Interview with Dominik Leszczyński, CEO and Founder of DL Invest Group, one of the fastest growing Polish development and investor groups

In recent months, DL Invest Group has acquired another international financial partner after the European Bank for Reconstruction and Development (which provided financing at the level of EUR 72 million): Macquarie Capital, which provided the company with financing in the amount of EUR 123.4 million. The company’s plans include: the construction of hundreds of thousands of square meters of modern warehouse and industrial space for renowned international companies, the construction of new office buildings and retail parks. It also does not rule out further acquisitions. Recently, it has bought an office building in Warsaw, which made its debut on the Warsaw market, and the historic Nadodrze railway station in Wrocław, where offices, commercial and service areas will be located.

DL Invest Group has acquired a financial partner. Is this funding for a specific purpose?

Dominik Leszczyński, CEO of DL Invest Group: Yes, this is another important step in the development of our company and confirmation of the quality of our structure, after obtaining financing from the European Bank for Reconstruction and Development, we acquired an international financial partner in the form of one of the largest banks in the world, the Macquarie Capital group, which will allocate EUR 123.4 million for our development. The debt is secured and the goal is to develop logistics projects located all over Poland, with a total area of ??over 193,000 sq m. sqm. Our cooperation plans are far-reaching, among other things, we are planning new investments based on our land bank on which we can build over 500,000 sq m. lease area.

What?

Consistently, in line with the adopted strategy, we are expanding our portfolio of assets, the value of which already exceeds PLN 2 billion, by building up our land bank. This year, it will include a warehouse for a pharmaceutical wholesaler for the Dr. Max in Teresin near Warsaw, where the Stokrotka distribution center with an area of ??over 34,000 sq m is already located (ultimately, the DL Invest Park Teresin project will provide over 100,000 sq m of lease space to the market), for which we are building another facility of this type in Rzeszów with an area of ??over 25,000 sq m. We have started the construction of industrial and warehouse space in Sędziszów Małopolski for SaarGummi, one of the global suppliers of components for the automotive industry, where the target development potential exceeds 100,000 sq m. There are also plans for further phases at DL Invest Park Psary, where Still, Gefco, Stokrotka or DHL Supply Chain are already located.

We are finalizing land purchases for the next last mile warehouses. In Poznań, it will be a courier facility with an area of ??10,000 sq m, and in Wrocław – 30 000 sq m. In the field of building small, suburban warehouses, we cooperate with, among others, InPost. In Katowice, on the other hand, we have a secured 7-hectare plot in post-industrial areas that we will revitalize. We intend to build 30 000 sq m. warehouse space, combined with office space of 20 000 sq m. It is a property at ul. Murckowska in a great location. We are working on new projects in very good locations, where we will adapt existing properties to the current needs of tenants. Central to this strategy is our “build and hold” business model. The implemented projects remain our property, which means that we act not only as a developer, but in particular as a long-term owner and investor who has, within the internal structure of the general contractor, a design office, rental departments and a property management department. Thanks to the extensive structure, we can quickly redesign and reconstruct the space, adapting the project to the needs of tenants, additionally guaranteeing their expansion and development in a given location without the need for relocation. In a dynamically changing market, our business model gives a great advantage over the standard competitive model, the so-called build and sell, where the tenant and the project are sold often still under construction. In addition, having extensive internal structures guarantees cost control at a high level, which also convinces our partners.

So DL Invest Group is developing strongly at a time when many companies start to think about their future?

Escape forward in the era of market turmoil is the principle we adhere to. Of course, this is not a rule that everyone can implement. We have been developing our company consistently for many years in line with the assumptions of our long-term strategy. We started with commercial projects, i.e. retail parks and other small commercial concepts, and a constantly expanded land bank. Then we started building office and warehouse projects, and now we are also considering our debut in the residential and hotel sectors. Our growth so far has been characterized by a very low level of indebtedness. Currently, we see many market opportunities and at the same time we have relatively large opportunities to obtain financing, secured on perfectly functioning real estate, on favorable terms, which enables us to develop dynamically at a time when most companies are considering limiting their activities. This well-thought-out strategy, implemented for many years, will put us in a new, good position when the market boom returns. To sum up: in times of prosperity, we did not consume profits, we focused on sensible, organic growth. And such a strategy is now appreciated by both banks and other financial institutions.

What are the company’s plans for the office sector?

