Hoyts pulls out of cinema market; Lodz hopes to see interest pick up
"We are stopping our activities in Poland," said Sven Ettrich, who was managing operations for Hoyts Cinemas Polska.
In the summer of 1998, Hoyts announced it would look to establish a chain of up to 10 multiplex cinemas. It then signed a letter of intent with publicly listed property developer Echo Investment to operate multiplexes in Echo's retail and entertainment projects around the country. The first Echo/Hoyts cinema was to be developed in Lodz, where Hoyts planned to invest $5.1 million in a retail center being developed by Echo.
Those dreams came to an abrupt end, however. Since the announcements, Hoyts has failed to open any cinemas in Poland and Echo recently said it had terminated the joint-venture deal with Hoyts.
"They didn't want to open that" cinema in Lodz, said Michal Kubicki, development director for Echo, which is listed on the Warsaw Stock Exchange (WSE).
As a result, Echo signed a deal with a different cinema operator, U.S.-based Silver Screen. The new partners said that the plan to jointly open theaters in Lodz and Szczecin.
In Lodz, Echo will lease the space to Silver Screen for 10 years with an option to extend it by another 10 years, Kubicki said. The multiplex will be located at the intersection of ulicas Piotrkowska and Pilsudskiego in the center of the city. It will have 2,000 seats and 10 screens and will be part of a larger 40,000 square meter retail complex slated to open in the first half of 2000, Kubicki said.
Hoyts' Ettrich said that the company "some months ago" decided not to develop its Lodz project nor any others in Poland. "We will focus our activities in Austria and Germany," Ettrich added.
He would not give further details on why Hoyts decided to leave the Polish market. "I won't comment on this," Ettrich said.
Before Hoyts soured on Poland, the company had said it was attracted to the market here because of a lack of cinemas. In addition, it noted that the average Pole goes to the movies only once a year while in the United States the average is more than five theater visits a year per person.
Ettrich would not say that Hoyts is out of Poland for good, but did say that the company is not coming back anytime soon. "Maybe if conditions change," he said.
More business for Lodz
U.S. developer AIG/Lincoln later this month plans to open the first phase of the Diamond Business Park Lodz, the first class-A, speculative warehouse development in the country's second largest city.
Property industry members believe the project could be the start of something big for Lodz, which has an image of a run-down, depressed urban area.
Although it has a population of about 1 million, Lodz's unemployment rate of more than 10% and stagnant economy has resulted in far less property investment than other big cities such as Krakow, Katowice, Poznan, Wroclaw or Gdansk. Each of these cities is smaller than Lodz in terms of population, but none of them has an unemployment rate higher than 5%.
"(Lodz) is not people's first choice," said Ben Bannatyne, an agent with Jones Lang LaSalle, the real estate firm hired to market the Diamond Business Park Lodz.
But high unemployment could ironically be Lodz's strong point in attracting future investment. "It has relatively cheap and relatively skilled labor," said John Palmer, an agent with Henry Butcher real estate agency. "A lot of companies don't want to go to Warsaw because wages are too high."
Access to cheap labor combined with Lodz's central location – it is just about 130 kilometers southwest of Warsaw and has good transportation links – could attract companies seeking operations bases for light manufacturing and logistics that are cheaper than Warsaw. "Lodz can be considered a viable alternative to Warsaw," Bannatyne said.
"It's a very central hub," Palmer said. "It's very good to serve all different areas of Poland."
Companies including France's FM Logistics, Casino and Carrefour, Raben of the Netherlands, Sweden's Ikea, and U.K.-based Tesco have either developed or are developing their own warehouse centers in the Lodz area.
But those projects are independent developments or built to suit projects, while AIG/Lincoln's Diamond Business Park Lodz will show whether there is a demand for facilities to rent in Lodz.
The first phase of the project will include only 10,000 square meters of warehouse space. AIG/Lincoln said that 50% of the project is already let but would not name the tenant until the official opening of the warehouse on Sept. 22.
Jones Lang LaSalle's Bannatyne said that the first phase of the project will have two tenants each taking 5,000 square meters. One is a manufacturing company that is a newcomer to Poland and the other is a company already based in Lodz, he said.
Demand for space will determine progress on the project's next phases. The developer, which owns 12 hectares of land, could possibly build up to 56,000 square meters of warehouse space.
The second phase of 10,000 square meters is planned to be completed in 2000 with the next phase's schedule still undetermined.
Bannatyne said that once the first tenants move in, others will follow. "The production tenant will spin off suppliers," he said.
Manufacturing suppliers can expect operation costs that are 20% cheaper in the Lodz as compared to Warsaw, Bannatyne said. The reason? Cheaper labor and lower rents. The asking monthly rent in the Diamond Business Park Lodz is $7 per square meter, while similar warehouse projects in Warsaw charge $8-$9 per square meter, Bannatyne said.
