First bowling-based entertainment site opens in Warsaw
United Entertainment Co. (UEC) last week opened a leisure and entertainment center in Warsaw, the first such venue in the capital, and the second of a planned 24 projects throughout the country.
The company opened its first center in Poland three weeks ago in Wroclaw and is planning to open a third in Krakow's Zakopianka shopping center in January. UEC then expects to follow the Warsaw center, at the Promenada shopping mall in Warsaw's Praga district, with two more centers next September in the Mokotow and Ochota districts.
The centers, anchored by 10-pin bowling alleys and including theme bars and American-style diners, are all expected to be up and running within the next four years. In addition, the company wants to open two centers each in Prague and Budapest. Total investment in the centers is likely to top $80 million.
If successful with the centers, UEC is hoping to either go public through an initial public offering (IPO) on the Warsaw Stock Exchange (WSE), a U.S. or U.K. market, or through a sale to a strategic investor, according to internal company documents obtained by the Business Journal.
UEC's business plan calls for it to have $95.2 million in annual revenue by 2004 and it expects the company to have a value of $140 million at that time. The company also expects to generate net profit of $16.9 million in 2004, although it only expects to move into the black on a net basis in 2001, the documents show. But UEC does expect to be profitable on an operating basis next year, with planned earnings before interest depreciation and amortization (EBITDA) of $1.6 million, the documents show.
The center rollout has gotten off to a somewhat slow start, however. The Wroclaw, Warsaw and Krakow centers were all expected to be open by the third quarter. "We had wanted to open (in Praga) earlier, but the schedule is dictated by developers," said John Gabrovic, UEC vice president for business development.
Neither he nor UEC CEO Marc Bushala would say how this would likely effect planned 1999 revenue. Nor would they comment on the figures contained in the documents seen by the Business Journal.
Because of the delay in opening the first three centers, though, it is now unlikely that UEC will reach its $1.67 million revenue target as outlined in company documents.
The company chose to locate its first Warsaw center in Praga because it believed there was a competitive void in the district.
"There's no alternative for (residents) there," Gabrovic said. "There's a huge void of entertainment in that whole side of the city."
In addition to the planned Mokotow and Ochota sites, the company also plans further centers in Zoliborz and another in an as yet undisclosed location, he added.
The Mokotow site will be located next to a Ster multiplex cinema on the third floor of Galeria Mokotow, which is set to become Warsaw's largest mall, Gabrovic said. This site will include a 26-lane bowling alley, while the Ochota site will be located off the district's main thoroughfare, Aleje Jerozolimskie, Bushala said. However, while those sites are done deals, the firm is still negotiating for the land on which to build the projected center in Zoliborz, he added.
Bushala said the sites would require an average investment of about $3 million, although he would not give detailed figures for those up and running, nor would he give projected revenue breakdowns. Company documents show, however, that the total project cost for the Wroclaw center was planned at $3.75 million and the Praga center at $3.03 million. The Krakow center investment cost is estimated at $3.54 million.
The centers are being financed through a mix of debt and equity, and UEC has financing nailed down until the end of next year, Gabrovic said. Company documents show that the first three sites have an average leverage ratio of 58%.
On the equity side, funding is coming from venture capital companies Oresa Ventures and Poland Partners Innova, which each have 37.037% stakes in the company. Bushala said that Amerbank supplied the debt financing for the Praga project, while LG Petrobank supplied debt financing for the Wroclaw and Krakow sites.
In addition to the venture funds, Bushala owns 22.074% of the company, while Todd Stump and rock star Bob Geldof, who were partners with Bushala in broadcast company Atomic Entertainment, own 2.407% and 1.445% respectively, according to company documents.
In addition to restaurants, bars and bowling, the entertainment centers will also house video game arcades and will be located next to hypermarkets and cinema multiplexes. "We only locate our centers in conjunction with large retail centers and multiplexes," Gabrovic said.
The Praga center is housed in about 2,800 square meters of space, while the Wroclaw project takes up 3,500 square meters and Krakow is planned for 3,300 square meters.
While hypermarkets alone are capable of attracting 400,000-500,000 customers a month, UEC expects to attract 50,000-75,000 patrons a month, depending on the location, he said. Due to the differing customer target for each site, the amount of income the company expects to have rolling in also varies.
UEC also plans on a further center each in Krakow and Wroclaw, and two each in Poznan, Lodz and Katowice.