We are planning five projects, among others, based on the expansion of excellent locations with new facilities / phases, the attractiveness of which is confirmed by fully rented existing projects. In Katowice, we are preparing to expand DL Piano at Roździeńskiego. The first phase of this project has 15,000 sq m. sqm We are working on the final DL Piano II concept. The second project is DL Tower II at Al. Korfantego 138. In Gliwice, we are finishing DL Prime and getting ready for the next stage. There is still a shortage of modern office space in Gliwice. However, the most demanding implementation in the coming years will be the historic Nadodrze Railway Station in Wrocław, which was recently bought. It’s a project with a soul. We intend to revitalize it and enrich it with new functions.

The company recently bought the IRIS office building in Służewiec Przemysłowy in Warsaw. Are you not afraid of competition?

This is a large acquisition for us – it is about nearly PLN 90 million. The facility is in 94% commercialized. The transaction will be another acquisition carried out in line with the goals set out in our strategy. We want to consistently implement our organic development plans based on the development of our land bank combined with the acquisition of opportunistic projects combined with revitalization, re-commercialization and active project management to increase their value.

The IRIS building is located in Warsaw’s Służewiec Przemysłowy, a unique area in Poland, which has been dynamically developing in recent years, being a reference point for many other business districts in the country. The district has undergone a significant metamorphosis, transforming from a monocultural area of ??the city into an almost self-sufficient office and residential district with very good communication, shops, service and recreational points. I am convinced that the excellent location of our building, scale and high quality guarantee great interest and success among tenants.

The retail sector is also very important to DL Invest Group. What are the company’s plans in relation to this market area?

Currently, our portfolio includes twelve retail parks. This year, the second stage of the park in Knurów was commissioned. Preparations are underway for the construction of a retail park in Mikołów, which is planned to be launched at the end of 2023. We are also planning two more facilities for which we already have building permits, i.e. in Kielce and in Nowy Dwór Gdański.

Additionally, the commercial element is strongly present in our new office complexes. While developing modern office buildings, we do not forget about the daily needs of our tenants. We prepare buildings in the mixed-use formula, using our experience gained on the retail market. Retail parks are by definition neighborhood concepts designed to meet the needs of local communities. In the same spirit, we introduce trade and services to our office investments – these are to be complementary functions to the needs of our office tenants and residents of neighboring buildings.

You are also going to make your debut in new sectors of the commercial real estate market, right?

Yes, we have been researching the hotel and PRS market for over two years. We intend to enrich our office complexes with apartments for rent and hotels. We are in talks with hotel operators about three locations. We want them to lease some of the space in our office buildings, running a hotel in them. At the same time, we are talking with investors about apartments for rent. In this way, our projects will become even more multifunctional complexes that will satisfy all the necessary needs of their users.

Which of your three locations do you want to transform into such classic mixed-use?

DL Tower in Katowice, DL Prime in Gliwice and in Siewierz, where we have areas near the lake intended for service, residential and hotel functions.

Are these not too bold projects? After all, both the sector the office and hotel facilities suffered heavily in the pandemic. Some even say that they did not actually recover from the pandemic condition. And certainly the banks have turned their backs on the hotels.

At the moment, we have no problems with obtaining financing for our office projects. Our portfolio is 97% leased and new properties are already under construction. Hence the decision to build more. The strategy of delivering high-quality projects to the market with an excellent accompanying infrastructure works well. The pandemic has obviously changed the office market. In regional cities, tenants have started to optimize their space, for example. We reacted quite quickly to this tendency by providing them with smaller surfaces. Additionally, our tenant portfolio is diversified. Our commercialization model does not focus on one or two major large companies, but on dozens of different entities. We have also launched the DL Space serviced offices concept. The idea is that at least five to ten percent of the area of ??each of our office buildings is filled with serviced offices. The solution works great. This is our proprietary concept, so we can always adapt it to the needs of our clients, and serviced offices are used by both small companies and large corporations that need additional space for a short period of time, for example for a design team.

DL Invest Group does not sell its buildings, so the strategy of providing real estate that meets the various needs of tenants seems to be the most appropriate.

Yes, at least once every four years, we try to liquidate one facility to show financial institutions that we can both build, modernize and manage, but also sell real estate profitably. This was the case, for example, with the shopping center in Zgorzelec, which we bought in 2020 during the pandemic, obtained financing, rebuilt, changed the tenant-mix and sold in 2021 with a total return on investment of 63%. It was also proof for financial institutions that a well-prepared project with a well-thought-out strategy can be an attractive asset even in difficult conditions, and DL Invest Group knows how to build real estate value also in difficult times.

Thank you for the conversation.