Interview with Mr Sven von der Heyden:

In perspective, are you happy that you came to Poland, or do you feel you should have concentrated your activities somewhere else, perhaps Asia or the US? Are you looking further east, to Ukraine perhaps?

I am totally happy I came to Poland, first arriving some 15 years ago and I've never regretted it. Our group links into the Polish business community, friendship and splendid relations with banks, architects, construction firms and so on. I believe we have at least another splendid 15 years ahead of us.

With respect to the other markets, well, we for example invested in New York in the middle of the nineties and lost our nerves far too quick. I love to invest a bit where others are not investing yet. Our exit in New York in 1996 proved to have been premature and we lost a bit of our equity, one of the few occasions luckily, but you cannot always be a winner. Ukraine fascinates me. But you always need to see the risk-reward scale. We have zero appetite for Russia and never had. I wouldn't mind owning an Oil-platform or a gas field there, but even that does not seem to be a safe investment these days.

We started last year to invest again in Germany after a 10 year absence from the market, which has shown to be healthy for us. Germany is ripe for a rebound and first signs are that this long awaited upturn in the economy and eventually in the real estate markets will happen imminently. So to answer your question in an unpopular way, for the moment we are not going further East but West!

Are you happy you went into property, not into another line of business such as banking or trading? In an ideal world, what would be your ideal profession; football star, concert hall pianist, politician?

I have my fingers in so many pies already! After I training as a banker and dealer on the Stock Exchange in London and in Munich, my first investment ever some 20 years ago was a 17 % participation in an antique painting by Tintoretto.... The art dealer promised to turn the painting in a couple of months ... and we still have it, hilarious! A more lucky investment but hard work was building up with my partners Christian Poloczek and Francisco Ventura the importer of SEAT cars in Poland. I sold the company in the late nineties when we achieved a revenue of Euro 125 mln with 64 dealers throughout the country. Since 2001, Von der Heyden Group is an active shareholder in IBB Hotels, a Spanish-based Hotel operator with some 15 Hotels under management and strongly growing. We have already 2 Hotels in Poland, currently negotiate to take over some 6-8 medium sized Hotels in Germany for the same reasons I said before. We are opening the most luxurious Skiing Hotel in the Spanish Pyrenees mountains with 160 Rooms in March 2006, which really excites me. Last but not least, we are in the marine business by representing the luxurious Ferretti Group (Pershing, Riva, Ferretti) in Menorca on an exclusive basis. Currently I am trying to get into the Water or Water Treatment business, in my view a market without limits. My dream profession? Maybe to be a politician!

Two years down the line how has Poland benefited from being in the EU?

In my view it was more of a historical step than a purely economic one. The latter could have been achieved with free trade agreements, which in fact already existed partly before. The EU has facilitated now many cross-border procedures, something important for us who are active in five European countries. Having always been fascinated about 19/20th century history, Poland's entry to the EU in my view was historically even more important than entry to NATO. I admit though, the latter made me sleep a bit better once we had the first millions sunk into the country. Poland will benefit largely, I would not limit the prospects just to the stereotype comparison with Spain. Poland's situation is different, in some ways more difficult and in some ways easier. Let's not forget the tremendous pressure globalization puts on every country trying to attract money today, something which for example Spain did not have to fight with really!

Is Poland a positive or a negative force in the EU in your opinion?

Hm - that is a tricky one... who are your readers? I have two answers ready! Sincerely, I feel that they have allowed themselves to be perceived as too stubborn in some negotiations that probably could have been achieved in a more diplomatic way. This approach has certainly born fruits short term. However, as a person I always prefer to strategically plan my relationships and prefer politicians doing the same without burning bridges the whole time. The famous saying "you meet everyone twice in life" also relates to politics.

What was your reaction to the news that PiS (Law and Justice) won both the parliamentary elections, meaning they led the formation of the government, and the Presidency at the expense of the more business and EU-friendly PO (Platforma Obywatelska)?

