Shopping malls can now be bought at a low price as several funds are exiting Poland, closing their investment positions.
“What is the best way to invest 25 million PLN? Shopping malls are now an excellent investment because you can buy them cheap, work on the property and then sell it at a high price in a few years,” says Grzegorz Mroczek, vice president of Cream Property Advisors, in an interview with MarketNews24. “Such projects can now be acquired at a discount of up to 60-70% compared to the original price and well below 50% of the replacement value, i.e. the cost of constructing a new object.”
Shopping malls should prove to be a stable source of income. The annual rate of return should be estimated at 8%. With good project management, returns can be higher. It is worth focusing on reducing operating costs and replacing tenants with more attractive ones.
The required equity contribution is 30-40% depending on the project. The quick return on investment should facilitate the project’s cash flow which will service the loan installment.
The amount of 25 million PLN may be prohibitive for a Polish investor in the commercial real estate market, thus it may become popular to form an investment group with 3-5 investors.
In shopping malls, rental agreements are long term, often exceeding a period of 5 years.
Shopping malls are characterized by high footfall and diversify the investment portfolio.
“Such a project can be installed in a new financial vehicle, such as a family foundation,” comments Grzegorz Mroczek from Cream Property Advisors. “After 2-3 years of good management, you can exit the project with a profit of around 50%.”
