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The Warsaw Voice » Real Estate » September 16, 2009
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Eyeing Expansion
September 16, 2009   
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Other logistics companies may have put new projects on hold amid the economic crisis, but Prague-based Pinnacle, an asset manager, operator and developer of European distribution facilities, is planning major expansion. The company, which was set up in 2001 and which is now present in Poland, the Czech Republic, Slovakia, Germany and Spain, is eyeing another four or five markets across Central Europe, recently appointed chief executive officer Ian Worboys and Craig Maguire, company manager for Poland, tell The Warsaw Voice.

How is your company doing amid the crisis?
Ian Worboys:
We're in a fortunate position. We're both a developer and an asset manager with around one million square meters of assets that are income-producing. With our buildings producing an income we have money coming in as well as-as a developer-money going out. For lots of our competition it's all money going out. For most developers it's a tough market at the moment. We also have a strong parent company in Arcapita, a Bahranian investment bank/vehicle with $5.4 billion in assets. We're one of the few developers-if not the only developer I know of at the moment-that is constructing build-to-suits.

Like any company, we've unfortunately had to make cuts across the board. But we have the backing of a prudent parent company and that probably gives us more breathing space than our competitors.

What are your plans for Poland over the next few years?
I.W.:
We see it as a market where the underlying economy seems to be stronger than most places in Europe. We see Poland, with the team we have here, as a strong market in which we want to expand business dramatically.
Craig Maguire:
We're looking at all key locations. 2001 to 2003 were difficult times and the logistics market in Poland was small and mainly centered on Warsaw. In the intervening years there has been an expansion across six major locations-Warsaw, ŁódĽ, Poznań, Wrocław, Upper Silesia, and the Tricity area of Gdańsk-Sopot-Gdynia. We are present in two. The market has expanded into a much bigger, countrywide market. Despite the effects of the downturn, it's a much more secure market for future growth. The long-term future is still positive. There will be difficulties in the next six to 12 months in terms of getting back to the volumes of the last two years. But the base is set for growth into these areas. We will go into all those areas.

How interested are you in expanding in Central and Eastern Europe as a whole?
I.W.:
We already have a site we purchased in Bulgaria a year ago. We are looking at several markets to see when the right moment to enter them is. Pinnacle has always had a belief that we can be in another four or five markets across Central Europe. It's just a question of timing before we go into them.

We have also seen the downfall of some companies which over-expanded during the last boom. My role as CEO is to make sure we don't over-expand.

As I look at Poland alongside the sites we have in the Czech Republic and Slovakia, and against the background of opportunities in western Europe, it's good to see a market that has stood up well in the recession compared to other European countries. We have still got good levels of demand here.

Is the crisis a good time to buy land cheaply?
I.W.:
For us it's an opportunity. With the backing and cash we have available we can buy sites. But we're being selective and trying to assess where the bottom of the market is before we move in and start buying more land.

"Cheap" is an interesting concept because no one's buying. It's a question of looking at our competitors and the landowners and seeing who may need to sell, and to tie that in with the demand we have from occupiers. I would expect us to buy land in the next 12 to 15 months.

Even though most developers in the logistics sector have put new projects on hold?
I.W.:
Often some of the best opportunities are as you come out of recession. In this market, if you have an edge, as we believe we do, you can take advantage of the market situation. It's down to timing.

Can you tell us which sites exactly you are eyeing and how much you want to spend?
I.W.:
Good try, but no.

How about some more facts and figures about your company?
I.W.:
With portfolios of property owned by our parent company transferred into the Pinnacle business, by April next year we'll have 1.4 million sq m of warehouses under asset management. That's all income-producing, stabilized income. That gives us a huge platform to build on and allows us to be a pan-European company when it comes to tenants and occupiers.
C.M.:
We are much smaller than many of our competitors in terms of people. We started with one person when we opened in Poland in summer 2007 and have now grown to 10 people. We have around 354,000 sq m of developable land in Poland. We have 137,500 sq m in existing assets.

What share of the market are you shooting for in Poland?
I.W.:
We don't tend to say what our target is. We're going to put the corporate finance in place to make sure Poland grows strongly.

How important is the promised upgrade of Poland's road network in the run-up to the Euro 2012 soccer championships to be hosted here and in Ukraine?
C.M.:
It's extremely important. The north-south and the two east-west corridors to be expanded are not just corridors for Poland but for the whole of Europe in terms of major transportation routes.

It's also about connecting the major cities in Poland. That will mean further opportunities for logistics.

P.K.
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