solution for clients interested in the living sector; starting from data, research and advisory, through business development and transactions, and ending with leasing and sales services on behalf of investors and developers. We believe in a holistic approach, especially in the emerging living sector.

CEE countries are currently experiencing a real invasion of foreign, mostly Scandinavian investment funds, interested in large apartment portfolios for PRS purposes. Why now?

Scandinavians are one of the first ones who entered our market with major forward acquisitions, but also a lot of other investors, from other jurisdictions, are looking into this market and I am sure there will be a few big transactions announced soon. Earlier, there were only a few investors on the market: players, who were first to invest in PRS, like Catella, Pimco with Echo and R4R or TAG Immobilien buying local developer Vantage. All of them are doing very well. Looking at their positive experience and having considered all market drives for PRS in our region, with the supply gap being the major one, it was just a matter of time when also other investors see this opportunity. To some extent – again – the pandemic helped. Whereas some reservations were held towards retail and office during the lockdown months, living assets became interesting alternatives here in CEE, and attention shifted towards them especially since all newcomers have a positive experience with this asset class in their home countries.

Dorota Wysokińska-Kuzdra

Dorota Wysokińska-Kuzdra

Senior Partner, Head of Corporate Finance & Living Services CEE

Dorota has over 20 years of experience in real estate, finance and banking. As Senior Partner and Head of the Corporate Finance & Living Services she provides advice on customers’ financial needs, including debt financing, mezzanine financing, raising capital and gaining capital partners, and also offering support in acquiring companies and entering the stock exchange. Additionally, Living Services covers a wide range of services, from advisory and support in the creation and implementation of living sector projects (including residential for rent – PRS, student housing – PBSA, seniors' homes housing, co-living, micro-apartments, etc, but also residential for sale), to asset management, including leasing and sales on behalf of investors and developers. Prior to joining Colliers in October 2018, she was a senior partner at Griffin Real Estate for 11 years, where she was responsible for the Group’s management and investments, and also for the first mezzanine fund operating in Poland.  Dorota Wysokińska-Kuzdra has graduated from SGH Warsaw School of Economics, the University of Cologne and the University of Duisburg-Essen. Dorota was chairperson in the Polish branch of the Urban Land Institute (ULI) between 2018-2021 – the international non-profit organisation that supports responsible planning and developing of cities, which functions as a platform of knowledge exchange between experts and participants in the real estate market, both in Poland and abroad. In 2020, in addition to the Polish role, she has been elected to join the Executive Committee of ULI Europe and is now creating ULI CEE HUB. More »

Poland is the country of first choice for these entities. Could you please describe what distinguishes the Polish market from other regional competitors, except for the scale, of course?

Well, scale is an important factor and this must be emphasized here as well. Apart from scale, Poland is a multicity country; thus, from an investment point of view, one has more submarkets to invest into, not only the capital city. Today PRS is strongly connected also to office sector, and one of the most important drivers for the office sector in Poland is the development of the modern BPO/ SSC sector - please note that Poland is the third-largest destination worldwide for global occupiers’ shared services centres. This, added to headhunting for talented people, which is often of most importance, and very good level of education, good universities in major cities in Poland - all these close the circle of common dependencies between students, young professionals, universities and business hubs – they are all today main contributors for the growth of the living sector.

I am also strongly convinced that current players on the market very soon will start to offer more family apartments for rent – realizing the business model of “growing/maturing” together with the customer and adapting to customers’ changing needs and following them.

Your agency has recently taken part in a few major transactions in the PRS market, advising the Crestyl/Cornerstone consortium and YIT in the development of the residential for rent platforms. What does it take to create a successful entity of that type?

One universal prescription for a successful PRS project doesn’t exist. Like with any type of asset, or – more generally speaking – in any type of business, there are numerous factors varying from one project to another and defining the outcome. It is obvious that when speaking of any real estate project, the location is the key, and in order to analyze a project and achieve the expected result, macro- and micro-location must be taken into consideration, as well as target group, economic factors, market drivers, market conditions, operating aspects and so on and so forth; but investor’s expectations and profile are also important. My advice would be to prepare well beforehand in order to know what to expect and start the process with a plan prepared on a solid basis – that may help in achieving success.

People in Poland are very attached to being the sole owners of their apartments – rental is usually considered a temporary solution, just a stop on the way to one`s own apartment. Why do you think it will change in the foreseeable future? 

It is just a popular belief, dating back to communist times in Poland, when the individual owners*hip of anything was pretty rare. In the early nineties, once the free market was introduced, we desperately wanted to catch up by buying and consuming almost everything, and the same happened with apartments.

Today, the institutional rental concept is a novelty and the market is still very small. Yet, the idea of renting is pretty well developed and common here in Poland – there are ca. 1.2 million of units in individual ownership designated for rental purposes. Of course, individual rental market is not standardized at all, and you have the full scope of flats in terms of quality, size and rental terms, as there are different owners, with different views, problems and plans. You rent an apartment from an individual once you are a student or young professional, but once you have a family – you prefer to buy because the risk of having the contract terminated by the individual owner for whatever reason is just too high.

Let’s imagine such a situation: you have a family, you have signed a few years job contract in – let’s say – Wrocław, and you want to move there with your family, but at this point, you have no idea whether Wrocław is your final destination, and you simply don’t want to buy an apartment there. Yet, you have to live somewhere. And this is where the gap for institutional family renting is.

I am not saying all Poles will switch to renting now; what I am saying is that without supply one should not be judgmental about demand. I can bet that once institutions will offer rental units designated for families, they will have no problem with renting it out.

The offer today is very limited, but we have enough benchmarks in various European countries to see that there is a place on most markets for both renting and owning as well. For some people renting will always remain a temporary solution; for instance, most co-living projects are temporary by definition: regardless of whether you are young, or maybe not that young but single or divorced. For some people renting will be a way of lie, satisfying the need of a place to live, free from the burdens of ownership. It’s like with commuting: if your need is commuting, you do not need your own car; owning is just one of many ways of satisfying your need to commute. It is a perspective worth applying nowadays also to real estate.

With the surging prices on the primary residential market, more and more people are afraid that investors buying large portfolios of apartments for PRS purposes are reducing the market supply, therefore inflating the prices even more. What is your opinion on these claims?

These claims have not many merits. With a supply gap of more than 3 million units on the residential market, all PRS players are helping and contributing to close this gap, and all developers selling part of their stock to PRS investors can easily increase the annual production of apartments, and therefore – contribute to closing that gap. The real problems lie in the lack of available plots, in the fact that permitting process become longer and more complicated, in the rise of construction costs and in huge pressure on labor costs, which will be increased by current high inflation.

Do you think that high residential prices are here to stay in the long term and therefore people will be migrating to the rental market, like in the Western European countries?

Yes, I think affordability will be one of the deciding driving factors for the rental market. There are no signs and arguments that residential prices would go down. Today developers are reporting ca. 30-40% of their sales going for so-called “investment purposes” – which means the units are bought by individuals to rent, not to live by themselves. Naturally, if this group of individual investment buyers decreases (some switching to other investment tools, some no longer affording to buy second or third apartment, and some having difficulties in getting mortgage loans), we will observe prolonged sales paths for developers. Maybe smaller, “one-off” developers will be even put under such pressure and forced to lower their prices, but this will not have any price effect on established developers with long-year track record. With the supply gap, with increasing construction costs, the residential prices will not move down, and I still believe they will be rising, even if the pace of growth will not be that quick or in worst-case scenario will be stable for a moment.