Like selling ice-cream

Poland, as a new market for Old Mutual Properties, is making Ian Watts a busy man. Eurobuild caught up with him on one of his many visits here

How would you describe Old Mutual Properties' aim and its position in the mother company's, Old Mutual structure?
Old Mutual Properties was started as a property investment company. It was engaged in development and management for Old Mutual and the investments made through its other business activities. In more recent times we have expanded this service and we operate for other clients besides Old Mutual, because the problem was that we would be limited by the direction our mother company was going in, not necessarily as far as opportunities are concerned, but with interest rates. So today we operate and provide consulting and property services to a number of companies in other parts of the world and not just within the South Africa or UK. We do business in Africa and the Middle East and we have been looking more and more into Central and Eastern Europe. At the moment we are busy with a project in the Ukraine. In Poland, we are currently operating indirectly through our sister company Heitman [Old Mutual owns 50% shares in Heitman Real Estate Investment Management] and we see opportunities coming with other services we provide in addition to those Heitman does. We do retail, offices, warehouses and industrial. The shopping centre market is much more sophisticated and there is a lot more to be done. In Poland we think there are opportunities for us on the office market as we think it will go through difficult times.

You have experience in the emerging markets in Africa. Do you think it is possible to bring this sort of expertise to Central and Eastern Europe?
These countries are just trying to get to the same level as France, Germany or the UK. This is a good opportunity for us because we understand what it is to try and compete in these markets and we bring experience with us in this matter. We have taken systems we know that work in more developed markets and we have adopted them to deal with less sophisticated markets.

Do you think you can compare market development in Africa and in Central to Eastern Europe?
The market here is very basic and it has to be established, so there is nothing wrong with it. In Central Europe it will not take twenty years to make the market more sophisticated. I think it's going to be much shorter and we have already started to see this. When there were a few projects it was easy to be successful but when you have more shopping centres it becomes more difficult. On the competitive market the question is how you manage those shopping centres to give you better performance and to meet customer needs. It's like selling ice-cream. If no-one was doing the same, people will come, but when you have ten people selling ice-cream, yours must be better, otherwise nobody will buy it.

So far you've worked in Poland via Heitman. I understand that now you are considering establishing an office here.
That is the stage we are at now. We want to set up a property services' operation within Poland using our association with Heitman, but understand that they are involved in a different business. They help us get to know things in the market and maybe some other things they are doing will provide opportunities. But we are not here to service Heitman. We would like to see that the market for us is much bigger than Heitman's. There are developers in Poland who would need some or all the services we provide and what we will be looking to do is develop relationships with some of those people, developers or investors, owners of buildings, saying to them this is a service we can provide, this is the experience we have.

What kind of services?
Perhaps management of shopping centres, facility management, development services: we have our own development expertise in planning and concluding new developments or expanding and re-modelling shopping centres. Over the years we have been very innovative

What are these inventions?
Most shopping centres are visited within an hour but in most of ours they stay for about three hours and that's something we have to manage. If people stay longer it means they spend more money. If you come for one hour, probably you will not eat so much, if you stay for three hours it's more probable you'll be hungry.

How do you get the customers in?
Through the activities and interest we create. Movies are one thing, bowling could be another. In the shopping centre in Durban which is by the sea and one of the biggest surfing spots in the world, we have put a standing wave that you can surf on in the shopping centre.

But we are in Warsaw, not, unfortunately, at the seaside...
What we would do here is sit with the developer, look at the centre and discuss the things that interest people operating there and would make the centre more appealing to customers. There are a wide range of things one can do involving promotion, the type of tenant and entertainment and all that requires management. At a conference in Zurich I spoke to German developers who said, "we don't have cinemas, they don't work any more, they are all going bankrupt". I know why they are going bankrupt, because they can't make the connection between people. If you can, your business will grow.

After the acquisition of 11 shopping galleries from the Casino Group and Apsys, Heitman became one of the biggest players on the Polish retail market and as Old Mutual has a 50% stake in the company, it seems natural that you would manage their properties.
It's possible, but when they purchased these properties, Apsys had a 3-year management contract. It is not a problem and that is why we don't work exclusively for Heitman. If they gave us work it would be much easier to start here. We know through our activities that Heitman is using its potential in Poland. We have an opportunity to persuade the owner of the buildings that this is the case.

I think it is a great opportunity for you to have them here, especially as they have set up a new Central Eastern European Property Fund, which will lead to new acquisitions.
Obviously it's much easier if that starts at the development stage, because there are no other parties involved. It is much more difficult when you acquire a building. Then we have the same within the operations that Old Mutual is directly involved in. When they acquire buildings we don't always manage them, because of previous contracts or whatever but sometimes it's better to stick with the contract. A lot of things we do in other markets are the same as what Heitman does here. But the arrangement we reached with them is they will concentrate on acquisitions and asset management and it well may be that this will create opportunities for them. This is a part of the philosophy behind it, because we will get involved in things which ultimately, will allow those projects to be sold to Heitman. A lot of other people, however, just want services, so you are available to sell if you don't work exclusively. In Ukraine we work for Heitman's competitor, for NCH Capital, an American investment fund.

I must ask about the Polish Council of Shopping Centres because you are one of the founders. It's quite hard to get any information about this organisation in Poland.
At last year's MAPIC we organized a round table discussion to look at issues important to the Polish market. So we started talking and wondered what role we could play. We decided to launch this council.

What is the goal of the organization? Is it a kind of lobby?
These are things which need to be talked about in the Council while it is being established.

But doesn't it exist?
It hasn't as yet been set up. There was only an agreement that it would happen.