Turf wars to come<BR>
The borders between the various countries, including those about to join the EU this year and others lined up for entry in 2007, are, it seems, of increasing irrelevance when it comes to expansion. Towns and cities hitherto untouched by the latest concepts, particularly in retail, will wake up one day to a choice currently only enjoyed by people in the bigger conurbations.
Though it insists the details have to remain a secret for the time being, the Polish developer Globe Trade Center (GTC) is to embark on an IPO on Warsaw's stock exchange, to accumulate funds it will then use to both strengthen its position in Poland and expand abroad at some speed. As well as the more obvious destinations such as Hungary and the Czech Republic, however, GTC has firm intentions to increase its presence in the Romanian and Serbian markets.
Mirroring its strategy in Poland, where it first developed Mokotów Business Park and then the nearby 48,000 square meter retail center, Galeria Mokotów, GTC in Bucharest has to date built the 13,000 square meter Europe House in Bucharest city center, which it then sold to Europolis for zł.120 million ($31 million) last year. Another office project in the city, the 14,000 square meter America House, is due for completion next year. With the accumulated funds from the IPO, GTC will seek to develop a retail center based on its third generation Galeria Mokotów model. Nothing of this type yet exists in Bucharest.
"If something like Galeria Mokotów were developed in Bucharest or Belgrade, we feel it would be a great success," says Mariusz Kozłowski, Sales and Marketing Manager of GTC. As a city with a population of 2.5 million people and one that will be part of the EU in three years' time, the Romanian capital's readiness for the arrival of a project like Galeria Mokotów, almost matches that of Warsaw, (a city of nearly 2 million) when it welcomed GTC's center to its soil in 2000. This is indeed confirmed by Nicu Gherghe, Agency Negotiator at CB Richard Ellis Romania.
The existing major shopping center developments in Bucharest that he lists, are, "all hypermarket-anchored," he says and only twenty percent of the total retail stock is represented by modern schemes. "Most projects do not have substantial entertainment or department store elements," he adds. The only challenge to a Galeria Mokotów-type development might come from the Metropola Center in the city center, which consists of 80,000 square meters and includes a shopping gallery, a five-star hotel and cinemas. But on the whole, there is "not much competition, though demand for such projects is high," according to Gherghe, "if we consider the affluence of those people who already visit malls and shopping centers." GTC can also take encouragement from his concluding remarks on the subject: "An active market is expected in the coming months: large international chains and local retailers have announced their intention to increase the number of outlets in Bucharest and across Romania."
"GTC's philosophy is to establish a base with an office development, then retail, and once we have a good knowledge of the local market, we move to retail and residential," says Mariusz Kozłowski. While the fresher markets of Bucharest and Belgrade invite this strategy to the letter, those in the Czech Republic and Hungary don't and there will not be any GTC retail developments in these countries in the near future. The residential market, however, is another matter and GTC has already completed a 450 apartment project on the banks of the river Danube in Budapest.
Despite these differences between the markets, Kozłowski holds that they won't entail a diffuse approach: "We think that there is a big synergy when working regionally, because we can use the same standards of lease contracts, the same agreements with contractors and Poland is also typically the main headquarters for most international companies in the region."
As for the domestic market, GTC will seek to implement its original philosophy but its current linchpin is its Galeria Kazimierz project in Kraków, a 36,000 square meter project due to start operating in 2005, which will use the Galeria Mokotów blueprint but adapt it to the cultural and historical sensibilities of Poland's former capital. A residential project there could easily follow and then GTC will look to the country's other large cities to continue its shopping mall concept tour. And here they will find that other developers have much the same idea.
With currently only three retail and entertainment centers in Poland: Sadyba Best Mall in Warsaw, Kraków Plaza and a center in Ruda Śląska, Plaza Centers Poland, (part of Plaza Centers Europe, a Dutch-based company) is set in 2004, to develop a further four centers, worth zł.828 million (E170 million). They include Poznań Plaza, a zł.268 million (E55 million) investment in the Western Polish city, which will consist of 70,000 square meters, and on which construction has already begun, and centers in Lublin, Rybnik and Sosniowiec. Over the next five years, the parent company will deliver seventy centers to the wider European market, of which thirty will go to Poland, at an average rate of four to six a year. Most of its current centers are situated in Hungary.
"We made a strategic decision to enter cities with populations of 100,000 or more and there are forty two such cities in Poland," says Krzysztof Armel, Director of Plaza Centers Poland.
Such grandiose plans are strongly inspired by the developer's recent signing of Heads of Terms with the American-based investor Heitman Financial Limited Real Estate Investor, (see related article on p 6), to establish a joint venture whereby the latter will acquire a ninety per cent stake in Plaza Centers' nineteen existing projects in Europe, though the developer will continue to manage the centers, which will also remain under its brand name.
