INTERVIEW: New owners give P3 wings

The capital injection PointPark Properties (P3) received late last year from its new owners TPG and Ivanhoe Cambridge has given it wings.

The company has pushed the pedal down on its development activities in Central and Eastern Europe in recent weeks and more is in the pipeline, CEO Ian Worboys told PropertyEU. 'We want to see the platform grow substantially. We will continue with development and will also grow the team a bit.’

On Monday, the Prague-based specialist investor, developer and asset manager of warehouse properties announced it has bought 22 hectares of land alongside the D11 motorway east of Prague for a new 120,000 m2 logistics park. The new development involving a total investment of around €85 mln will, when complete, boost P3's total lettable area around the Czech capital by nearly 40%.

Following P3’s aborted IPO in October 2012, the company was forced to lay off 13 staff, roughly 20% of the total. But its prospects have brightened considerably under its new owners which acquired the firm from Bahraini investment company Arcapita. Worboys: ‘Before the acquisition, we were scraping the money together for any new activities, but now our balance sheet has built up very nicely. At present, about 40% of our activities are in CEE and 60% in Western Europe. We would like to see a more even balance of 50-50. That is our goal for our 3 to 5 year business plan.’

According to press reports, P3 is poised to put meat on the bone of its new ambitions. The company is believed to be the frontrunner in a bid to acquire the €500 mln Project Bora Bora portfolio from Tristan Capital Partners. The package consists of around 930,000 m2 of sheds in Germany, Austria, Poland and the Czech Republic. The deal would significantly bolster P3’s portfolio across Europe where it is active in 12 European countries with a portfolio consisting of 48 warehouses covering 1.46 million m2. Its land bank allows for the development of more than 590,000 m2 of warehouse space across Europe. Both P3 and Tristan declined to comment on the report.

Worboys has indicated in the past that the acquisition of standing assets is also a priority and this remains key to the P3 growth, he said. In recent months, however, P3 has also focused on developing its land bank across CEE, in particular in Czech Republic and Slovakia. While Poland is the biggest market in the region, it is also the toughest at present, Worboys said. ‘There’s too much competition and there’s still a hangover of supply in Poland due to developments in the mid-2000s. We’re still fighting there against empty warehouses and some obsolete space.’

Nevertheless, the occupier market for warehouses in Poland is improving, Worboys said, pointing to the decline in rental incentives. ‘In 2006 to 2007, it was a landlords' market, but it became an occupier market after that. Now it’s becoming a landlords’ market again. We have just started building a BTS scheme for Sofa.com, one of Europe’s leading furniture etailers, at our Poznan site.’

That trend is particularly visible in Czech Republic and Slovakia, he noted. ‘There’s demand but little or no supply; occupiers are finding it tougher and tougher. Leasing figures are down because there’s no space to lease. It’s a bumper year for build to suit.’

Rent-free periods shrinking
While rent-free periods on 5-year leases were as much as 12 to 15 months until recently, they have now fallen to well under 12 months in Poland and around 3-6 months in Czech Republic, he added. ‘In Slovakia rent-free periods are around 6 months for a 5-year lease nowadays, there is such little supply.’

While the Polish market still has some trouble spots, Worboys claims P3 has performed well there with an occupancy level of 98%. Elsewhere in CEE, the company’s occupancy levels are up in the high 90s, he added.

At the same time, increased competition between the leading developers such as Goodman, Prologis and Panattoni and strong growth from investors are pushing yields down in the region, Worboys noted. ‘The market has become hotter, yields are coming down across CEE, in Poland and Czech. The UK and Germany are already there (in terms of yield compression and rent-free periods), but Spain and Italy still have a long way to go. For the whole of Europe though, I think we will see lower yields than in 2007 over the next two years.’

Spain is now also back on P3’s radar, Worboys said. The company already acts as asset manager for six buildings in Barcelona, Madrid and Zaragoza. ‘We see opportunities particularly in the central cities.’

Worboys is also upbeat out the opportunities being thrown up by online retailing and changes in distribution. ‘This is a great thing for us to happen…we’re seeing a big increase in demand for warehousing from the likes of Amazon, Asos and DHL. Having land bank and the facilities in the right order is key, the supermarkets have been doing that for years. The last-mile delivery is the place where P3 can definitely play a role.’