In the summer of 1998, Hoyts announced it would look to establish a chain of up to 10 multiplex cinemas. It then signed a letter of intent with publicly listed property developer Echo Investment to operate multiplexes in Echo's retail and entertainment projects around the country. The first Echo/Hoyts cinema was to be developed in Lodz, where Hoyts planned to invest $5.1 million in a retail center being developed by Echo.
Those dreams came to an abrupt end, however. Since the announcements, Hoyts has failed to open any cinemas in Poland and Echo recently said it had terminated the joint-venture deal with Hoyts.
"They didn't want to open that" cinema in Lodz, said Michal Kubicki, development director for Echo, which is listed on the Warsaw Stock Exchange (WSE).
As a result, Echo signed a deal with a different cinema operator, U.S.-based Silver Screen. The new partners said that the plan to jointly open theaters in Lodz and Szczecin.
In Lodz, Echo will lease the space to Silver Screen for 10 years with an option to extend it by another 10 years, Kubicki said. The multiplex will be located at the intersection of ulicas Piotrkowska and Pilsudskiego in the center of the city. It will have 2,000 seats and 10 screens and will be part of a larger 40,000 square meter retail complex slated to open in the first half of 2000, Kubicki said.
Hoyts' Ettrich said that the company "some months ago" decided not to develop its Lodz project nor any others in Poland. "We will focus our activities in Austria and Germany," Ettrich added.
He would not give further details on why Hoyts decided to leave the Polish market. "I won't comment on this," Ettrich said.
Before Hoyts soured on Poland, the company had said it was attracted to the market here because of a lack of cinemas. In addition, it noted that the average Pole goes to the movies only once a year while in the United States the average is more than five theater visits a year per person.
Ettrich would not say that Hoyts is out of Poland for good, but did say that the company is not coming back anytime soon. "Maybe if conditions change," he said.
More business for Lodz
U.S. developer AIG/Lincoln later this month plans to open the first phase of the Diamond Business Park Lodz, the first class-A, speculative warehouse development in the country's second largest city.
Property industry members believe the project could be the start of something big for Lodz, which has an image of a run-down, depressed urban area.
Although it has a population of about 1 million, Lodz's unemployment rate of more than 10% and stagnant economy has resulted in far less property investment than other big cities such as Krakow, Katowice, Poznan, Wroclaw or Gdansk. Each of these cities is smaller than Lodz in terms of population, but none of them has an unemployment rate higher than 5%.
"(Lodz) is not people's first choice," said Ben Bannatyne, an agent with Jones Lang LaSalle, the real estate firm hired to market the Diamond Business Park Lodz.
But high unemployment could ironically be Lodz's strong point in attracting future investment. "It has relatively cheap and relatively skilled labor," said John Palmer, an agent with Henry Butcher real estate agency. "A lot of companies don't want to go to Warsaw because wages are too high."
Access to cheap labor combined with Lodz's central location – it is just about 130 kilometers southwest of Warsaw and has good transportation links – could attract companies seeking operations bases for light manufacturing and logistics that are cheaper than Warsaw. "Lodz can be considered a viable alternative to Warsaw," Bannatyne said.
"It's a very central hub," Palmer said. "It's very good to serve all different areas of Poland."
Companies including France's FM Logistics, Casino and Carrefour, Raben of the Netherlands, Sweden's Ikea, and U.K.-based Tesco have either developed or are developing their own warehouse centers in the Lodz area.
But those projects are independent developments or built to suit projects, while AIG/Lincoln's Diamond Business Park Lodz will show whether there is a demand for facilities to rent in Lodz.
The first phase of the project will include only 10,000 square meters of warehouse space. AIG/Lincoln said that 50% of the project is already let but would not name the tenant until the official opening of the warehouse on Sept. 22.
Jones Lang LaSalle's Bannatyne said that the first phase of the project will have two tenants each taking 5,000 square meters. One is a manufacturing company that is a newcomer to Poland and the other is a company already based in Lodz, he said.
Demand for space will determine progress on the project's next phases. The developer, which owns 12 hectares of land, could possibly build up to 56,000 square meters of warehouse space.
The second phase of 10,000 square meters is planned to be completed in 2000 with the next phase's schedule still undetermined.
Bannatyne said that once the first tenants move in, others will follow. "The production tenant will spin off suppliers," he said.
Manufacturing suppliers can expect operation costs that are 20% cheaper in the Lodz as compared to Warsaw, Bannatyne said. The reason? Cheaper labor and lower rents. The asking monthly rent in the Diamond Business Park Lodz is $7 per square meter, while similar warehouse projects in Warsaw charge $8-$9 per square meter, Bannatyne said.
