The death of a developer

Europe Towards the end of August, it was announced that British developer Parkridge Holdings (and sister company Parkridge Gate Development, which provides administration services to the group) had been taken into administration. PricewaterhouseCoopers has now taken over the administration of the two companies, but not over its hundred-plus subsidiaries in 14 European countries, according to an official statement from PwC. The move comes after a failed attempt over the last two years by the group to re-finance its debts. At the end of December 2008 (the last figures published by the group), these amounted to GBP 234 mln repayable on demand or due or by the end of this year, and when shareholder loans are included come to GBP 345 mln, with the Royal Bank of Scotland, Lloyds and Anglo Irish Bank being among the main lenders to the company.
The news that such a major developer and well-known name as Parkridge has finally gone under has been greeted with some shock in real estate circles, and coming soon after the panic on the stock markets a few weeks earlier, has intensified fears that we are on the verge of a double-dip recession.

Ignoring the signs
Perhaps there had been earlier signs that not all was well with Parkridge. Prior to the credit crunch it had been the second largest industrial developer in Poland. And then suddenly, in March 2007, it sold its warehousing business and European industrial land bank and development division to its bigger rival ProLogis in a deal worth more than EUR 580 mln. At the time a market analyst told us that the sell-off was a complete surprise and attributed it to the fact that "everyone has their price". It is now more likely, however, considering the state of its accounts since the end of 2008, that the company was already experiencing liquidity problems.
Parkridge Holdings has been operating in Poland since 2003, since when it has invested more than USD 800 mln in projects with a total area of 754,000 sqm. Since selling off its industrial development business, its main subsidiary in the country has been Parkridge CE, which is still nominally responsible for the development of its Focus Mall shopping centres and Focus Park retail parks in secondary towns and cities. Four Focus Malls have already been built in Rybnik, Bydgoszcz, Zielona Gora and Piotrków Trybunalski, with more to come in various stages of development in Jelenia Góra, Starogard Gdański, Tomaszów Mazowiecki, Gliwice and Piła. A Focus Park in Swidnica has already been opened, while work began on another in Włocławek in the first quarter of this year. In addition to this, at the end of last year the development also started of the Parkridge Business Center complex in Wrocław - a mixed-use warehouse and office project. In May, in what in retrospect should perhaps have given us more grounds for concern, came the announcement of Parkridge CE's sale of Alfa Asset Management in a management buy-out. Among the properties managed by the company are the existing Focus Park and Malls.

No comment
The future of these assets and projects for now ?remains unclear. According to an official statement by PricewaterhouseCoopers, Matthew Hammond and Rob Hunt of PwC have been appointed joint administrators of Parkridge Holdings and Parkridge Gate Developments. But the statement adds that: "PwC has not been appointed administrator over any other companies in the group, some of which are in liquidation and others continue under the control of the directors." It is believed that the day-to-day running of the subsidiaries is for the moment unaffected, but further clarification from PwC or Parkridge about the fate of the subsidiaries in the CEE region has not been forthcoming. Parkridge Holdings has now taken down its website and is unavailable for comment, while a phone call to Parkridge CE at the moment is merely answered with a recorded message about office opening hours. What is certain is that Parkridge Holdings being taken into administration shows that the banks are moving to reclaim their debts, and the group's subsidiaries are unlikely to remain unaffected by this process.
Nathan North