Going on the offensive

Radosław T. Krochta, vice-president of the board of MLP Group:
No, it does not, because the planned offering will mostly consist of new shares and a small number of shares sold by our current shareholders. An additional element of the offer is a lock-up agreement that limits the sale of shares by current shareholders for a year.

This is not your first attempt at a flotation. You submitted a prospectus in 2010, but the IPO did not take place. Then you were planning to raise PLN 100 mln. Do you think that such an amount is realistic this year?
We do not want to reveal our expectations just yet. At that time the valuations were not favourable and that was why we did not go public. Nowadays comparable companies in the property sector have more attractive valuations. This gives us hope that things will be different this time. However, you should take into account the fact that despite not going public we have exceeded our targets. We have proven that we are able to build substantially and increase our net asset value. This represents a continuous development and H1 2013 has so far been the best example of this. This was a record period for us because we signed leases for almost 50,000 sqm of new warehouse space.

Why bother going public then?
We want to develop even faster. We are planning to double the volume of the area in our portfolio from the current app. 350,000 sqm to over 700,000 sqm within four years. And the interest from potential tenants is growing. Last year we bought land for a project in Bieruń – and Silesia is one of the key locations nowadays. The park, which is to be located over an area of 11.9 ha, will offer 55,000 sqm of warehouse and production space. Almost 25,000 sqm of this is leased at this time and the construction work has already started.

And when are you planning to build your subsequent projects?
Where we are already present: Warsaw, Silesia (Tychy and Bieruń) and Poznań. The locations could also include Wrocław. We are not interested in other regions, such as Łódź, where there is a lot of competition and most of the tenants are logistics providers. So we do not believe we are able to reach an appropriate margin there; the north of Poland is also not very attractive to us. We are currently able to extend our warehouse portfolio up to 720,000 sqm thanks to the potential of the land we have already gathered. We will also gradually supplement the bank with new purchases as the parks fill up with tenants or are sold.

Are you considering expanding outside the Polish market?
We are looking at other markets. We see a lot of potential in the East, where there are no big players and the market is very fragmented. It is not out of the question that we could buy a started project that requires additional financing and is possible to extend. However, 90 pct of our focus is on Poland – it is a promising market that we know well.

Is MLP currently involved in any speculative projects?
Since the beginning we have only built BTS facilities. Admittedly, if one of our parks had an area of 30,000 sqm, then two, three or five thousand might have been developed speculatively, but we have never built strictly speculatively and we are not planning to do so. We have also maintained a very conservative policy in terms of rents – we have not been cheap. That is why we have been slightly behind the competition with regard to the amount of space we have built up. However, thanks to this policy, which has given us a sufficient source of revenue, we have made it through the recession unscathed. Our company is probably one of the most liquid and cash-rich developers in Poland at this time. And now, just as signs of a revival of the market are being noticed, we are in a position to develop almost any kind of project. So now we are going on the offensive. As far as BTS is concerned, one interesting and novel formula is to build warehouses outside parks. There are only a few such projects on the market at this stage. I think that these could be a tasty morsel for investment funds due to the long-term cash-flow. Lease periods under this formula can amount to 10, 15 or 20 years, whereas in the logistics industry the periods are considerably shorter – 3 years or 5–10 years when it comes to production areas. Besides, the entire warehouse sector is attractive due the high rate of return. It is much higher than for offices or shopping centres.

Is MLP looking for financial partners?
We have not ruled this out, but we have no such plans at this stage. We are planning to finance projects through our own capital and loans.