After a stormy period in Russia, Atrium has entered calmer waters and is focusing on refining its inner-city focus and redeveloping existing malls in Central and Eastern Europe.
Liad Barzilai has only been CEO of Atrium European Real Estate for a few months, but his decade of experience within the CEE-focused shopping centre owner and management group – and indeed across Gazit Globe – is evident as he gives his first CEO interview to PropertyEU at this year’s Mapic.
Barzilai spent eight out of the last 10 years as Atrium’s CIO, head of acquisitions and VP of business development, and has been an integral part of the company’s focused transition from 2009 to 2017.
‘We added €1 bn of asset value to the portfolio over that period, but dropped from holding 160 properties to just 60,’ Barzilai says. ‘That’s the essence of our current strategy – concentrating on owning large, dominant shopping centres in core CEE markets. My mandate as CEO is about finessing that still further.’
Inherited non-core
A long-standing Atrium executive, Barzilai took over from Josip Kardun as CEO in March 2017, after working at the company for 10 years. ‘From 2011 I was leading the transaction side of Atrium’s business,’ he says. ‘I was in charge of the portfolio recycling, selling and buying assets. We had inherited a number of non-core properties and it was clear that we needed to lose more than half of our 160-asset portfolio. We disposed of many small properties and acquired a number of standing projects and development schemes, activating a €300 mln redevelopment pipeline in Poland.’
By 2017, the portfolio’s global occupancy rate had improved from 93.6% to 95.5%, the company’s operating margin had risen from 71% to 96.6%, while development and land holdings dropped from €727 mln to €327 mln. In the meantime, recovery in Russia has aided growth this year, with net rental income improving 21.1% in the first nine months of 2017.
‘Russia stabilised this year, and that stability is helping retailers outperform,’ says Barzilai. ‘People are spending more money and feeling better about themselves. The second reason for our income growth is that we have had to grant a lot of discounts in Russia over the last couple of years, but have now been able to claw back discounts as the currency stabilised.’
‘In time, we may exit Russia; but it’s important to note that we have been through the tough times and have now turned a corner,’ he says. ‘Long term, we would prefer less volatility and more stability.’
Focus on Poland
It is Poland, more than ever, which has become the heart of Atrium’s strategy, a territory characterised by ‘more than 10 years of straight economic growth,’ notes Barzilai. ‘It can’t last forever but it is now almost on a par with Western Europe. Index provider FTSE Russell promoted Poland to developed market status this October; it’s a transparent market and an easy place to work. The people are hardworking, open and honest. It’s becoming a great back office for near-shoring in the EU for many companies, and international companies are also moving to Warsaw, where they’re already setting up European headquarters.’
Atrium has four major redevelopments in the works at the moment, three of which are in Warsaw. ‘We’ve already spent €75 mln on these schemes so far this year,’ says Barzilai. ‘We’re tackling a complete remodelling of Atrium Promenada, adding 44,000 m2 of GLA in total, with a target completion date of 2021. However, the new food court should be ready next year. At Atrium Targowek, on course to relaunch in 2018, we’ve added 8,600 m2 of GLA, enlarging the number and size of anchor tenants and expanding the food court. Meanwhile, at Atrium Reduta, we’re introducing a whole new food experience, with 11 F&B units, as well as adding a new cinema and fitness club to relaunch with an extra 5,800 m2 of GLA by the end of 2019.
Placemaking
‘In total, that means we’re creating an extra 60,000 m2 of GLA across our Warsaw centres, underlining our belief in the urban trend. Placemaking is at the heart of our strategy – looking at our assets and really creating third destinations for people after home and work, not only in terms of where they would shop, but also focusing on leisure, including food, cinemas and fitness. Millennials prefer experiences over consumer goods and we’re responding to the trend.’
For Atrium, 2018 will involve a close focus on its redevelopment pipeline, ‘but also further disposals and acquisitions’, adds Barzilai. ‘We’re looking at those now, continuing to refine the portfolio to focus on our core cities, and that essentially means Poland and the Czech Republic.
‘It’s an exciting time – the urbanisation trend, the challenges of online and a new understanding of what drives people to shopping centres and what makes them stay longer are all part of our focus. Atrium is seeking operationally to be more strategic, more innovative, and more sustainable. It’s all about future-proofing the portfolio, as well as leading the way in our core markets.’
PERSONAL PROFILE
Liad Barzilai was appointed CEO of Atrium in December 2016, taking charge of the company earlier than planned at the start of March 2017, due to Barzilai’s ‘extensive, existing knowledge of the group’s operations’. Prior to that, Barzilai held a range of roles at Atrium and Gazit Globe for more than a decade. He holds an MBA from Tel Aviv University.
COMPANY PROFILE
Atrium is an owner and manager of food, fashion and entertainment-anchored shopping centres with a presence in six CEE countries. Its €2.6 bn portfolio, which comprises 60 properties with over 1.1 million m2 of GLA, is 84%-focused on core CEE territories. It holds 22 assets in Hungary, 21 in Poland, seven in Russia, six in the Czech Republic, three in Slovakia and one in Romania. Its largest territory, by asset value, is Poland, with a share of about 48%. Across the portfolio, Atrium’s shopping centres have an average total occupancy of 95.9% as well as 175 million visitors.