"We'd been looking for a serious investor for some time," says Krzysztof Armel, "they are very serious and own properties worth around zł.42.6 billion ($11 billion). We are at the due diligence stage right now and are waiting for the approval of the boards and so on. We believe the joint venture will be finalized in 120 days and then we will come together as a joint venture company. There will be a huge amount of money which will allow us to develop ourselves seriously in a very short space of time."
He points out too that when news of the joint venture was announced, the shares of Plaza Centers Europe's holding company, the Israeli Elbit Medical Imaging Ltd, went up by thirteen percent on the Tel Aviv stock exchange. "This is proof that the biggest investors trust us," says Armel.
As with GTC, Plaza Centers will be introducing their third generation concept to these Polish cities for the first time, unless one or the other of the developers gets in ahead, of course. It uses a standard model of two floors, the first of which is for the shopping gallery and the second 3,000 square meters of entertainment space, "though we do use a variety of architects," says Armel and the different malls can vary according to the, "city's atmosphere or the shape of the plot. From time to time, we have to heed the demands of the conservation authorities," adds Armel, "though this is rarely a problem."
Fundamental to Plaza Centers' retail projects are its Fantasy Parks, which invariably consist of bowling alleys, computer and video game arcades and cinemas of around six to thirteen screens, none of which would seem to offer anything path-breakingly new. Yet Krzystof Armel claims that although such notions are at the "brainstorming stage," cultural events, such as exhibitions and theatre performances, might in the future augment Plaza Centers' retail developments.
Whilst GTC are disinclined to do retail in Hungary and Plaza Centers have already been there and done that, TriGranit, a Canadian/Hungarian developer, with a number of significant projects to its name already, is making a big enough impact in that very market in Poland, in the short time they've been operating here. Late last year it acquired the Silesia Park project in Katowice, from under the noses of everyone, it seemed, and now it is about to begin work on Silesia City, a multifunctional scheme to be built on a former coal mine, at a cost of zł.2.9 billion (E600 million). Construction will begin this year and the first phase of the project will be complete in twelve months' time. This announcement too came right out of the blue and there seems no telling what TriGranit might do next. Originally it was to move into Warsaw to embark on a large-scale downtown multifunctional center, which would find itself in open competition with the likes of Złote Tarasy. Now, however, it has gone and planted its flag very firmly into Silesian territory and has already made its mark in cities such as Bucharest and Belgrade as well. Polish developers such as GTC, about to make bolder incursions into less developed markets, would be well be advised to keep an eye on their rear flank at what the Hungarians are up to.
Though it insists the details have to remain a secret for the time being, the Polish developer Globe Trade Center (GTC) is to embark on an IPO on Warsaw's stock exchange, to accumulate funds it will then use to both strengthen its position in Poland and expand abroad at some speed. As well as the more obvious destinations such as Hungary and the Czech Republic, however, GTC has firm intentions to increase its presence in the Romanian and Serbian markets.
Mirroring its strategy in Poland, where it first developed Mokotów Business Park and then the nearby 48,000 square meter retail center, Galeria Mokotów, GTC in Bucharest has to date built the 13,000 square meter Europe House in Bucharest city center, which it then sold to Europolis for zł.120 million ($31 million) last year. Another office project in the city, the 14,000 square meter America House, is due for completion next year. With the accumulated funds from the IPO, GTC will seek to develop a retail center based on its third generation Galeria Mokotów model. Nothing of this type yet exists in Bucharest.
"If something like Galeria Mokotów were developed in Bucharest or Belgrade, we feel it would be a great success," says Mariusz Kozłowski, Sales and Marketing Manager of GTC. As a city with a population of 2.5 million people and one that will be part of the EU in three years' time, the Romanian capital's readiness for the arrival of a project like Galeria Mokotów, almost matches that of Warsaw, (a city of nearly 2 million) when it welcomed GTC's center to its soil in 2000. This is indeed confirmed by Nicu Gherghe, Agency Negotiator at CB Richard Ellis Romania.
The existing major shopping center developments in Bucharest that he lists, are, "all hypermarket-anchored," he says and only twenty percent of the total retail stock is represented by modern schemes. "Most projects do not have substantial entertainment or department store elements," he adds. The only challenge to a Galeria Mokotów-type development might come from the Metropola Center in the city center, which consists of 80,000 square meters and includes a shopping gallery, a five-star hotel and cinemas. But on the whole, there is "not much competition, though demand for such projects is high," according to Gherghe, "if we consider the affluence of those people who already visit malls and shopping centers." GTC can also take encouragement from his concluding remarks on the subject: "An active market is expected in the coming months: large international chains and local retailers have announced their intention to increase the number of outlets in Bucharest and across Romania."
