Investing In Commercial Real Estate In Poland
Real Estate in Poland generally speaking has seen investors realising healthy profits during the last few years
. The property boom experienced before the crisis has steadied somewhat, however there are especially good profits for the prudent foreign and local investor. In particular this activity has been especially fruitful for foreign owners of Real Estate in Poland; due to several factors, exchange rates, interest rates, extra revenues gained from outdoor wall advertising and the actual profit on realisation.Investors purchasing commercial real estate need to be especially prudent when acquiring, or more specifically during the 90 days after actual purchase. It is during this time your review and analysis of the management, administration and especially re - negotiation of your current contracts sets the difference on what type of profits you can expect when selling in the short term, or your cash flow while holding your commercial real estate.
Your Lawyer plays an extremely important part during the acquisition of your real estate and the first 90 days immediately after acquiring. It is important that your Lawyer has a good understanding of english so that the key aspects of your leases of your agreements are fully understood during the renegotiation process.
Key negotiation points need to be dealt with prudently when taking over commercial real estate in Poland.
Does your existing lease agreements have a deposit? Quite often in my experience the lease agreements for commercial Real Estate in Poland do not have a deposit. You should have at least 2-3 months deposit to give you power during the holding period of your real estate.
Is your lease agreement Inflation proofed or Inflation linked? This is quite often omitted from the basic Polish contracts, or at the very bare minimum linked only to inflation. A prudent investor should aim for yearly increase of between 3-5% or inflation which ever is the greater. A lot of bank contracts will refer to the inflation rates published by Eurostat, or reference the NBP (National Bank of Poland). Either resource gives you a fair indication of the CPI to be included in your contract renegotiations.
Termination clauses, and your ability or rights to increase the Price of the contract? Termination Clauses are often left out, or referred back to the Polish Civil Code. Quite often in my experience this area is only in the favour of the lessee. And it is not until after sometime when the issue arises that the foreign investor seeks advice to find out that there investment has little or no ground to exit or terminate the contract and therefore are stuck with a contract for its term. This can mean the investor is left with terms significantly under market value, and especially if this the real estate is in a very good location. Meaning that the investor if the term remaining is within 5-7 years will see little or no increase in income, loosing against inflation and on sale during this time see little or no gains.
Having said this, the prudent investor investing now can pick up real bargains if they are cautious in pre sale analysis and negotiations, especially considering the basic issues outlined above can find themselves ending up with solid gains and increased revenues on there investment on commercial real estate in Poland.
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