Cutting out the rich food

Are the good times over for retail developers? ‘Eurobuild CEE’ spoke to Yann Guen, board member of Mayland Real Estate, and Tomasz P. Matusiak, director of Multi Development, who are both convinced that this is still a long way away

Emil Górecki, ‘Eurobuild CEE’: Have your companies suffered at all from the problems generated by the crisis on the financial markets?

Yann Guen, Mayland Real Estate: “Suffered” is an exaggeration. Rates of return have increased slightly, which affects those operators who have to sell their projects. Financing has become quite 
a headache and it may become rather difficult to obtain loans, while the loan-granting procedure itself will take longer. There are still many investors with capital to spend and wanting to invest it in property. And there are also those, like ourselves, who believe in the market’s potential and still want to develop. Real estate is a very safe place to invest. The trouble lies in-between: how to believe in this capital and in its real effects. No one can even guess how many projects will be put on hold, with the situation changing by the day in front of our very eyes. But I do think we are dealing rather with a psychological crisis governed by illogical factors and in which no analyst is able to predict how things are going to turn out. Our company is going ahead with all its investments while keeping a close eye on market developments.

Tomasz P. Matusiak, Multi Development Poland: Exactly. We are at a very peculiar moment. The market keeps presenting us with an increasing number of projects that are ready for implementation or in the construction phase. Peculiar, because that was inconceivable only one year ago when sellers were able to set their price and the purchaser accepted it without question. Today, such aggressive investors only want to get their money back, since they have no idea how much their property will be worth in a couple of months. However, the offers are of poor or, at best, mediocre quality, so we are simply not interested in buying them. As for changes on the market, we feel what other developers are feeling: that banks are demanding greater deposits and higher security, while the costs of carrying out the projects have spiralled. The outcome is that we have to be more flexible in securing project finance, which is not to say that banks are flatly refusing to finance the development of any project whatsoever. They are simply focusing instead on the safest investments.

Nathan North, ‘Eurobuild CEE’: Are you expecting new operators on the market in the next 2-3 years? After all, it seems as though everyone who can is getting out of real estate.

YG: New companies will most definitely be entering the market. Middle East investors have a lot of capital to spend and I am aware of their interest in real estate. But apart from that, they are still unknown quantities who give little away. However, they are watching the market and waiting for the best moment to appear and to start purchasing.

TPM: I feel sure buyers for the projects I mentioned earlier will arrive. A crisis is a fine time for speculators, who bide their time and pick the right moment to purchase properties and sell them shortly afterwards for a decent profit.

YG: Retail properties are a safe form of investment, since the foundations of Poland’s economy are stable. The future belongs to the best projects in terms of location and quality of the tenants. The turmoil may ironically have a beneficial effect on the property market. Up until now the financial sector has reaped the greatest profit from our activities, whereas it is the developer who should be the winning party. I hope that this will now be the case.

EG: Are you happy with all the turmoil on the market?

YG: Absolutely not! But I sometimes get the impression that we have a situation in which someone has been gorging themselves on chocolate. Eventually, that person will have to throw it all up – and this is necessary for the sake of returning to good health. This is just what is happening on the market. It is not the first recession I have observed. Each gives rise to something new, although it is almost always a process of natural selection.

TPM: Only the best projects have any chance of surviving today and their developers always survive. Shopping centre customers want much more than just to do the shopping. They expect a comprehensive range of services, entertainment, a pleasant atmosphere etc. The customer’s voice must always be listened to.

NN: So what’s going to happen to developers who don’t listen to customers?

TPM: Many will disappear from the market, and in addition, everyone is expecting some consolidation to occur.

EG: Have you had any feedback suggestions from customers about new ideas on how a shopping centre should be laid out? Is their appearance going to change?

YG: Both shopping centre tenants and customers are becoming more demanding and this requires the creation of high quality space and new places to attract and retain visitors. A shopping centre must be more interactive, it must “talk” to the customers and encourage them to stay longer inside. What we are now developing is a kind of shopping resort, with retail outlets, entertainment, services, a pleasant atmosphere etc. I feel that we shall soon start transforming older existing facilities into these kinds of resorts.

EG: Do you intend to devise any fresh concepts for shopping centres? Is this a good time to take such steps?

YG: The market never stands still. There is always room for new projects. The trick is to find the right niche. A saturated car market is quite inconceivable: roads can be packed with blue and inexpensive vehicles and that is when more expensive, red cars should be manufactured.

TPM: City centres are what customers, followed by developers, are turning their attention to today. They are becoming places where people want to take a walk and spend time. People currently spend time inside a shopping centre only in the winter, preferring to sit outside in the summer. And this is exactly the type of space that should be developed. Despite the fact that Poland is hardly southern France or Spain, future facilities should have a semi-open character.

YG: Quite right. That’s the