In fighting form

ALEX HAYES, Eurobuild CEE': What are Goodman's immediate plans for development in Europe and Poland?
KRISTOF VERSTRAETEN, commercial director for Continental Europe, Goodman: We are the number one developer at the pan-European level and the clear market leader in Germany. Now the strategy is to also become the number one developer in Poland. But there is some catching up to be done: our competitors have been active on the Polish market for a lot longer with established portfolios. Prologis, Panattoni and Segro are a lot bigger in terms of investment, but we are accelerating. We will also consider selective acquisitions to build our portfolio. We are looking for modern buildings in good locations. I believe that owning more than 1 mln sqm in Poland in three to four years is a realistic target.

How does your leadership in Europe affect your business here in Poland?
By being the market leader in Germany we can work with major logistics service providers, such as DHL and DB Schenker, plus manufacturers and retailers. When we deal with clients in Poland we have the German quality label. Of course we also have to adapt our strategy to local market conditions. In Poland our aim is to secure land in all of the key locations and we will even consider selective speculative development.

What does the Baa3' rating that was recently awarded to your GELF fund by Moody's mean for you?
The Moody's rating will have an important effect in the long term. It will allow us to go to the bond markets for new debt and diversify away from bank financing. We are looking to get to a minority position of our funding through banks by replacing some bank loans with bond issues. This is a group-wide strategy implemented across the globe. We also intend to raise new equity and keep the gearing levels low. In the last 18 months we raised EUR 2.5 bln in new equity globally. Most of the money is from a small number of very large pension funds, sovereign wealth funds and insurance companies looking for stable core returns. These investors have an allocation for real estate and within that a sub-allocation for logistics. We are working with Dutch pension fund APG, the Employees Provident Fund (EPF), the Canadian Pension Plan Investment Board, and the Malaysian Pension Fund. GELF, our flagship European fund, raised EUR 350 mln last year and EUR 300 mln the year before in new equity. Our advantage on the market is our capital.

Where and how do you intend to use these funds?
Traditionally we are a BTS developer, but in Poland we will be more speculative. It is worth developing when local vacancy rates fall to 5 pct or below. Poznań and Silesia have worked through their vacancy levels, while in Kraków and Gdańsk there never was an oversupply. Some areas to the west of Warsaw and to the southeast of Łódź are still working through their oversupply and I don't see this issue being resolved within the next few years, but every other market in Poland will be back on track soon with limited warehouse vacancy and a need for new development.

What do you see as driving the market?
It's probably true that the growth in logistics is currently being fuelled by retail and automotive manufacturing, and there is also e-commerce. For every item sold online you will require more warehouse space than for traditional retailing. Across Europe e-commerce has been growing by 18 pct per year. Amazon last year recorded a 40 pct growth in electronics and general merchandise. Everyday items require more warehousing space as opposed to books, for instance. Zalando is another important e-commerce retailer, specialising in fashion and shoes, which has leased 130,000 sqm from Goodman in Erfurt, in central Germany. When it comes to e-commerce, Poland might be behind the curve, but there is no reason why it should not be just as big here as it is elsewhere in Europe. Once the services are provided in Poland, there could even be faster take-up of the concept.

When will this be?
This is a timing question - so it's hard to predict. Within the next two years we will see the effect of e-commerce on the Polish market and the need for more warehouses.

Some say that the Polish economy has become intertwined with the German economy. Is this true?
It's partly true that the Polish economy moves with the German. The retail market is being driven by the general evolution of Polish consumer spending, while business from the automotive and manufacturing sectors is of course linked to Germany. Since 2008 the Polish economy has grown by 16 pct, whereas elsewhere in Europe they are where they were before the crisis. Poland is clearly more important for us than in 2008.

Many businessmen seem to be waiting for the effects of the credit crunch to catch up with Poland. What's your position?
I'm no more worried about Poland than any other part of Europe. Even with low GDP growth there is a requirement for more logistics development.

Are there any other markets that Goodman is looking at in the CEE region?
The Czech Republic is an interesting country for us. However, we intend to concentrate on the bigger countries first. There is much more opportunity in Poland, where the new infrastructure will trigger new development. The new roads give us the chance to compete with established companies, allowing us to penetrate their markets. The Kraków ring road has allowed us to develop the Kraków Airport Logistics Centre. We are also developing the Łódź Logistics Centre in Pabianice southeast of Łódź near the future Łódź ring road. The port of Gdańsk is to expand its capacity to 1 mln containers this year, so we are developing our Pomeranian Logistics Centre on the back of this growth and the improved motorway connections that connect our site with the rest of Poland.

PointPark Properties has recently announced that all its future warehouse projects are to be BREEAM certified. What is Goodman doing to be green?
To apply for BREEAM certification for all our buildings would be very expensive. When we are looking for sustainable development, we are primarily looking at energy use, which is explainable to our customers and saves money. We have DGNB certified buildings in Germany, BREEAM in the Netherlands and HQE in France. But a certificate is just a certificate for which you pay money to a consultant. It is more important to make buildings future proof and as energy efficient as possible. We have conducted an analysis on our complete portfolio and looked at what measures need to be taken. Nobody thus far has reviewed a complete portfolio of over 100 assets. We did it in-house and received a positive reaction from our customers, who want to know the answer to the question: "How much money will I save on my energy bills?"

Kristof Verstraeten
has recently been appointed commercial director for Continental Europe. He joined Goodman in 2007 as director of capital transactions and regional director for Germany. Prior to that he was associate principal at McKinsey & Company in Brussels, where he co-led the European logistics practice group. Kristof holds a master's degree in civil engineering from the University of Louvain as well as an MBA from the Vlerick Business School. Goodman commenced operations in Poland in 2005 and now owns and manages over 252,000 sqm throughout the country. Currently the group has 13,500 sqm under development and holds a land bank on which it could develop 850,000 sqm of warehouse space. With total assets under management of EUR15.1 bln and over 390 properties under management, Goodman is the largest listed industrial property group on the Australian Stock Exchange and one of the largest listed specialist fund managers globally. In Europe, the group has offices in Germany, the Netherlands, Belgium, Luxembourg, France, Spain, Italy, Poland, the Czech Republic, Hungary, Slovakia and the UK.