"GTC's philosophy is to establish a base with an office development, then retail, and once we have a good knowledge of the local market, we move to retail and residential," says Mariusz Kozłowski. While the fresher markets of Bucharest and Belgrade invite this strategy to the letter, those in the Czech Republic and Hungary don't and there will not be any GTC retail developments in these countries in the near future. The residential market, however, is another matter and GTC has already completed a 450 apartment project on the banks of the river Danube in Budapest.
Despite these differences between the markets, Kozłowski holds that they won't entail a diffuse approach: "We think that there is a big synergy when working regionally, because we can use the same standards of lease contracts, the same agreements with contractors and Poland is also typically the main headquarters for most international companies in the region."
As for the domestic market, GTC will seek to implement its original philosophy but its current linchpin is its Galeria Kazimierz project in Kraków, a 36,000 square meter project due to start operating in 2005, which will use the Galeria Mokotów blueprint but adapt it to the cultural and historical sensibilities of Poland's former capital. A residential project there could easily follow and then GTC will look to the country's other large cities to continue its shopping mall concept tour. And here they will find that other developers have much the same idea.
With currently only three retail and entertainment centers in Poland: Sadyba Best Mall in Warsaw, Kraków Plaza and a center in Ruda Śląska, Plaza Centers Poland, (part of Plaza Centers Europe, a Dutch-based company) is set in 2004, to develop a further four centers, worth zł.828 million (E170 million). They include Poznań Plaza, a zł.268 million (E55 million) investment in the Western Polish city, which will consist of 70,000 square meters, and on which construction has already begun, and centers in Lublin, Rybnik and Sosniowiec. Over the next five years, the parent company will deliver seventy centers to the wider European market, of which thirty will go to Poland, at an average rate of four to six a year. Most of its current centers are situated in Hungary.
"We made a strategic decision to enter cities with populations of 100,000 or more and there are forty two such cities in Poland," says Krzysztof Armel, Director of Plaza Centers Poland.
Such grandiose plans are strongly inspired by the developer's recent signing of Heads of Terms with the American-based investor Heitman Financial Limited Real Estate Investor, (see related article on p 6), to establish a joint venture whereby the latter will acquire a ninety per cent stake in Plaza Centers' nineteen existing projects in Europe, though the developer will continue to manage the centers, which will also remain under its brand name.
"We'd been looking for a serious investor for some time," says Krzysztof Armel, "they are very serious and own properties worth around zł.42.6 billion ($11 billion). We are at the due diligence stage right now and are waiting for the approval of the boards and so on. We believe the joint venture will be finalized in 120 days and then we will come together as a joint venture company. There will be a huge amount of money which will allow us to develop ourselves seriously in a very short space of time."
He points out too that when news of the joint venture was announced, the shares of Plaza Centers Europe's holding company, the Israeli Elbit Medical Imaging Ltd, went up by thirteen percent on the Tel Aviv stock exchange. "This is proof that the biggest investors trust us," says Armel.
As with GTC, Plaza Centers will be introducing their third generation concept to these Polish cities for the first time, unless one or the other of the developers gets in ahead, of course. It uses a standard model of two floors, the first of which is for the shopping gallery and the second 3,000 square meters of entertainment space, "though we do use a variety of architects," says Armel and the different malls can vary according to the, "city's atmosphere or the shape of the plot. From time to time, we have to heed the demands of the conservation authorities," adds Armel, "though this is rarely a problem."
Fundamental to Plaza Centers' retail projects are its Fantasy Parks, which invariably consist of bowling alleys, computer and video game arcades and cinemas of around six to thirteen screens, none of which would seem to offer anything path-breakingly new. Yet Krzystof Armel claims that although such notions are at the "brainstorming stage," cultural events, such as exhibitions and theatre performances, might in the future augment Plaza Centers' retail developments.
Whilst GTC are disinclined to do retail in Hungary and Plaza Centers have already been there and done that, TriGranit, a Canadian/Hungarian developer, with a number of significant projects to its name already, is making a big enough impact in that very market in Poland, in the short time they've been operating here. Late last year it acquired the Silesia Park project in Katowice, from under the noses of everyone, it seemed, and now it is about to begin work on Silesia City, a multifunctional scheme to be built on a former coal mine, at a cost of zł.2.9 billion (E600 million). Construction will begin this year and the first phase of the project will be complete in twelve months' time. This announcement too came right out of the blue and there seems no telling what TriGranit might do next. Originally it was to move into Warsaw to embark on a large-scale downtown multifunctional center, which would find itself in open competition with the likes of Złote Tarasy. Now, however, it has gone and planted its flag very firmly into Silesian territory and has already made its mark in cities such as Bucharest and Belgrade as well. Polish developers such as GTC, about to make bolder incursions into less developed markets, would be well be advised to keep an eye on their rear flank at what the Hungarians are up to.
