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Silverstein Partners With Poland’s Richest Man in Warsaw Real Estate Deal

Dec 9 2011

Larry i Jan

Larry Silverstein, after more than five decades of investing almost entirely in New York City real estate, is making his first foray abroad in Poland, one of Europe’s most in-demand property markets.

The developer of office towers at Manhattan’s World Trade Center site has teamed with Jan Kulczyk, Poland’s richest man, on a 500 million-euro ($666 million) venture to buy and develop properties, beginning in Kulczyk’s home country. They made their first purchase, an eight-story Warsaw office building, in August, and are working on plans to add towers to the Polish capital’s skyline.

Kulczyk has “done everything, but one thing he hasn’t done much of is real estate development,” Silverstein, 80, said in an interview. “It took a little while to understand his goals, and to make sure his goals coincided with ours. And, at the end of the day, they do.”

The partnership is an element of Silverstein Properties Inc.’s strategy to expand beyond its New York base, which also includes building a Four Seasons hotel at Walt Disney World Resort in Orlando, Florida, and preliminary contacts in China. Poland has displaced Russia as the “strongest magnet” for foreign real estate investment in Europe, the Middle East and Africa, according to a report by Real Capital Analytics Inc.

In the 12 months ended Oct. 31, foreign investors poured $3.4 billion into Polish commercial properties, compared with $1.6 into Russia’s, New York-based Real Capital said in a report last month. Most of the demand is for retail and office buildings, according to Dan Fasulo, managing director at the research firm, which tracks commercial real estate sales.

‘Financial Capital’

Poland is appealing because of its “very stable economy,” said Mickey Kupperman, Silverstein Properties’ chief operating officer. Warsaw “is perhaps on its way to being the financial capital of eastern Europe, so we see great opportunity there, ”he said in an e-mail.

For Silverstein, it’s a good time to start investing abroad because his company has “an increasing comfort about where we are in terms of the other projects,” he said. One of his lower Manhattan towers, 4 World Trade Center, is up to the 56th of 72 planned stories, according to the developer. Bases are under construction for two other buildings at the site, where the twin towers stood before the 2001 terrorist attacks. Last year, he completed the second of two apartment towers at the western end of 42nd Street.

Warsaw Skyscraper

Kulczyk Silverstein Properties, as the venture is known, plans to build a 426-foot (130-meter) skyscraper in central Warsaw to be called the Chmielna Tower. The company is awaiting final approval from the city, Piotr Krawczynski, managing director of Kulczyk Silverstein, said in a telephone interview from the capital. From there, the partnership is focused on central and eastern Europe, he said.

Kulczyk, 61, is chairman of Kulczyk Oil Ventures Inc. (KOV), which explores and develops oil deposits in Southeast Asia, the Middle East and Europe. With a net worth of $2.6 billion, he’s Poland’s wealthiest man, according to Forbes magazine, and No. 440 on its list of the world’s richest people. He’s among the largest shareholders in SABMiller Plc (SAB), the world’s No. 2 brewer, whose brands include Miller, Coors Light, Grolsch and Peroni beers.

Silverstein “is able to execute things others may call dreams,” Kulczyk said in an e-mail. “On top of that, we like each other as individuals and we share views and tastes in relation to different things, not only business.”

Focus on Offices

The partners plan to spend about 500 million euros of their own money over the next five to seven years to invest mainly in office properties, according to Krawczynski. They’re aiming to invest about 1 billion euros, or $1.33 billion, including debt, he said.

Kulczyk said he envisions a portfolio of about 13 to 17 properties, primarily focused on office towers.

“The region still lacks world-class buildings and architecture” that would meet the expectations of “more and more demanding customers,” he said.

Warsaw is an undersupplied office market, said Richard Petersen, managing partner of Cushman & Wakefield Poland, an arm of New York-based commercial-property brokerage Cushman & Wakefield Inc. The third-quarter vacancy rate in the city’s central business district was 7.2 percent, lower than almost any U.S. market and the third-lowest in Europe after London’s West End and Madrid, according to the firm.

Top-Tier Space

The city has about 3.6 million square meters (38.3 million square feet) of top-tier office space, almost all of it built since 1994, he said.

“It’s about half the size it could be,” Petersen said.“We think it could go to about 7 or 8 million square meters over the next 10 to 12 years.”

Demand comes from corporations seeking regional offices in eastern Europe, banks, insurance and accounting companies, and“quite a big pharmaceutical sector,” he said.

Kulczyk and Silverstein teamed up in late 2009 or early 2010, Kupperman said. After a year of organizing and forming an investment strategy, the partnership made its first deal in August, buying the 10,678-square-meter Stratos Office Center in central Warsaw. The price was $50.3 million, according to Real Capital. Tenants include the Belgian Embassy and BRE Leasing, a unit of Commerzbank AG.

Read more: http://www.bloomberg.com/news/2011-12-08/silverstein-links-with-poland-s-richest-man-for-first-property-deal-abroad.html

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