A Cutt above
It’s hard to imagine a transaction this year changing the CEE logistics landscape as profoundly as the one in which ProLogis purchased Parkridge’s industrial business. The two rivals have been battling their way across the region, the competition between them exporting lower prices from Poland down into the Czech Republic and beyond. Now, in a deal for which there was none of the usual pre-transaction rumor leakage, ProLogis has bought not just the company existing stock in the UK, Western Europe and CEE, but also its land bank.
ProLogis bought Astral, Parkridge’s industrial unit in the UK, which has 10 industrial projects under construction that will provide roughly 5.2 million square feet of new product. Their projected value upon completion is more than USD 2.25 billion (€1.7 billion).
In Central Europe, Parkridge and Morely Fund management set up the €200 million Parkridge European Distribution Fund in 2004. This has led to the construction of 5.6 million square feet of warehouse facilities, and an additional 4.5 million is currently under construction. It also controls enough land to support the construction of an additional 5.2 million sqf of new industrial.
Industry insiders suggest that one of the primary attractions for ProLogis will actually have been the land bank Parkridge had managed to assemble. “ProLogis wanted access to the land bank. Land is key in CEE and Parkridge has been really good at going out and buying good bits of land. It’s not a question of what you pay for it, but if you can get it.”
Parkridge chairman John Cutts said he was delighted to see this consolidation taking place. “The remainder of the Parkridge business…will benefit greatly from the equity provided by the transaction, and we look forward to a period of strong growth across Europe.” Cutts will join ProLogis as vice chairman of Europe.
Those with long memories will no doubt have a sense of déja vu at the news, since when ProLogis first came across the Atlantic, it got a foothold in the UK market by buying out Kingspark Estates, led by none other than Cutts. He was brought across to work with ProLogis in Europe where he worked for three years, before leaving to set up Parkridge and its UK industrial business Astral. Hans van Leuken and Piotr Michalski were then recruited in 2004 from ProLogis to set up Parkridge’s European distribution fund.
TriGránit plans Russian pipeline
TriGránit is the latest international player to launch itself on the Russian market by teaming up with a partner. The Hungarian company isn’t doing things by half though, having signed a strategic deal with Gazprom subsidiary Gazprombank-Invest to pump around €5 billion into building up to thirty “city centers” across the country, according to an interview with TriGránit president Sándor Demján, published by Népszabadság.
Press reports claim that each of the parties will bring €1 billion in equity to a 50/50 joint-venture, with the remainder to be borrowed. However, Peter Roshchin, TriGranit’s Russian head, says that such details, as well as the eventual structure and responsibilities within the partnership, are still being hammered out.
Schemes are said to be planned in Moscow, St. Petersburg, and Yaroslavl, although the only details revealed thus far are on a €300 million multifunctional project on 132 hectares in the southern city of Krasnodar. Currently touring the regions looking at sites and meeting with local officials, Roshchin says that the 12-month old project concept is under the microscope, but nothing is definite as yet.
He reports that schemes need to be of a volume of at least €100 million, and be located in cities with a minimum population of 600,000 to qualify. Investments as large as €1 billion are also being looked at. Projects from all three core commercial sectors, as well as “leisure” are the targets, he adds: “Anything that we’ll be able to hold long-term, so not so much residential.”
Given the immense demand, coupled with the barriers to development and investment in Russia, the declared ambition to spend at least €5 billion could be optimistic – especially within the four years Demján mentions. Roshchin agrees that the influence of the state-controlled gas giant will help here.
The strongest business relationship between Russia and Hungary is through Gazprom and MOL. TriGránit shareholder Sándor Csányi (who also heads OTP Bank) is deputy chairman of the Hungarian energy group.
Life’s good
It’s getting so tough to buy land these days, you’ve got to buy failing television screen plants to do it. That, at least, is one interpretation of a dramatic leap into the unknown taken by Remon Vos, director of CTP Invest, through the purchase of a factory in the Moravian town of Hranice for roughly €40 million.
LG Phillips launched the production of CRTs there in September 2001 in what was hailed as the largest-ever foreign investment in the Czech Republic. Production eventually reached 3 million pieces annually, but back in the Netherlands, all was not well with the parent company, which went into bankruptcy at the beginning of 2006. A new company, Multidisplay, was created with the purpose of maintaining production, through cooperation with its creditors.
CTP Invest is to pay off 30 percent of Multidisplay’s debts of €261 million by November 30, with the first million due at the beginning of March. Vos claims that the plant could produce up to 1.9 million tubes in 2007 and that further investments of €140 million are being planned that would require an increase in the number of employees. The factory comes with an additional 150,000 sqm of land. Some of which is apparently being set aside for new television-related production halls, but CTP Invest looks likely to build other sheds on the site as well. “The Hranice site will become a large industrial park, for which we aim to attract companies especially from the electronic industry,” says Vos.
Russian roulette
Anyone used to a bit of gambling in Russia could soon have to add some extra travel time and expenses to maintain the habit. Under a new federal law, all of the casinos working in the country are to be relocated to just four locations, under a new law approved by the Russian authorities in January.
Since then, regional officials have been putting together proposals on exactly where to locate these mega-gambling zones, offering to place one of them in city of Ivanovo, located about 200 km North of Moscow, in two others in the vicinity of St. Petersburg and Kaliningrad and the fourth zone in Russia’s far east in the Primorye region.
Russian officials have become increasingly concerned by the impact gambling is having on the population, and there’s widespread suspicion that casinos serve as useful conduits for laundering money, they also have a miserable record on tax payments. According to statistics of the Russian Audit Chamber, roughly 7,000 licenses have been issued in the country in recent years, less than half of these businesses actually pay taxes.
The Russian gambling industry, not used to playing against the house, claims the government would kill the sector if it follows through on the law. For now, casino operators seem to be betting that the initiative gets shelved between now and implementation. “We are indifferent to this law – there’s nothing bad and nothing good for us in this,” said a poker-faced Vyacheslav Popov, the executive director of the Russian Association Gambling World.
“It is the authorities’ business to determine places where these zones are to be located and so far there’s not much known about it. And anyway, Russia is the sort of country where things can change repeatedly. There are [parliamentarian and presidential] elections ahead, among other things,” he hints.
The annual turnover of casinos and gambling spots operating in Russia estimates over USD 20 billion. Most of them are located in Moscow, which had 56 casinos and 1,300 establishments with gambling machines as of the end of 2006. Following new regulations passed by city officials, it’s expected that nearly half of the casinos will cease operations by July 1, by which time only those with more than 800 sqm will be allowed to continue.
The Road to Nowhere
The Polish media has had a laugh at the expense of the General Inspectorate for National Roads and Motorways (GDDKiA) for rather poor planning. Journalists discovered that two sections of the S8 expressway to link Wrocław with Warsaw and Białystok, scheduled to meet near the town of Wieruszów in the Łódź province, would miss each other by more than five kilometers. GDDKiA rushed to fix the problem by updating plans for the two sections to meet on the Wieruszów’s outskirts. Then, however, the town’s residents got involved, claiming they would not allow busy road to ruin their peace. Negotiations are underway.