Speeding up expansion

Radosław T. Krochta, general director and president of the board at MLP Group: Our plans are quite clear. We have four large new projects. In December we purchased two new plots: in Wrocław, Psie Pole and Szałsza near Gliwice. Our priority will be to commercialise these projects. We have also signed two reservation agreements and will make a purchase this year. These are plots in Czeladź, Silesia and Łódź Widzew. We are also negotiating the purchase of another plot in Poznań.

How much will you be investing in such projects this year?

About PLN 200–300 mln on the Polish market alone.

What are your projections for the leasing of the space?

We do not disclose any projections ourselves. This is done by analysts involved in the assessment of our company, and they expect us to lease app. 100,000 sqm and indeed we will be trying to lease at least that much – this is our minimum target. We are finalising a very large amount of those contracts already.

Last year MLP announced the speculative construction of 10,000 sqm of warehousing in your parks. How are these plans coming along?

A speculative building in Poznań has been completed. Now we are about to start the construction of two more buildings in Gliwice and Wrocław and are just waiting for the building permits.

Has anything changed in terms of the risk assessment by your company?

Vacancy levels are very low in Poland. This of course varies depending on the region, but it is 5–6 pct on average. Which is why we believe that this is a good time to build speculatively. However, we do not speculatively build facilities with areas of many thousands of square metres. These are buildings that have areas of around 10,000 sqm.

The vacancy rate of your portfolio is currently lower compared to the country’s average, as it only amounts to 2.6 pct. Where does this stem from?

It is a management issue. We have always had low vacancy levels. Historically we always had 97 to 99 pct of the total area leased. This is a normal situation for us.

I will quote someone from a slightly different sector. The founder of the Hilton hotel chain, Conrad Hilton, once said that the fact that all the rooms are occupied means the prices are too low. Are your prices not too low?

The market is so aggressive these days that that we are not expecting any significant price growth. We hope to take an even bigger slice of the cake thanks to the prices we offer. We will speed up our expansion while maintaining returns at similar levels as now – and these are attractive for us. Last year we generated a net profit of over PLN 70 mln. So we do not see any need to increase our rents, but we can see a chance for speeding up our expansion.

Are you still planning to enter the German market?

Of course, but this has been postponed for two quarters. We are very advanced in terms of three projects, which we will most probably carry out. The goal that has been imposed on us by our supervisory board is to make at least two or three acquisitions on the German market this year. This is likely to happen in Q3.

Why is it being held up?

We are approaching this investment very cautiously and we have to analyse everything very thoroughly. My attitude is that is better to spend more time on this and minimise the risks than to jump into anything rashly.

So the plan for this year is...

Certainly, to be present on the German market. There are also plans for Romania, which we also have a very opportunistic approach towards. If a plot comes up in a very good location that is available to buy on attractive terms, we will buy it. However, it is the German market and not the Romanian one that is our priority.

At the end of March, MLP Group had leased a total of 324,800 sqm. Are you planning to sell any of this?

We have recently sold two parks. But we’ve always tried to have 300,000–400,000 under our management. The idea behind this is to ensure the stability of the company. This year we are likely to sell one or two facilities, depending on how strong the demand is for completed warehouse facilities.

MLP paid out a dividend in May. What is your strategy in this respect?

We want pay dividends of 4–5 pct each year. On the one hand, this will show our shareholders that we operate in a very attractive sector nowadays, in which the demand for warehouse space has been growing and in which we are planning to expand further. On the other, we want our shares to become an alternative for bank deposits, because 4–5 pct is a higher interest rate than for a bank deposit these days. So this is all about reconciling the money distribution among the shareholders as well as the development of the company.