Breezy man
Amnon Shiboleth, the chairman of the board of the Blue City mixed-use scheme in Warsaw, can’t take his hands off his BlackBerry. With ambitious plans underway – a shopping centre and even an exclusive warsaw hotel – we can’t blame him. But what about the crisis? It’s not the end of the world, he tells ‘Eurobuild CEE’
Mladen Petrov, ‘Eurobuild CEE’: Welcome back to Warsaw. Since you have just come from New York, I am expecting some good news, finally. Yes, there is a recession, but we are also seeing some good signs, Goldman Sachs’ record profits to name just one. Give me some more good examples…
Amnon Shiboleth: I have good and bad news for you. The recession hit New York very badly. Just a few days ago I walked down Madison Avenue counting the empty stores, looking for tenants. So, from 57th Street on to 72nd Street on Madison, I counted 17-18 empty stores. They were all occupied by high-end tenants a year ago. Now they are full of ‘For rent’ signs. There are plenty indications that the recession is not over yet. In fact, I think that it is going to get worse before it finally starts to get better.
You were supposed to give me some hope!
True, there are some indications, such as the Goldman Sachs’ results, but I think that they are not signs that the crisis is over. They only mean that it is not the end of the world. People tend to build up their hopes, but for every positive sign you still have three negative signals. Unemployment in America is a major issue: we are still seeing a lot of new people out of work, but, thank God, the level of unemployment has come down. This means that if in one of the bad months 500,000 new people became available, now the figure is down by 200,000 people – but this is still 300,000 newly unemployed people, and a very negative sign.
So what should be done?
There are lots of things that can be done. Some of the top public companies have lost up to 90 pct of their value. If you can raise the cash this is the right time to buy stock. Maybe these companies won’t get back to the heights they reached before the crisis, but they are still clearly going to improve dramatically from where they are now. So I am buying.
Good for you. And how about Europe?
There is Europe, there is Poland and there is Warsaw. They are all very different. Europe is not a homogeneous unit, as examples from across the continent show. Spain is doing extremely badly in terms of real estate, while Poland on the other hand is doing relatively well, much better than the rest of the continent. Warsaw is also another good performer.
Some economists say that the real effect of the global crisis is going to be felt here later, that we are probably a year and half behind – meaning that 2010 might be a difficult year for Poland... For me, Blue City shopping centre is one of the indicators for what is going on in Poland. Honestly, I didn’t believe a year ago that Blue City would be where it is today, and I was very pleasantly surprised. A lot of good new tenants, a lot of good rents. So where is the crisis?
I don’t see it here, at our property, but we also have to be realistic. We are not an island in a rough sea. We are prepared for the worst, but thank God that so far we haven’t had to use our resources. Our tenants, both old and new, are happy with their sales, given the circumstances. So I am optimistic.
Marks & Spencer is opening a 2,000 sqm store. And recently a few Inditex brands, including Zara, set up shop in your mall. Blue Office is now 100 pct leased. What extras and freebies did you offer them in order to land them as tenants? Lower rents, maybe?
No, not really. We offer services that our competitors don’t. Our tenants are offered a mix of stuff that not all our competitors provide, such as fairs and all kinds of events every weekend. Certainly, they cost money and require a lot of organization, but we are committed to doing them. They just bring people in. This is their final destination – they don’t come just for couple of minutes on their way to a meeting. They want to be here. They go to the fair, come to play squash, have a haircut, enjoy an exhibition. It’s not only about collecting rent. Everyone does that. We are trying to run a shopping centre that not only focuses on shopping.
But everyone says that.
Nowadays in America and Western Europe, new shopping centres are completely different. Until recently, 90 pct of the area in the mall was occupied by stores, with the remainder being designated for the cinema and the food court. In the new good projects the ratio between retail and leisure is an even 50-50. In Warsaw the 90-10 concept is still quite popular. We are aiming at getting this down to 60-40.
And how are you going to make enough money out of this 40 pct that is not for stores and compensate for the lower revenue from monthly rents?
That’s the issue. The rent is fixed, but you also get certain percentages of sales. So if we run a fair that has attracted one new customer who wouldn’t come otherwise, and if he or she goes shopping, and the chances are that he or she will, we are getting a certain cut out of whatever he or she has bought. It is all about synergy.
What else is on your Polish agenda?
Maybe Wilanów – a rapidly growing Warsaw neighbourhood, where around 80,000 people are holed up due to the poor transport connection with the city centre. Wilanów is not the best place for a new residential project right now, but it is a great place for a shopping centre smaller than Blue City. And we are looking into this. We are now trying to identify the exact location, talking to two groups. I believe this could be a sound investment. Buying the land is not a problem. The more dramatic issues are the building permits. Unfortunately, the city of Warsaw is not as cooperative with developers as Wrocław or Poznań in terms of employing people to make sure the investment process is as smooth as possible. Warsaw in this regard still has a long way to go.
