Pinnacle back in the game

As Martin Carr, Pinnacle’s CEO, tells ‘Eurobuild CEE’, the company has been waiting for the ideal economic climate to return to the Polish market. Founded in 2002, Pinnacle currently has app. EUR 350 mln assets under management. These include three Prague properties: Metropole – a 55,000 sqm shopping centre owned by Commerz Real in Zličín; Charles Square Center – a 20,000 sqm gla mixed-use office and retail building also owned by Commerz Real; and Millennium Plaza – a 20,000 sqm gla office and retail mixed use building in the city’s CBD, which includes the four-star 293-room Marriott Hotel. Pinnacle has recently made large land purchases across the Polish region of Upper Silesia, including five plots from Mostostal Zabrze worth PLN 61 mln, for which it is now preparing the building permitting processes. These are to be the sites for the construction of retail and warehousing projects, to be developed in line with Pinnacle’s new business model. Apart from running the Czech asset management business, which now, as the company’s existing assets age, also includes refurbishment activities, Pinnacle will be investing in two different sectors in Poland. “Firstly, we want to invest in the industrial sector, mainly in Upper Silesia. Secondly, we would like to develop convenience shopping centres, or what the Americans call ‘strip malls’,” says Martin Carr. “These essentially comprise a discount food supermarket, food and beverage tenants all around, and four to six comparison shops in the middle,” he adds.

Silesian dream

The largest of the five Mostostal Zabrze properties is a 24.7 ha site located on ul. Strzelców Bytomskich in Bytom, and the other four include 4.6 ha and 5 ha plots in Katowice, a 7.3 ha parcel in Gliwice and a 2.3 ha plot in Sosnowiec. Pinnacle expects to start the construction work on the first of the sites in Q2 2015. The company says it will also look to expand three of the sites and seek out new purchasing opportunities. “We have contracted Mostostal Zabrze for the five sites as part of the initial deal and are now considering buying other Upper Silesian plots of different sizes,” says Martin Carr. He does not rule out developing mixed retail and warehousing projects on the plots, but for now the industrial space is set to be developed in three different formats. “Industrial business parks are to be built designed to address three different market needs. One is what we call a ‘trading space’, which will be for 500 to 1,500 sqm tenants and will have a showroom in the front, offices above it and a pick-up point at the back. So this could be for building supplies, city logistics, parcel deliveries, or high value retail goods that need to be delivered, repacked and sold. The second format is solely for logistics, which could serve larger city logistics or smaller FMCG logistics. The third format will be for production,” he adds. The industrial parks are to comprise 50,000 sqm gla on average.

More flexible leasing policy

When asked about concerns over the possible overheating of the burgeoning Polish warehousing market, Pinnacle’s CEO says that a more flexible approach in terms of lease length policy could be what is needed for Pinnacle to succeed. “Two and three year leases drive the market but are harder to finance and harder to buy because of their higher risk. By tailoring our buildings to meet clients’ requirements we hope to be able to secure longer leases of seven to ten years, which are far safer and more interesting to me,” he points out. The company claims it has already raised the financing for its Upper Silesian investment programme. However, it has not revealed any details about this. “We have our capital in place for all five projects. The source is confidential, but the equity that we had in the past always came through joint venture investing – typically with London fund management partners,” explains Martin Carr. The company’s overall Upper Silesia land bank currently amounts to app. 85 ha. “As we look forward to the next five years, our Polish business will absorb more capital than the EUR 350 mln we have under management in the Czech Republic by a ratio of a minimum of 2:1,” he adds.