EBRD moves into logistics
The European Bank for Reconstruction and Development has decided to lend zł.69.7 million (€15 million) to the Europa Distribution Center for expansion of the Europa Park logistics center in Mszczonów. The announcement, made on November 21 in Warsaw, came at around the same time that EBRD President Jean Lemierre indicated that the bank's total investments in Poland in 2004 will be zł.232.4 million (€50 million).
The loan will assist in the financing of a 13,450 square-meter expansion to Europa Park's warehouse facilities that should be completed by April of 2004. Later developments at the logistics center will also include a railway container terminal and related infrastructure, occupying a total of about six hectares. Europa Park, when completed, will consist of some 500,000 square meters of warehouse space in at least 15 buildings, light industrial and distribution space.
The EBRD is targeting the country's logistics sector as part of a strategy it hopes will stimulate private investment. Warsaw EBRD Board Director Tadeusz Syryjczyk released a statement to the press saying "The timely development of the warehouse and logistics market is crucial for European Union accession countries such as Poland. It will help them to integrate better into pan-European distribution networks."
"Infrastructure in the warehousing sector is a more compelling investment," says Warsaw EBRD Senior Financial Analyst Lukasz Misiewicz. "It is still underdeveloped compared to the office market." Add to that the fact that the EBRD had already worked with the loan's sponsors - the shareholders of the holding company are the same as those of another EBRD-financed project here in Warsaw - and the Europa Park investment turned out to be the right place at the right time.
The loan is the second investment the EBRD has made in the Polish property market this year, and comes in the form of mezzanine financing, a relatively new tool here in Poland. While under a typical mezzanine structure, the debt would be subordinate to the primary, or senior lenders and unsecured, in this case the loan provided by the EBRD is partially secured. The instrument allows Europa Distribution Center to build some of its space speculatively. This means that it will not be necessary to wait for pre-lease agreements with tenants in order to begin construction, and that new facilities can be prepared for a new tenant in as little as three months, as opposed to nine to 10 months when starting from scratch.
That is good news, according to the EBRD, which anticipates demand for warehouse space to continue to exceed supply outside of Warsaw, in part due to Poland's EU accession next May. And the Europa Park distribution center, as well as the other logistics facilities that have chosen to locate in that area, could be well positioned to benefit from any increase in shipping due to their rail access to the main Berlin to Moscow line.
While he declined to discuss the specifics of the loan to Europa Park, Misiewicz said that the cost of the loan will depend upon the performance of the debtor and will be higher than for a standard senior loan due to the higher risk accepted by EBRD.
After Poland's accession to the European Union, explains EBRD press officer Axel Reiserer, the bank plans to focus even more on infrastructure projects including roads, railways and wastewater treatment facilities, municipal infrastructure and environmental projects.
That does not mean that the EBRD will abandon any of its other plans or the course it has mapped out with projects recently financed. One recent groundbreaking event for the bank was its investment, last March, of zł.139.5 million (€30 million) in Dom Development's Marina Mokotów residential project. The zł.775 million ($200 million) project, which is to add 1,500 new apartments to Warsaw's Mokotów neighborhood, represents the first time that the bank has committed funds for residential development in Poland. At the time of the loan, the EBRD called the investment a challenge to other banks to step up their efforts to finance similar projects.
The Europa Park loan also fits into the EDBR's strategy of promoting Poland's small- and medium-sized businesses, a group which does not yet enjoy wide access to mezzanine financing. In general, the EBRD strategy here in Poland has been focused on areas traditionally underserved by private investors and lending tools. Reiserer says the reason for the gap is simple: "Private banks target consumers because of higher margins."
Since its establishment in 1991, the EBRD has invested approximately zł.12.5 billion (€2.7 billion) in Poland. Privatization of the country's largest industries has in the past proven both one of the largest areas of involvement of the EBRD and one of its most difficult. The situation today revolves in large part around the financial markets.
"We do not deny that we are interested in BGŻ," Reiserer said of the EBRD's desire to purchase shares in the state-controlled Bank Gospodarki Żywnościowej, "but that will go forward when the government makes up its mind."
Last week BGŻ shareholders agreed to issue upwards of 8.6 million new shares. The move could raise up to zł.500 million for the bank, and if its strategy of courting new shareholders works, it intends to seek buyers among domestic and foreign financial institutions; the BGŻ president invoked the European Bank for econstruction and Development as one of its targets. The EBRD had previously stated that under the condition that the government no longer be the majority shareholder, the EBRD would purchase up to 20 percent of shares in BGŻ. "The ball," Reiserer said, "is in the government's court."
