Interview with Sven von der Heyden, President of VON DER HEYDEN GROUP.

How would you describe the situation on the Polish commercial real estate market after the EU accession? Have there been any changes? What are the perspectives for the future?
SvdH: The polish Real Estate Market has already anticipated the EU accession well before the accession has happened. In other words, yields, prices per sqm have already smoothened and are more or less in line with other European Countries, with the exception of for example Paris and London, which in terms of valuations per sqm. are at the top end of European Real Estate Industry. We still see good opportunities, but honestly speaking, in a declining rental market it is getting more and more difficult eyen for us, with 15 years of experience and contacts all over the place, to get attractive deals done.

What influence has the EU accession had on the Von Der Heyden Group?
SvdH: The EU accession was a personal dream of mine for years, and in a nutshell, we are extremely happy with Poland now being a fully accepted member of the European family. It gives us and our investments stability, not so much from a security perspective, as Poland became already many years ago a member of NATO. It is for me a rather cultural milestone and of course, now Poland being able to export at no additional cost to other countries will eventually also bring unemployment down, which we badly need. We just have to be a bit patient, just look at Spain, which had a huge structural unemployment rate of 21 % (!!) and is now the powerhouse of the European Economic zone together with small countries such as Ireland. Last but not least, I do hope that the entry in the EU will bring a new class of professional politicians in Poland whose first aim is to serve their country. There are certainly already today many of them, but simply not enough. lf anything disturbs me personally, than it is the constant political squabbles and corruption affairs which paints a terribly bad but also wrong picture of Poland.

What area of commercial real estate do you find most attractive. Until now you have focused on office space. Is it going to continue, or should we expect changes?
SvdH: Given the earlier mentioned decline in rental rates we obviously prepared ourselves and started investing in 2001 also in Hotel Projects. The Hotel industry in general is very management intensive, but with the right team in place you can manage to come close to returns of well performing office buildings We started with Lublin, then got the construction permit for a Warsaw project which we luckily did not start, given in what difficult shape the Warsaw Hotel market is today. We are now building our second phase development in Poznan which is called Andersia Towers, a mixed-use project with some 10.000 sqm of net rentable office space and a 4 Star+ Hotel with 178 Rooms. We believe in Poznan, however also see some room for improvement in terms of marketing the City in a more positive light abroad and within Poland. We have no other plans than offices and Hotels and some residential, which we have gained experience with in Germany in the nineties. Residential seems to be a hot-pick at the moment and we own sufficient sites in Poznan and Warsaw to jump onto the train!

Your company was so far involved in the investment projects in Warsaw, Poznan and Lublin. Where are you going to go next and why?
SvdH: We are seriously looking at Krakow and currently have one Hotel Project under negotiation. We also look at smaller Cities such as Katowice, but it is too early to say more at the moment.

What, in your opinion, is the biggest discouragement for foreign investors when it comes to investing in Poland?
SvdH: Oh, now I dare to give you the honest answer.. The redtape, the bureaucracy and above all the corruption. We managed to get around all this, however it takes an enormous amount of patience and at the end lot of money for lawyers making sure that you secure your rights. lf we are being offered deals were we have to bribe someone, we turn the deal down on first sight. We have a reputation to loose and our reputation is maybe 50 % of our success. Companies such as BZWBK, the Polish Bank Guarantee Fund, PwC, the Polish Press Agency and many others would have probably never worked with us, if we would not enjoy an impeccable reputation in terms of our business habits. But I can tell you, it is a hard fight every day but I can encourage everyone to stick to his principles, on the long run it pays off.

What’s in the nearest future when it comes to your investment activity in Poland
SvdH: We are going to invest some Euro 150-200 mln. over the next 3-4 years, divided into Poznan, Warsaw, Katowice and Krakow. Maybe some opportunity comes along in other cities, but again, we intend to only look at opportunities to have enough room to fall if something goes wrong.

Is Andersia Tower going to be a success?
SvdH: I don’t have crystal ball, but I can assure you that we have worked during the last 2 years very hard to optimize our project, to harmonize the architecture, to find a right compromise between construction details and Von der Heyden Group quality on the one side and practicality and costs on the other side. Furthermore, I am a strong believer that we will not flood the office market in 2006/2007 with the additional 10.000 m., which only represents some 7 % of current office stock. Mind you, Andersia Towers will certainly be the most attractive building in town and will certainly also attract tenant interest, same as much as Poznan Financial Centre did in the past and still does today. The Hotel component shall be successful, without a doubt. We have a clear idea what we want and what the market is crying for in terms of client service. The IBB Andersia Towers will be an elegant mixture of an International Hotel with a Polish soul and Spanish temperament... and I am convinced that this is a perfect mix!

What is „Opportunity Poland”, what are the organization’s goals?
SvdH: Opportunity Poland is a non- profit organization, created by a large number of Polish and International Businesses. It has personally hurt me in the past to see, that Poland did not represent itself the way it can, that prejudices abroad are not in line with Polish reality and I felt we need to help. As we are from the Real Estate world, we started our activities on the Largest International Real Estate Fairs in Cannes and in Munich, and with some good will from all parties involved managed to have for example a much nicer presentation of Poland during the last 2 fairs. Important to note, that Cities such as Warsaw, Poznan and Wroclaw are members of Opportunity Poland. Our team is working hard and 2005 will be another milestone for our association, as we want to start to tackle other fields where we support to attract foreign business to Poland and above all, improve Poland’s image abroad!