On April 9, 2020, CEE Legal Matters reported that Dentons had advised Hines Poland Sustainable Income Fund on the sale of a portfolio of six Polish distribution parks and the Nord Point office building in Warsaw to Chinese investor CGL Investment Holdings Corporation Limited. We spoke to Mietek Godzisz, Head of Hines in Poland, about the deal.
CEELM: To start, please tell our readers about the Hines Poland Sustainable Income Fund.
Mietek: The Hines Poland Sustainable Income Fund is a private closed-end fund focused on investing in yielding office and industrial assets in Poland. The fund’s strategy is to target, within these two asset classes, properties that are both of high-quality at purchase and offer the potential for further improvement in their sustainability features. The fund was first closed in July 2014 with a total capitalization of EUR 155 million in equity, with the equity commitments made by institutional, public, and private investors. Between 2014 and 2016, the fund invested in assets worth approximately EUR 250 million in gross asset value, including in three office assets in Warsaw and six logistics and industrial parks across Poland. Under the fund's regulations, there are specific requirements and improvement targets in sustainability that Hines — as the general partner and fund manager — was required to achieve during the first years of the hold period. Hines met all these sustainability requirements by Hines by early 2019.
CEELM: What do you think made these particular targets attractive to CGL Investment Holdings Corporation Limited?
Mietek: I believe that CGL Investment Holdings Corporation Ltd was attracted to the industrial/logistics portfolio of the fund owing to the defensive locations of these parks, the quality of tenant base, and the sustainability of this well-diversified portfolio. As a result of the competitive bid process, CGL emerged as the most motivated bidder, but also a reliable, large strategic player, and so one capable of completing the transaction as anticipated. We were very happy to grant exclusivity to CGL, which proved to be the right decision, as CGL has pursued the transaction with focus and discipline through the efficient closing despite the global uncertainty arising from the Coronavirus pandemic.
CEELM: What would you say were the most complex aspects of the deal?
Mietek: As the assets of the fund's industrial portfolio was very diverse, including a multi-tenanted park with a significant office component in Warsaw, CGL needed more time for the due diligence that might have been expected. This caused some slow-down in the transaction process. Such a decline in the deal dynamics was a challenge to manage as we all know that time often kills deals. It was both the fund's and CGL's job to keep all the involved teams, including the advisers, properly focused and disciplined throughout the process, which we did well, I would say. We were fortunate to have CGL as the counter-party who was as committed as we were to get the deal through the finish line as soon as practicable.
CEELM: How was the legal work involved in the deal split between your in-house legal function and your external advisors?
Mietek: We actually do not have an internal legal function in Poland. Therefore, we worked with external counsel at the asset level in Poland, and another counsel at the fund level in Luxembourg. Naturally, the Polish level legal work scope was significantly broader as the entire portfolio deal was carried under Polish law. The work of coordinating the counsels, including to some extent the counter-party counsel, was carried out by our asset manager and myself throughout the transaction process. As with any complex transaction, there were problems to address, including some that were legal in nature, but none proved too difficult to resolve for CGL, Hines, or our attorneys. I do not recall any issue to be of gravity that would threaten the transaction or cause unusual concern.
CEELM: What were the main considerations for in choosing Dentons to assist you on this deal?
Mietek: Dentons has long been the law firm of first-choice in Poland, in particular for larger real estate transactions. That said, we carried out a fair market selection process among several law firms prior to engaging Dentons for the job. In our and the fund manager’s opinion, Dentons offered the best overall value proposition, considering the Dentons' team dedicated to the deal and the fee structure proposed.