The loan will assist in the financing of a 13,450 square-meter expansion to Europa Park's warehouse facilities that should be completed by April of 2004. Later developments at the logistics center will also include a railway container terminal and related infrastructure, occupying a total of about six hectares. Europa Park, when completed, will consist of some 500,000 square meters of warehouse space in at least 15 buildings, light industrial and distribution space.
The EBRD is targeting the country's logistics sector as part of a strategy it hopes will stimulate private investment. Warsaw EBRD Board Director Tadeusz Syryjczyk released a statement to the press saying "The timely development of the warehouse and logistics market is crucial for European Union accession countries such as Poland. It will help them to integrate better into pan-European distribution networks."
"Infrastructure in the warehousing sector is a more compelling investment," says Warsaw EBRD Senior Financial Analyst Lukasz Misiewicz. "It is still underdeveloped compared to the office market." Add to that the fact that the EBRD had already worked with the loan's sponsors - the shareholders of the holding company are the same as those of another EBRD-financed project here in Warsaw - and the Europa Park investment turned out to be the right place at the right time.
The loan is the second investment the EBRD has made in the Polish property market this year, and comes in the form of mezzanine financing, a relatively new tool here in Poland. While under a typical mezzanine structure, the debt would be subordinate to the primary, or senior lenders and unsecured, in this case the loan provided by the EBRD is partially secured. The instrument allows Europa Distribution Center to build some of its space speculatively. This means that it will not be necessary to wait for pre-lease agreements with tenants in order to begin construction, and that new facilities can be prepared for a new tenant in as little as three months, as opposed to nine to 10 months when starting from scratch.
That is good news, according to the EBRD, which anticipates demand for warehouse space to continue to exceed supply outside of Warsaw, in part due to Poland's EU accession next May. And the Europa Park distribution center, as well as the other logistics facilities that have chosen to locate in that area, could be well positioned to benefit from any increase in shipping due to their rail access to the main Berlin to Moscow line.
While he declined to discuss the specifics of the loan to Europa Park, Misiewicz said that the cost of the loan will depend upon the performance of the debtor and will be higher than for a standard senior loan due to the higher risk accepted by EBRD.
After Poland's accession to the European Union, explains EBRD press officer Axel Reiserer, the bank plans to focus even more on infrastructure projects including roads, railways and wastewater treatment facilities, municipal infrastructure and environmental projects.
That does not mean that the EBRD will abandon any of its other plans or the course it has mapped out with projects recently financed. One recent groundbreaking event for the bank was its investment, last March, of zł.139.5 million (€30 million) in Dom Development's Marina Mokotów residential project. The zł.775 million ($200 million) project, which is to add 1,500 new apartments to Warsaw's Mokotów neighborhood, represents the first time that the bank has committed funds for residential development in Poland. At the time of the loan, the EBRD called the investment a challenge to other banks to step up their efforts to finance similar projects.
The Europa Park loan also fits into the EDBR's strategy of promoting Poland's small- and medium-sized businesses, a group which does not yet enjoy wide access to mezzanine financing. In general, the EBRD strategy here in Poland has been focused on areas traditionally underserved by private investors and lending tools. Reiserer says the reason for the gap is simple: "Private banks target consumers because of higher margins."
Since its establishment in 1991, the EBRD has invested approximately zł.12.5 billion (€2.7 billion) in Poland. Privatization of the country's largest industries has in the past proven both one of the largest areas of involvement of the EBRD and one of its most difficult. The situation today revolves in large part around the financial markets.
"We do not deny that we are interested in BGŻ," Reiserer said of the EBRD's desire to purchase shares in the state-controlled Bank Gospodarki Żywnościowej, "but that will go forward when the government makes up its mind."
Last week BGŻ shareholders agreed to issue upwards of 8.6 million new shares. The move could raise up to zł.500 million for the bank, and if its strategy of courting new shareholders works, it intends to seek buyers among domestic and foreign financial institutions; the BGŻ president invoked the European Bank for econstruction and Development as one of its targets. The EBRD had previously stated that under the condition that the government no longer be the majority shareholder, the EBRD would purchase up to 20 percent of shares in BGŻ. "The ball," Reiserer said, "is in the government's court."