Honestly, being a foreigner and not being a political journalist, my right to criticize is limited. I want to answer this question with an anecdote. When PIS won I wrote an SMS to our Managing Director asking him in a joking way whether I may still enter Poland with my German passport. Yes, I was worried, but when I saw who was in the cabinet, and observing closely the work of the Prime Minister over the last couple of weeks, I am pleasantly surprised and relieved. I actively support Polish-German friendship and support many polish cultural events. Let's face it, I am a militant European by heart but believe in the importance of regional values and strengths and a certain independence in make decisions politically. I happened to be born in Germany, our holding is in Amsterdam, my family lives in Spain and I dedicate at least 60-70 % of my work time to our Polish Investments. This is the future and those who cannot adapt to this Pan-European concept might have difficulties in some years, if not already now.

You were once thinking of developing in the residential market in Poland. There's huge activity in the Polish residential market right now. Is developing in this sector something you are considering?

Of course and indeed, we have been so busy in stabilizing all our office and hotel developments that the residential investment came short. However, we are starting in May to build 280 apartments in Poznan, plan to develop a luxury scheme in the very centre of Warsaw and have more ideas. What worries me though are the crazy land prices, I feel the air is getting thinner and there is far too much "financially engineered" capital out there looking for opportunities which are more and more scarce.

What is your perspective on the office market right in Warsaw? There's a lot of supply out there now.

Look, we have sold or rented all we have, so my answer is sincere and not driven by wishful thinking. I am convinced that that all those gurus who predicted a catastrophe for the Warsaw Office market will be proven wrong. We had in 2005 a record year in take up, banks are still conservative when it comes to new developments which puts a lid on overly speculative developments. If the new government manages to spark a real investment wave in the service sector, than there is no barrier for the Warsaw office market. However top rents won't go over the Euro 20/m² hurdle again. Those times are over for some time.

You developed the Lublinianka hotel down in Lublin.

It seems like a one-off development. What was the thinking behind that?

Lublinianka.... you are touching my heart. What an emotional one, however not a one-off at all. When we started to come to Poland in 1990 and seriously needed to make some money to pay our first employees and visits to Poland, I decided to import exotic fruits to Poland, believe it or not! As we found a trustworthy person in Lublin, we opened the first office in Lublin. And now comes the story of the young man... we always had to drive by the Lublinianka to get to our office, looked out of the window and said "when we have money one day we will buy this building".... Only 8 years later one of my most trusted advisors showed me a picture and I was electrified! This is how it was! Lublinianka, after lots of bad luck with an explosion of refurbishment costs, a non performing German Hotel operator who did not pay rent, not even the operational costs... We went through hell and over night needed to manage this Hotel ourselves. Now the Lublinianka is the best hotel in the whole Lubelskie region. We put a special emphasis on service while the competition kills each other with price wars. We are now making decent money and we will return our equity in some years. Luckily we can survive this. We are now building the Andersia Tower Hotel in Poznan and have recently acquired a beautiful property in a secondary Polish city and will turn it into a top notch boutique hotel with 44 rooms. So you see, we are fully under steam!

You've avoided the retail sector so far. What are the reasons for this?

That is a good question which I am asked a lot and there the simple answer is that we have close to no idea about retail. If we do it one day, we will team up with someone who knows the ins and outs as well as we know them on the office and hotel markets.

What trends can we expect in the real estate market in Poland and the CEE region in the short, medium and long term?

The market will be earmarked on the investment side by some inflationary tendencies the next two years. I also believe that a couple of buyers will have a terrible hangover in 2008-2009 when they realize that they overpaid in 2006. However, the markets are dynamic, we have some 120 million people in the CER region (not counting Russia and Ukraine) who are all, with exceptions of course, as hungry as West Europe was after the 2^nd World War. If the balance is somehow kept between demand and supply, we may be lucky and not suffer what the German real estate market suffered the last ten years. For me it is simply ridiculous to buy a residential apartment block in Berlin for half the price or even less of what it costs in Warsaw or in Prague. Investors have to stay firm with their two feet on the ground and not spin the spiral too much. With respect to trends, there will be more of a drive to quality but at the same time an increasing amount of affordable lower class developments will be built. The middle segment, in line with social developments, will get thinner, unfortunately. But there is always the chance to make good business in Poland in as long your company plays the "Polish card".